IRS Revokes North Carolina NAACP’s Tax-Exempt Status

(NTD)

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 loss of tax-exempt status by the North Carolina State Conference of the NAACP took place on May 15 but didn’t become public knowledge until local media outlets began reporting on it last week. The state chapter is known nationally for suing over voter ID requirements, which it claims disenfranchise minorities and poor people.

The Tar Heel State NAACP chapter lost a case at the U.S. Supreme Court on June 23 when the justices ruled 8–1 that the state’s Republican-controlled Legislature must be allowed to step in to advocate for a heavily litigated voter ID law in court because Josh Stein, the state’s attorney general and a Democrat, allegedly wasn’t doing enough to defend the statute.

But the chapter won a major legal victory on Aug. 19 when the Supreme Court of North Carolina ruled that enough electoral districts of the Republican-dominated General Assembly were so racially gerrymandered that the lawmakers may have lacked authority to move two state constitutional amendments forward. One of the amendments would have required that voters present photo identification to vote in person, and the other would have lowered the maximum state income tax rate, as The Epoch Times reported. The litigation is still in progress.

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.

The state chapter appears to be in a state of disarray. As of press time, its website was down. Its Facebook page was still active but hasn’t been updated since Aug. 4.

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.

“We’re giving the North Carolina State Conference on the ground support to make sure they can continue to focus on the day-to-day civil rights work that impacts black North Carolinians.”

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.”

Nonprofits typically register under section 501(c)(3) of the tax code as charitable organizations, which limits how much political and legislative lobbying they may conduct. A 501(c)(3) isn’t an “action organization”—and many in this category describe themselves as educational groups or private foundations. A 501(c)(3) “may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates,” according to the IRS.

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.

UPDATE: This article has been updated to include the earliest reporting on the North Carolina State Conference of the NAACP losing its tax-exempt status.