IRS revokes tax-exempt status of thousands of Maryland groups

Soccer clubs, PTAs, community associations, a temperance union and inactive foundations belonging to a couple of Baltimore sport legends are among the thousands of Maryland groups that have had their tax-exempt status revoked by the Internal Revenue Service.

About 275,000 organizations nationwide — including nearly 6,200 in Maryland — lost their tax-favored status last week for failing to file annual returns for three years in a row.

The IRS says it believes the vast majority of them are defunct. As for donors, this means that contributions to any charities on the list will no longer be tax-deductible, and consumers will need to do their homework before giving.

"It underscores the concern we've always had: Knowing that the charity you want to give to is a legitimate charity," said Bob Ottenhoff, president of GuideStar, which tracks nonprofits.

The move by the IRS is long in coming. Congress, concerned about financial abuses in the nonprofit world, passed legislation in 2006 requiring tax-exempt organizations to submit yearly information returns to the IRS.

Since then, the IRS has tried to get the word out, particularly to groups so small that they had never had to file.

Those who failed to file returns for 2007, 2008 and 2009 automatically lost their tax-exempt status.

Among Maryland organizations that lost tax-exempt status is the Ray Lewis Foundation Inc., established by the Ravens linebacker in 2002. According to GuideStar, the last year for which the group filed a return was 2004, when it reported assets of $107,204 and spending on charitable programs of $37,640. Lewis was listed as a director; his mother was named as president/director.

Lawyer Marc Rosen, who represents Lewis, said the foundation was replaced last year with two professionally run foundations under Lewis' name.

"In 2010, legal professionals working with Mr. Lewis began an internal review and determined that the volunteers running the day-to-day affairs of the Ray Lewis Foundation were behind regarding tax returns and that the best course of action would be to turn over the complete management of Mr. Lewis' foundation activities to career professionals," Rosen wrote in an email.

Donors' contributions aren't affected, Rosen said. He said volunteers with the old foundation were instructed to forward any donations to one of the new foundations. The overdue paperwork related to the old foundation, Rosen said, will be filed soon with the IRS.

The Kelly and Cal Ripken Jr. Foundation is also on the IRS list. Spokesman John Maroon said the foundation has been inactive for about a decade.

The Ripkens launched the Cal Ripken Sr. Foundation in 2001, Maroon said. That organization handles the family's charitable efforts, such as building parks for youths.

Many other groups on the IRS list appear to have been small organizations, now defunct.

"You're talking about community organizations and sports leagues where somebody started an organization, and at some point the kids grew up, the parents moved on or the club folded and nobody ever took the step to close the organization," GuideStar's Ottenhoff said.

About 1.82 million tax-exempt organizations remain nationwide. Seventy percent of them are charities.

If you made a donation before the IRS announced that the charity lost its tax-exempt status, the gift still will be tax-deductible. But new gifts won't be.

To find out whether a charity remains in good standing with the IRS, check Publication 78, which has been updated online at irs.gov. GuideStar.org also provides this and other information on nonprofits.

"It's not enough to say, 'I want to give to a charity that is legitimate or one that's filing paperwork,'" said GiveWell.org cofounder Holden Karnofsky, whose site evaluates charities and posts its top picks for donors.

Donors also should look for charities with proven results, Karnofsky said. And that's not necessarily the organization that devotes the most money to programs, he added.

"You can spend unlimited money without getting results," Karnofsky said.

eileen.ambrose@baltsun.com

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