Political Economy Report


How Conservatives Put Half a Million Non-Profits Out of Business

John Boehner’s legacy will amount largely as being President Obama’s toughest adversary. The looming threat of John Boehner’s time bomb haunts the White House every day. I can count three instances, one of which blew up my non-profit arts production company. This personal narrative reflects the larger trends of our political economy and it has global relevance.

I first noticed this strategic lawmaking with the “the fiscal cliff” also known as “sequestration”, resulting in across the board spending cuts to all Federal programs. This was planted in to the debt ceiling issue like a pipe bomb in the exhaust of a gasoline truck. Terminator Pip BombThe great win for Republicans was maintaining most of those cuts in Obama’s budget since. The damage of sequestration was felt closely to me when budget cuts in my Mother’s school district (Marana, AZ) slashed her job. Thankfully she was close to retirement and her income was subsidized by unemployment benefits. Ironic how that all works out.

The next great blunder to the public on Speaker Boehner’s watch was the “government shut down” in which Federal workers were furloughed while House Republicans tried to force feed defunding the Affordable Care Act. Judicial, Executive, and half of the Congressional branch were moving forward with ACA. Even Arizona Senator John McCain accepted the law, while the dance continued for an embarrassing length of time in the House of Representatives. We observed how trite and spite drives the political system more than ever. What we less often take in to account is the financial motivation of their spite. I would suggest that new non-profit money devoted to political causes riled up politicians dramatically. [1]

Another time bomb that flew under the radar was put forward in the Pension Protection Act of 2006[2]. Making small tax code changes with a big ax and many other abstractly related reforms[3], Lois Lerner, IRS director of exempt organizations had to reassure the public “that it is not our intention to blow organizations up.”[4] It was the across the board revocation of federal tax-exemption in 2008 that she is referring to. This portion of the bill is the baby of R-Iowa Senator Chuck Grassley, who has a great deal of antipathy for non-profits operating with corruption.[5]GWB Signing of H.R. 4 the Pension Protection Act of 2006.  EEOB 450

The time bomb was clocked as the bill offered existing organizations three years to comply, without explicit written notice, from the date of the bill passing. The result was 275,000 corporations losing tax-exempt status by 2011.[6]

A complete list of revoked organizations is available with the IRS[7]. According to my excel spreadsheet transferred from the text list, the figure is now 550,907 corporations revoked. Here are three examples chosen at random.

996015222|ENSEMBLE OF THEATRICAL ARTISTS||1313 MAKIKI ST|HONOLULU|HI|96814-1330|US|03|15-MAY-2010|09-JUN-2011|

During March of 2013, I was in the throws of producing the 33rd Annual Cathedral Park Jazz Festival, under the fiscal umbrella of InterArts, a non-profit corporation that I volunteered for as President, on September 23rd, 2009. I was feeling on top of my game after a bumpy but successful first year (with jazz fest), having filed our CT-12 and 990-N forms earlier than required, marking three years in business, keeping compliance. I was going headlong in to major fundraising, more clear about my intentions than ever.[8] That year, I was boosting revenue for the jazz fest by 30% above historical record, having a great impact on local economics, as the arts typically do.

Former Treasurer, Rolf Semprebon is versed with non-profit regulations but is really a general-purpose tax professional. That is why he overlooked one important detail that the IRS had taken upon itself to make. By issuing our tax-exempt status retroactively, we did not understand our filing requirements and the IRS did not explain them. I had a fiscal sponsorship with KBOO Community Radio for those first two years and I thought that the income was counted with theirs. In 2008, no such money was made or transacted, but IRS still held that we needed to report a $0.00 fiscal year on the 990-N simply because we set our fiscal year ahead by seven days in the Articles of Incorporation, back in 2009.[9]

It only makes sense to a robot that can’t compute human reasoning. Indeed, when the office of a few dozen people revokes 100,000 organizations each year, the only way is through computerized systems. Standardized letters, standardized prints, envelopes, all day long revoking organizations. It explains why this would happen after filing two 990-N forms since the time of incorporation. There is no human to say, “Oh, let me give them a call, they don’t understand something.”

It is a way out of actual administration for the IRS, because their need apparently was to determine what organizations continued to conduct business. Here’s the puzzle though. Every existing Domestic Non-Profit (DNP) continued to report to their State and was administratively dissolved by their State if they did not report. But for some reason, conservative lawmakers in Washington believed it was necessary to require the smallest players to report to the federal government also.

The failure to file two consecutive forms on time was reasonable. But prior to the Pension Protection Act of 2006, small organizations like InterArts were not required to file at all. We made under $25,000 each year until, ironically, the final year of operation, ending September 2013.[10] So we fought using the Taxpayer’s Advocate service and a Congressional Liason via Rep. Blumenuer’s office.

Republicans are reputed to prefer that the federal nose stay out of their business and therefore should prefer their states to handle their own regulation. In the State of Oregon, I was required to report revenue, the Officers of the Board, addresses and phone numbers, the same stuff 990-N discloses. I was on top of that from year one. These documents become public record and hence the IRS is not burdened with record keeping. But the Pension Protection Act vastly increased administrative demand from the charitable department of the IRS by collecting this data. That sounds like “big government” to me.

It seems like a simpler route is to trade lists with every state, determining what corporation had been dissolved by the state. The IRS master list would be updated, as opposed to swinging the federal axe on every entity that makes a mistake.

If this were about protecting pensions, I would remind all Congressman that retirees making donations only needed to seek the data through the state office. And again, if an organization is administratively dissolved by the State, it can no longer conduct business.

In fact, the letter I received from IRS suggested that one option going forward would be to pay taxes on InterArts revenue. But I was incorporated as a DNP with Oregon. If I behaved as a tax-paying corporation, like an LLC, I would be breaking State law. It was a strange recommendation. Because the State letter I got offered help in reapplying for tax exemption.

There was a period in which organizations could reapply with a written statement explaining what they did wrong and why it will never happen again, as if we are children. But after three years, if you weren’t on that early boat, you simply had to reapply with Form 1023 and $500.00. Easier said than done when your marketplace already requires the tightest budgets and smallest staff of any corporate environment. I decided it wasn’t worth it and dissolved in January of 2014.

The hot news story at the time of all this was IRS scrutiny over conservative advocacy groups. So when I wanted to refute my problems, I was shit out of luck because the office was suddenly overwhelmed with political distractions. It seemed like the IRS had revoked thousands of tax-exempt corporations while receiving thousands of new applications from all kinds of politically motivated groups, thanks to Citizens United[11]. Many of which are not 501(c)(3) in their intention because that is supposed to be charitable, not political. So in my perspective, IRS was trying to weed out groups that didn’t need to organize as tax-exempt corporations but perhaps were better off as 501(c)(4) or even (6).

While some progressive groups were scrutinized, it was conservative groups that took the cake according to an IRS audit.[12] This again seems acceptable when you have a known faction of Americans with antipathy for taxes and suddenly a landslide of politically motivated applications pour in from that faction.

Congressman Blumenuer’s office, in my district, had accepted my case and was helping push it through the wild brush of politics. He may never have even heard about my case himself. Concerning the other thing, he had a simplistic, moot if not a little relevant point to it all. Here is a video of what he had to say.

[1]. A Fox News article explains how enriched conservative groups with major donors like the Koch Brothers had long planned such legislative terrorism.



[4] From New York Times, “IRS Moves to Weed Out Deadwood Charities”




[8] InterArts was a 501(c)(3) tax-exempt organization, put together for the purpose of being a sort of cultural production company, for artists by artists to produce the arts. Such a concept is difficult to launch and it was shoestring. That is why Cathedral Park Jazz Festival was important to me.

[9] More specifically, IRS assumed two preceding form 990-N (fiscal years 2008 and 2009) were missing. We had filed late for 2010, spurring automatic revocation.

[10] I plan to file a 990-N for that year, although the IRS will not accept it. This is in protest to be consistent with my argument that 2008 was not a year of operation and they’re misconstruing an arbitrary date of incorporation. Robotic management is inflexible, but humans once reasoned through problems like this.



Sean Ongley

By Sean Ongley

Co-Founder of THRU Media. A background in non-profit, music, and radio preceded my ambitions here. Now, I aspire to produce new media and publish independent journalism at this site and beyond.

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