Sacramento’s NAACP among hundreds of chapters that lost IRS tax-exempt status
Hundreds of state and local affiliates of the NAACP across the country have lost their federal tax-exempt status over a disconnect between the national NAACP office and the IRS, The News & Observer has learned.
The Bee’s sister news organization first reported Tuesday that the North Carolina NAACP has lost its tax-exempt status as it deals with multiple, dramatic challenges, including allegations of misspending and the national NAACP seizing control of the group.
But the state organization isn’t to blame for losing an exemption that lets nonprofits keep more of the money they raise. The problem is between the national NAACP and the IRS, with the civil rights group blaming the IRS, according to an NAACP letter obtained by The News & Observer.
The NAACP’s Sacramento chapter is among the affiliates that lost their tax-exempt status.
The IRS mistakenly rejected the NAACP’s inclusion of local branches in a group tax filing, says the letter, which is dated Thursday. The IRS has made the same “mistake” in the past, the letter states.
“It has (been) brought to our attention that several NAACP Units received letters from the Internal Revenue Service indicating that their tax-exempt status has been revoked,” wrote Janette McCarthy Wallace, the NAACP’s general counsel. “This is an error because individual NAACP Units are not required to file Form 990s of their own.”
There are many more than “several.” A News & Observer analysis of the IRS data shows revocations of roughly 600 state conferences or local branches. More than 200 other groups affiliated with the organization, including university chapters and youth councils, also had their tax-exempt status revoked this year.
Among the other state conferences the IRS penalized: California, Texas, Ohio, Illinois, Missouri and Kansas. Local branches on the IRS revocation list include New York City; Washington, D.C.; and Kansas City.
Betty Williams, president of the NAACP’s Sacramento chapter, said she was confident the organization’s tax-exempt status would be restored.
“I truly believe its an IRS error. Local branches don’t file 990s. We complete financial reports that go to our national office yearly. Sacramento NAACP branch is find and I’m sure they’ll get it resolved,” she said.
Why was tax-exempt status revoked?
Aba Blankson, an NAACP spokeswoman, said in an email response that the auto-revocation of the conferences and branches is an “administrative system” error.
“The IRS provides a mechanism to resolve such instances,” she said. “We are working to submit the necessary documentation to demonstrate that the IRS has, once again, erroneously revoked the exempt status of NAACP Units.”
Robert Barnette Jr., president of Virginia’s NAACP state conference, confirmed that similar issues with IRS filings have happened over the years. But this year’s sweeping revocations exceeded anything he’d seen before.
“It just happened to have encompassed more units and branches than typically we see,” Barnette said. “We’ve been doing this for years, and apparently with new people and leadership (at the IRS) they’re not aware that the national NAACP files one tax return that covers all of the branches that send their annual financial reports to them.”
The IRS said it was prohibited by federal law from commenting on “specific organizations.”
The IRS allows nonprofits that are part of a group organization to file their tax information under a “group exemption.”
A letter on the IRS website, dated Sept. 15, gave the NAACP a group exemption approval.
According to the letter, a “subordinate organization” that doesn’t file its own tax return or is not included in a group return for three consecutive years “will have its federal income tax exemption automatically revoked effective from the filing due date of the third tax year.” A state conference or local branch would be considered a subordinate organization to the NAACP.
This story was originally published September 3, 2022 at 5:25 AM.
