Thousands of nonprofit organizations in Iowa are within days of losing their federal tax-exempt status, according to the Iowa State Bar Association (ISBA). Under a tax reform law enacted in 2006, many nonprofits that previously did not have to file a Form 990 with the Internal Revenue Service will have to do so by May 17 or their tax-exempt status will be revoked. According to the latest data available, more than 5,500 organizations in the state, ranging from 4-H clubs and American Legion posts to professional associations and parent-teacher organizations are at risk of losing tax-exempt status.

“I believe many (nonprofits) are not aware of it,” said Bill Boyd, an attorney with Nyemaster, Goode, West, Hansell & O’Brien,P.C. in Des Moines and a member of the ISBA’s nonprofit corporation section. “The IRS sent out a notification on this, but not recently.” Many of these nonprofit organizations probably do not have legal representation, or may not have the resources to address this issue, he added.

The provision, enacted as part of the Pension Protection Act of 2006, requires all nonprofit organizations other than churches and church-related organizations to file the information form with the IRS. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status. The requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law.

In an e-mail to its members this week, the ISBA urged its members to work with their nonprofit clients to ensure that they don’t inadvertently slip out of compliance. The May 17 deadline applies to nonprofits that operate on a calendar-year basis.

“This would be a great public service for Iowa attorneys,” the ISBA said in an alert to its members. “Plus, it will be easier to help groups file the simple, eight-question Form 990 now than to help them later submit a reinstatement application for tax-exemption with the IRS.”

If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable, according to information posted on the IRS website.

The Urban Institute’s National Center for Charitable Statistics has developed an online tool that nonprofits can use to determine if they need to file. More information is available on the IRS website.