2012 SENATE JOINT MEMORIAL 12-003 BY SENATOR(S) Lundberg, Harvey, Grantham, Mitchell, Renfroe, King S., Cadman, King K., Newell, Roberts, Spence, Giron, Brophy, Jahn, Lambert, Neville, Scheffel, White, Aguilar, Bacon, Boyd, Foster, Heath, Hodge, Hudak, Johnston, Morse, Tochtrop, Williams S., Shaffer B.; also REPRESENTATIVE(S) DelGrosso, Liston, Acree, Barker, Baumgardner, Becker, Beezley, Bradford, Brown, Casso, Conti, Court, Ferrandino, Fields, Gerou, Hamner, Holbert, Hullinghorst, Jones, Joshi, Kagan, Kefalas, Kerr A., Kerr J., Labuda, Lee, Looper, Massey, McCann, Miklosi, Murray, Pabon, Pace, Peniston, Priola, Ryden, Schafer S., Scott, Singer, Stephens, Summers, Swalm, Swerdfeger, Todd, Tyler, Vaad, Vigil, Waller, Williams A., Wilson, McNulty. MEMORIALIZING CONGRESS TO MODIFY CERTAIN REPORTING PROCEDURES FOR SMALL NONPROFIT ORGANIZATIONS TO REQUIRE THE INTERNAL REVENUE SERVICE TO ADEQUATELY NOTIFY SUCH ORGANIZATIONS OF THE PROCEDURES AND TO ALLOW SUCH ORGANIZATIONS TO REMEDY REPORTING DEFICIENCIES. WHEREAS, In 2004, the United States Senate Finance Committee issued a white paper proposing reforms to federal oversight of nonprofit organizations; and WHEREAS, Senator Charles Grassley, Chair of the Senate Finance Committee, encouraged formation of a panel of nonprofit leaders to examine these issues in the white paper and submit recommendations to Congress; and WHEREAS, In 2005, the Panel on the Nonprofit Sector (panel) issued a "Report to Congress and the Nonprofit Sector on Governance, Transparency, and Accountability"; and WHEREAS, As part of its report, the panel recommended that small nonprofit organizations be required to file an annual notice with the Internal Revenue Service. The report also recommended that the Internal Revenue Service should have the authority, "[a]fter an appropriate phase-in period, . . . to suspend the tax-exempt status of organizations that fail to file the required notification form for three consecutive years"; and WHEREAS, The panel recommended the annual notice because it ". . . will assist the IRS in providing more accurate information to the public about organizations eligible to receive tax-deductible contributions"; and WHEREAS, In 2006, Congress adopted the "Pension Protection Act of 2006" (act), which was based in part on the panel's recommendations; and WHEREAS, Section 1223 of the act, codified at 26 U.S.C. sec. 6033, created new and unfamiliar annual filing requirements for many small nonprofit organizations by requiring those organizations to annually file Form 990-N, also known as the e-Postcard; and WHEREAS, The act requires that an affected organization's tax-exempt status "be considered revoked" rather than "suspended" after failing to file the e-Postcard for three consecutive years; and WHEREAS, Although the Internal Revenue Service sent an initial mailing in 2007 and has since developed other resources to alert these affected nonprofit organizations of the new filing requirements, nonprofit organizations with outdated contact information with the Internal Revenue Service did not receive these notices, and many others were not sufficiently aware of how to comply with their new reporting duties; and WHEREAS, Based on some constituent conversations with Internal Revenue Service representatives and contrary to statements on the Internal Revenue Service's web site, the Internal Revenue Service does not send reminder notices to organizations that do not file their e-Postcards on time and only notifies affected organizations after such revocation has occurred; and WHEREAS, Approximately 400,000 nonprofit organizations across the United States, including thousands of organizations in Colorado, many of which have annual budgets of less than $25,000, have had their tax-exempt status automatically revoked by the Internal Revenue Service for failing to file an annual notice for three consecutive years. Although many of these organizations no longer do business, many other organizations continue to operate and could have successfully maintained their tax-exempt status if they had received more timely notice of the impending revocation; and WHEREAS, Although the Internal Revenue Service allows revoked organizations to apply for retroactive reinstatement of their tax-exempt status, the application process is burdensome and costly for these nonprofit organizations; now, therefore, Be It Resolved by the Senate of the Sixty-eighth General Assembly of the State of Colorado, the House of Representatives concurring herein: That we, the members of the Colorado General Assembly, hereby memorialize the United States Congress to amend 26 U.S.C. sec. 6033 so that: (1) The Internal Revenue Service is required to send timely notification to remind small nonprofit organizations when they have not filed the e-Postcard on time and to inform them of any impending revocation or other action affecting their tax-exempt status due to their failure to file an annual notice for three consecutive years; and (2) The Internal Revenue Service is required to suspend, not revoke, the tax-exempt status of any nonprofit organization that fails to file for three consecutive years so that a nonprofit organization's tax-exempt status may be simply and retroactively restored without the organization being required to reapply for a determination of tax-exempt status. Be It Further Resolved, That copies of this Joint Memorial be sent to each member of Colorado's congressional delegation, Speaker of the United States House of Representatives John Boehner, Senate Majority Leader Harry Reid, Secretary of the United States Senate Nancy Erickson, Clerk of the United States House of Representatives Karen L. Haas, and Treasury Secretary Timothy Geithner. ____________________________ ____________________________ Brandon C. Shaffer Frank McNulty PRESIDENT OF SPEAKER OF THE HOUSE THE SENATE OF REPRESENTATIVES ____________________________ ____________________________ Cindi Markwell Marilyn Eddins SECRETARY OF CHIEF CLERK OF THE HOUSE THE SENATE OF REPRESENTATIVES