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Wednesday, August 28,2013

Tax-exempt status

Following up on complaint, state Attorney General’s Office seeking more information about City Councilwoman Kathie Dunbar’s nonprofit. Dunbar says 'We’re not worried about it.'

by Andy Balaskovitz
The Internal Revenue Service revoked the tax-exempt status of the nonprofit South Lansing Community Development Association in May 2012 for failing to file annual financial reports. But the association — founded and directed by Lansing City Councilwoman Kathie Dunbar — until recently claimed on its website that any donations are tax-deductible.

While Dunbar says the website claim, which the state Attorney General’s Office says would be a violation of the Michigan Charitable Organizations and Solicitations Act, was an oversight and has since been fixed, it prompted a complaint by City Council regular Kathi Raffone to the AG’s Office.

In an Aug. 19 letter to the association, Joe Kylman, an auditor from the AG’s Charitable Trust Section, asks for an explanation of the tax-exempt status revocation and the website discrepancy within 20 days.

The 501(c)3 revocation does not mean the organization must stop seeking donations as long as it’s still property registered under the Solicitations Act. However, according to an Aug. 22 interdepartmental email from Kylman, “the most recent solicitation registration expired” on Jan. 31, 2009, and hasn’t been renewed. “Because we have never received financial information from the organization, we cannot determine if they should have been, and still should be, registered to solicit,” he wrote.

Joy Yearout, a spokeswoman in the Attorney General’s Office, said an organization may be exempt from that requirement if it raises less than $25,000 a year. The Aug. 19 letter asks for financial information “so we can determine whether it qualifies for a registration exemption,” she said in an email.

The most recent financial report — called a 990 — available online for the organization is from 2007-’08. It lists total revenue at $112,155. However, in an interview Monday night, Dunbar said donations only make up a “small” portion of the association’s revenue. “A majority of our budget is not donation-based,” she said, adding that most of it comes from the annual Hawk Island Triathlon, fees for services, a weekly farmers market and grants.

Dunbar said the association lost its taxexempt status at a time when hundreds across the Lansing area also did after changes in reporting requirements from the IRS.

Bill Gesaman, of the Michigan Nonprofit Association, said a “few thousand” across the state lost tax-exempt status.

Dunbar said the association board is in the process of reinstating the tax-exempt status and complying with state requests.

“We’re not worried about it,” she said.

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