IRS gets tough on nonprofit tax status: 3,048 organizations in S.C. lose their exemptions

The Internal Revenue Service has stripped 3,048 South Carolina nonprofits of their tax-exempt status for failing to file financial information with the agency for the past three years.

Losing that status not only subjects organizations to paying taxes on future donations, but it could scare off potential donors who no longer would be able to write off gifts on their own returns. Nationwide, some 275,000 nonprofits lost their tax-exempt status for failing to file necessary paperwork with the IRS.

GuideStar, a clearinghouse for information on nonprofits, said the move fundamentally changes the landscape for the industry.

But it looks like a good many, if not most, of the local groups targeted by the IRS are dormant or have been long-defunct anyway.

They include groups such as the Palmetto Golf Association, a North Charleston-based organization that was still on the IRS rolls even though it folded a decade ago.

Louis Hassell, former agent for the association, said his group was around for about 10 years and raised some $15,000 for Jenkins Orphanage before a drop-off in participation led to its demise. "People just moved on to other things," he said.

The Charleston Speech and Hearing Center in North Charleston also is no longer around to feel the pinch of losing its tax-exempt status, said Mitchell Carnell, its former executive director. Carnell said he retired in 1999 from the organization, which helped people with communication handicaps, and the center shut down about seven years later. "It's been out of business for quite a while," he said.

Ralph Lundy, a founder of the Mount Pleasant-based Walt Chyzowych Memorial Fund, also wasn't surprised to see the IRS pull his organization's tax-exempt designation. "We planned it that way," he said.

The fund was established to honor Lundy's friend and mentor, a coaching giant who helped shape soccer in America before he died unexpectedly at age 57 in 1994. Lundy, head coach of the College of Charleston's men's soccer team, said the fund is now merging with the National Soccer Coaches Association of America Foundation, though awards will still be given in Chyzowych's name.

It was unclear Thursday just how many groups on the IRS list are still active. Still, Guidestar's chief predicted the action will have a lasting effect.

"This event will have a tremendous short-term impact on the nonprofit sector and those who support and rely on it. The true impact, however, will be long-term," Bob Ottenhoff, GuideStar's president and CEO, said in a written statement. "Over time, knowing which organizations are in good standing with the IRS will increase public confidence in the sector as a whole, which in turn will increase support for the nonprofits it comprises."