There are a substantial number of criteria that must be met for an organization to be considered exempt from taxes. Normally, a 501 (c) 3 status allows certain organizations to be free from paying taxes based on their organization’s not-for-profit goal. To meet the criteria set forth in California and federal tax law, certain steps need to be taken. If these steps are not taken, a tax controversy may arise that can imperil the organization’s exempt status.

A California group that recently sent out mailers in support of their local government is facing such scrutiny. In the mailings, the group listed itself as a tax exempt organization under 501 (c) 3. However, when a media outlet researched the issue with the IRS, no documents were discovered to support this assertion.

There have also been questions as to whether the organization falls under the necessary requirements to be considered tax exempt. Exempt status is only granted to those organizations that carry out specified duties, which some have claimed is outside the scope of this organization. None of those who have been listed as being involved in the organization have made any comments with respect to the allegations.

It is anticipated that a complaint will be filed with the IRS. If a complaint is made, the tax controversy that results could place the individuals involved at risk of legal consequences. However, authorities will first need to ensure that any complaint filed has a factual basis. The factual and legal issues surrounding the classification of an organization as tax exempt are numerous and complicated. Those seeking or relying upon this designation may benefit from seeking professional assistance in order to ensure all laws and regulations have been honored.

Source: The Coast News, “Questions linger over group’s 501 (c) 3 status,” Jared Whitlock, Dec. 13, 2012