Have you received a letter from the IRS?
Civitan International, the parent entity of all Civitan clubs and districts, has recently received its determination from the IRS granting 501(c)(3) status upon our merged organization (combining our membership organization and foundation). This has been a multi-year process, which was substantially delayed by the division of duties between the Cincinnati, Ohio office and the Exempt Organizations Division office of the Internal Revenue Service (IRS) in Ogden, Utah.
Despite our progress this past year, many clubs have received correspondence from the IRS in error relating to our ongoing reclassification. Some clubs that were not required to file a Form 990 this past fiscal year received a CP420 stating that they should file a 990-N or face penalties for noncompliance. After several conversations with the IRS, this issue has been resolved. Other clubs that filed a 990 this past fiscal year mistakenly received LTR 2699Cs from the IRS requesting the completion of a Schedule A for the prior year’s filed return as is normally required for Section 501(c)(3) entities. This correspondence produced confusion at the club level that could not be resolved with a call from the club to the IRS. To further complicate matters, the State of Tennessee relied upon incorrect IRS data and mailed out of dozens of letters to clubs in Tennessee seeking charitable group registration and threatening penalties for noncompliance. After several conversations (and correspondence) with both the State of Tennessee and the IRS, these issues are now resolved. We are simply waiting for the Ogden office of the IRS to complete their correction of our information in the Business Master File, their organizational database. In addition to the inconvenience and confusion, as well as the administrative burden related to addressing and correcting these IRS errors, this has additionally delayed an anticipated mail-out to clubs regarding the necessary governance language changes, our next step in the reclassification process.
The IRS still has to decide upon the change in status for clubs and districts from 501(c)(4) entities to 501(c)(3). They may allow Civitan International to coordinate this approval, thus shortening the approval process. However, the Washington, DC office of the IRS is now involved in the review of our file (as well as the files of Kiwanis International and Optimist International), and if they determine a higher level of review is necessary, further delays may result. Language consistent with the Section 501(c)(3) of the Code will be mailed to all affected U.S. clubs within the next month(s) as one of the final steps towards reclassifying the clubs as 501(c)(3) public charities.
In this interim period, the IRS has allowed clubs to use the public charity status of Civitan International for grant applications, individual contributions, and other charitable activities - as long as contributions are used in compliance with Section 501(c)(3) of the IRS Code and the mission of Civitan International. Clubs or districts wishing to utilize the exempt status of Civitan International should contact World Headquarters prior to submitting grant applications or conducting solicitations.