IRS revokes tax-exempt status of hundreds of NAACP branches. Here’s what we know.
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 N&O 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 N&O.
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that several NAACP Units received letters from the Internal Revenue Service indicating that their tax-exempt status has been revoked,” wrote Janette McCarthy Wallace, the NAACP’s general counsel.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.” An N&O 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; Sacramento, California; Washington, D.C.; Kansas City, Missouri and Kansas City, Kansas; Wichita, Kansas; Myrtle Beach and Rock Hill, S.C.; Macon, Georgia; and Biloxi, Mississippi.
More than 40 local branches in North Carolina lost their tax-exempt status this year, the IRS data shows.
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.
NC NAACP troubles
The tax-exemption loss is just one of several problems the North Carolina conference is contending with, along with heated conflicts among members, allegations of financial mismanagement of past leaders and disciplinary action from the national NAACP.
The N&O on Tuesday reported on internal NAACP documents that included a presentation in February by the North Carolina conference’s new treasurer, Gerald Givens Jr., that identified eight years of “very problematic” payment patterns, including “potential misappropriation of funds on multiple levels.” More than $1 million had been spent without proper authorization, Givens told state and national officials at the meeting.
The national NAACP put the N.C. organization under a punitive “administratorship” starting in 2019.
Gloria Sweet-Love, president of the Tennessee conference and a co-administrator of the North Carolina conference, could not be reached for comment by The N&O on Thursday or Friday. The Tennessee conference also lost its tax-exempt status, the IRS data shows.
Asked about North Carolina’s revoked tax-exempt status in brief interviews with The N&O last month, Sweet-Love said they were working to resolve it, but didn’t mention a problem with the group tax filing. She addressed the N.C. conference’s financial issues, and said an audit was underway to look at the six years of financial activity prior to the election of a new president last year.
Officials with the national NAACP and some local members have accused the Rev. Anthony Spearman, a former N.C. conference president who died this year, of failing to transfer years’ worth of records and financial documents to his successor, current President Deborah Maxwell of Wilmington.
Before his death, Spearman accused the national organization of never adequately justifying why it took disciplinary action against the N.C. conference and of not taking steps to resolve any perceived problems.
“Before the Administratorship, our State Conference was looked upon as one of the most effective, distinguished and viable of Southern-based civil rights organizations since the great steps forward many of us participated in during the 1960s until the present times,” Spearman wrote to Derrick Johnson, the national NAACP CEO and president.
“The Administratorship has caused some to question the integrity of the State Conference, which our many partners depend upon. It has sown seeds of distrust and discord among our key financial supporters who have limited their giving as they struggle to understand the logic behind the Administratorship,” Spearman added.
In a 2021 letter to Spearman, Sweet-Love defended the takeover. She wrote that unnamed NAACP members had filed several complaints against Spearman and his predecessor, the Rev. William Barber II, accusing them of not following NAACP rules and policies.
One of Spearman’s supporters, the Rev. Cardes Brown, who served as the N.C. conference’s religious affairs chairperson, said Sweet-Love and others should have disclosed that the N.C. conference’s tax exempt revocation was part of a national problem. The fact that they didn’t, he said, shows that they are trying to divert attention away from the issues he and others are seeing.
“This is becoming an autocracy,” he said of the national organization.
This story was originally published September 2, 2022 at 4:17 PM.
