Tax Protection Ends for Dormant Causes
IRS Hits Nonprofits Long Behind on Disclosures
Five years have passed since House Majority Leader Tom DeLay resigned from Congress, and it has been 24 since the Texas Republican created a conservative grass-roots group that failed to take root.
But until last month, you could still make tax-free donations to that nonprofit, People Restoring an Internationally Competitive Economy.
Like tens of thousands of defunct organizations that gave up their causes years ago, DeLay’s PRICE has lingered on official books because the federal government had no process to flush it out.
That changed in June, when the IRS stripped tax-exemption privileges from 275,000 nonprofits that had not filed required disclosure forms. In one move, the IRS eliminated about 15 percent of the entire sector.
Congress passed a law five years ago requiring the IRS to do so as a way to ensure nonprofits file information about their donors and expenses. The process has also helped shutter inactive groups to prevent misuse of the nonprofit status.
“It is a game changer because nothing like this has happened before,” said Lindsay Nichols, a spokeswoman for GuideStar, which collates data on nonprofits.
Nichols praised the IRS move, saying it could help clarify how many tax-exempt charities and foundations are active.
Despite a yearlong effort by the IRS to alert groups about the change, the sweeping revocation of tax-exempt status caught some off-guard. Groups with annual budgets of less than $25,000, which have not had to file in the past, must now do so to retain their exemption status.
Scores of local American Legion groups and AARP chapters were on the list, as was the active Muslim advocacy group Council on American-Islamic Relations. IRS staff members are helping such organizations reapply for tax-exempt status.
But a large chunk of the list consisted of groups that disbanded long ago. Nichols said half of the groups on the IRS list were not in the GuideStar database, indicating that they probably have not been active for years.
For them, losing tax-exempt status was the final nail in the coffin of their bygone movements.
PRICE, which DeLay described to Roll Call in 2003 as the only ambitious goal he set and did not meet, failed to get off the ground after it was established in 1987. Jeff Judson, a DeLay staffer who served on the PRICE board, did not respond to requests for an interview.
Some of the groups, such as the Nuclear Freeze Foundation and Citizens Against Nuclear War, stopped functioning after the Cold War subsided. David Cohen, who was active in organizing grass-roots support for arms control bills, said the movement had accomplished its mission when the Berlin Wall came down.
But other movements on the IRS list fizzled before they could win.
Solar Action Inc. began in the 1970s to pressure the Jimmy Carter administration to adopt renewable technologies. In 1978, the group led a nationwide celebration of solar energy with millions of participants. News reports said 20,000 people gathered near the Washington Monument, which served as a giant sundial.
“It created a little boom, in the aftermath of which Congress started increasing year after year the renewable energy budget,” Denis Hayes, who ran the nonprofit, told Roll Call.
The group splintered after the event, and its lobbying arm, Solar Lobby, failed to gain traction.
“We did not have enough force at the Solar Lobby at the time when the Reagan administration was deregulating,” said Hayes, who continues to promote renewable energy today as president of the Bullitt Foundation.
Like Hayes, Mark Hopkins of Spacecause has remained involved with his subject. He currently serves as head of the National Space Society, but he launched Spacecause in the 1980s as a grass-roots lobbying arm to promote space exploration and federal investment in space programs.
While trying to save the space station program, Spacecause members sent 40,000 letters to the White House — enough to get noticed in the pre-Internet era. But Hopkins has since changed his mind about the effectiveness of grass-roots advocacy.
“One of the things I discovered when I was doing grass-roots lobbying was that [public relations] is extremely important,” he said. “We found that Congress actually pays more attention to what happens in the press than to the letters they receive.”
Lack of money, rather than a shift in strategy, led to the end for other groups on the list.
John Cross ran the Citizens Committee on Paperwork Reduction, which successfully pressured Congress for the 1980 Paperwork Reduction Act before disbanding. He said his coalition of anti-regulation business groups could have accomplished much more.
But, as it goes for many in the sector, the funds dried up.
“There were a lot of things we would have liked to have done but couldn’t,” Cross said.