Syrian relief groups face unexpected delays from IRS on tax-exempt status

Aid groups seeking to help people caught in Syria’s civil war are facing unexplained delays in their applications to the Internal Revenue Service (IRS) for 501(c)(3) tax-exempt status.

The delays are similar to those that many conservative organizations have complained about when applying for tax exempt status, though it is unclear why the Syrian applications are being held up.

{mosads}One Syrian relief group has waited more than two years, and another just recently won its tax-exempt status after waiting nearly 18 months, but only after suing the IRS.

People familiar with the process of applying for tax-exempt status say the IRS normally takes about a year to decide on even the most complicated applications.

A government report found the IRS had used improper criteria to target Tea Party and other conservative groups for extra scrutiny, and administration and legislative investigations are now underway.

But the aid groups requesting tax-exempt status say the IRS has not
explained why their applications have been delayed, and the IRS did not
respond for this story.

The IRS has also rejected pressure from Congress and the Obama administration’s State Department to speed up the process. Rep. Jim Moran (D-Va.) pressed the IRS to move more quickly last year, as did senior State Department officials, but the IRS rebuffed both.

The groups are working on a variety of projects related to Syria,
including getting food, goods and services to Syrians, and fixing
infrastructure and communications equipment. Others seek to provide
emergency medical and humanitarian aid to Syrians.

Without a tax-exempt designation from the IRS, the Syrian aid groups are finding it more difficult to raise money from donors. People who donate to groups with a “pending” tax-exempt status can still deduct donations from their taxes, but are generally more cautious in doing so.

“Waiting over 26 months for nonprofit designation is not only unprecedented but directly impedes our access to reliable funding, threatens our ability to implement our programs and excludes us from services specific to nonprofits,” said Dr. Bushra Al-Aysami Sangid, who sits on the board of the Syrian Emergency Task Force.

Cassie Chesley of the same group added that without 501(c)(3) status from the IRS, her group and others have more difficulty winning grants from the State Department or the U.S. Agency for International Development (USAID). They can, however, still access federal grants through subcontracting agreements, and some federal grants do not require 501(c)(3) status.

The Syrian Emergency Task Force applied for 501(c)(3) status in March 2011, and has yet to hear any reason for the delay.

Another group, Syria Relief and Development, filed in November 2011 and just had their tax-exempt status approved by the IRS last week, but only after filing a lawsuit against the IRS last summer. According to the group’s co-founder and legal counsel Jomana Qaddour, the IRS asked the group to withdraw the suit and promised it would complete the application in six months.

But Qaddour said the IRS never offered any substantial reason for the delay.

“We’re OK to the extra scrutiny, we understand that you want to ask us thorough questions. But at least contact us, at least assign [the application],” Qaddour said. “They just basically said, ‘We haven’t gotten around to it.’ ”

Highlighting the importance of the status, Qaddour said her group won a “significant” grant just days after the IRS handed down its final decision.

The successful suit by Qaddour’s group could prompt similar actions.

James Warren, who has his own law practice in Washington, D.C., and has worked with some of the Syria groups, said U.S. law allows the option of legal action against the IRS once 270 days have passed with no result.

As of this week, six groups looking to help Syrians filed their tax-exempt status with the IRS at least 270 days ago. Three other applications were filed last November, from United for a Free Syria, Damascus Center for Human Rights Studies and Syrian American Alliance.

Greg McRay is president and CEO of the Foundation Group in Tennessee, which represents organizations that seek tax-exempt status from the IRS. The Foundation Group submits more than 1,000 applications to the IRS each year.

According to McRay, it typically takes about eight months before the IRS assigns an agent to review potentially problematic applications, a delay caused mostly by a backlog of applications.

But after that, the IRS agent can usually work with the applicant and clear the way for approval after two or three months.

While some applications can be approved in as little as six weeks, these applications usually involve groups with easy to understand and non-controversial programs, such as a basic charity. However, McRay said that charitable groups doing overseas work, especially in controversial countries like Syria, will always be closely examined.

Syria remains one of the four countries that the State Department views as a state sponsor of international terrorism, which would bring even greater scrutiny to applications involving this country. Still, McRay said applications should be completed after about a year, making the delays for Syria-related groups an exception.

McRay said he could not speak to why these groups might be facing delays at the IRS, but said his company did notice lengthy delays when it comes to the applications of conservative groups.

“We know that it’s real,” McRay said of those delays. “And some of more liberal groups did not get it. We can vouch for the fact that it’s real, we saw it.”

— This story was updated at 10:57 a.m.