The tax-exempt status of the influential North Carolina branch of the National Association for the Advancement of Colored People (NAACP) was automatically revoked by the IRS after the nonprofit group failed to file required returns with the tax agency for three consecutive years.
The status revocation by the IRS doesn’t prevent the NAACP chapter from operating, but it’s likely to make it harder for the chapter to raise money and could burden it financially if it has to pay taxes and fines.
The NAACP, a civil rights organization, was founded at the national level in 1909 by white and black activists. The organization is credited with helping to end lynching and various forms of racial discrimination and with helping to get the landmark Civil Rights Act of 1964 enacted.
Internal Dissent
The chapter has been rocked by internal dissension for some time. Chapter President Rev. T. Anthony Spearman was accused of financial misconduct and was defeated in chapter elections last year. Spearman, 71, who became president in 2017, was found dead in his home on July 19. Authorities are still investigating his death.In June, Spearman sued several state and national NAACP officials, claiming that they had defamed him and conspired to oust him from the presidency because of his “growing national profile” and because he supported a former NAACP employee who claimed that another leader in the group sexually harassed her, according to WRAL-TV. He also claimed that he was falsely accused of misappropriating chapter funds.
The national NAACP organization stepped in and placed the state chapter under an administratorship, later appointing Da’Quan M. Love as the chapter’s new executive director to help fix its chaotic finances. Love resigned as executive director of the Virginia NAACP chapter in February after 14 months in the position, claiming that officials there mistreated him.
“The national NAACP has been very concerned with the state of the North Carolina NAACP State Conference for many years,” Love told WRAL.
“The national NAACP has launched a financial audit, a full financial, multi-year audit of the state conference, as well as all the branches in the state of North Carolina to rectify these issues and get to the bottom of these challenges and ensure that this does not happen again and we’re in good financial standing.
No Appeal Process
Because the tax exemption was revoked, the group is no longer exempt from federal income tax. The law prevents the IRS from undoing an automatic revocation and there’s no appeal process. An organization that experiences an automatic revocation must apply to have its status reinstated, according to the federal tax agency.Although none of the group’s filings with the IRS from recent years appear to be publicly available, the Raleigh-based North Carolina NAACP, which obtained tax-exempt status in 1961, appears to be a nonprofit corporation recognized under section 501(c)(4) of the tax code. The IRS calls such entities “social welfare organizations.”
However, the 501(c)(4) designation can provide activists with greater flexibility in their efforts to influence public affairs by lobbying for legislation, for example. Such organizations are allowed to engage in some political activities, as long as doing so isn’t their primary activity.
There’s a critical distinction between the two nonprofit categories.
Donations to an IRS-recognized 501(c)(3) are tax-exempt, which aids in fundraising because donors may deduct donations from their income taxes. However, donations to a 501(c)(4) group aren’t tax-exempt, even though the organization itself is exempt from paying taxes on its ongoing operations while it remains in good standing.