Tuesday, September 25, 2012

Burning Money in Laguna Woods Like it is 2016 – as in the Movie

Burning Money in Laguna Woods Like it is 2016 – as in the Movie



Let’s take a look at exactly what the ramifications are for GRF to lose its non-profit 501 (C) 4 exempt status:

GRF 501(c) status is revoked retroactively with an effective date of ?, 2013 (the due date of the 2012 Form 990). There may be serious (and expensive!) consequences at the state level including, but not limited to, sales and property taxes, payroll and unemployment taxes and workers’ compensation, as well as thorny issues with the state Department of Charitable Solicitations. This list only scratches the surface of the problems facing GRF.

So, how does GRF go about restoring its 501(c) status?
For starters, it must file a new Form 1023 (or 1024) with the IRS, as well as pay the filing fee. The
process will be a lot like the first time the nonprofit went through it, though I expect there will be
additional scrutiny placed on these “do-overs”. I also expect enormous backlogs at the IRS.

Assuming the organization still qualifies (and some will not) and the application is prepared by someone who knows what they are doing (a shameless plug for us), the IRS will issue a new determination letter effective the date of the new Form 1023’s receipt at the IRS. The Shareholders demand documentation so they can reinstate a 501 ( c ) 3 Corporation that will benefit all the Laguna Woods Village residents.

A retroactive effective date is possible, but very tricky. First off, a letter requesting retroactivity back to the revocation date is required. In addition, all of the Form 990s that were not filed must be prepared and included with the Form 1023. Here’s where it gets even messier…

Why is retroactivity desirable? With a 501 (C) 3 We Can Save Millions on Our Assets
It seems easier to just forget about the past 990s and just accept IRS determination from the date of the application, right? Not so fast. While that may work for some, keep in mind that the nonprofit will have a period exceeding one year where it was operating as a for-profit organization. As such, GRF will likely be required to file a for-profit corporate tax return, Form 1120. That’s a big mess. Also, getting renewed status retroactively will help eliminate the many potential problems at the state level.

For overwhelming evidence, click here 

Paul Loughrey

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