story by Emily Hilley-Sierzchula and Michael Tilley
An organization that raised $10,000 at a fundraiser in February is not recognized as a tax-exempt 501(c)(3) organization by the Internal Revenue Service or as a charitable organization by the state of Arkansas.
Although another similar fundraiser is planned for August, the IRS has no record of 990 tax forms from any year that were filed by the Northwest Arkansas Arts Foundation. The Arkansas Attorney General’s office has said it will contact the group about their status.
Every tax-exempt organization is required to file 990-type forms annually, according to IRS publication 557.
The NWAAF was founded in 2011 by dance apparel store owner Kat Barlow, her husband Matt Barlow, and Donna Hamilton, of Fayetteville. The organization, which has a post office box in Springdale, seeks to “enhance lives through performing arts,” according to its website. In almost two and a half years since incorporation as the NWAAF, the organization has held a few ballet classes, a Nutcracker performance and Talent Wars, their “first signature event,” according to the NWAAF.
At the Talent Wars event in February, Kat Barlow said the proceeds would be split into three areas: sponsorships and scholarships, covering the cost of bringing in master classes, and a testing facility to precede the organization’s long-planned “performing arts center.”
Instead of being split into thirds, however, the $10,000 “went toward covering the event costs,” Barlow said in April. “Then we’ll do it again.” The proceeds came from ticket sales, sponsorships and donations, Barlow said in February. Barlow sees “two major signature fundraisers a year” in the organization’s future.
Tickets to Talent Wars, which were later discounted, were $60 per person, $100 per couple, and $500 per table. Credit card payments for tickets to the fundraiser were processed by Barlow’s apparel store, not the NWAAF, according to the NWAAF website. Around 200 people attended the fundraiser. Arvest was a main sponsor and the Fayetteville Chamber of Commerce was also represented.
Barlow said she talks to the IRS weekly, but goes through customer service and talks to someone different each time. After two and a half years the organization does not have a caseworker. The IRS has an office in Fayetteville with three caseworkers on staff. Accountants and attorneys who spoke with The City Wire said obtaining the proper IRS status for non-profit fundraising takes less than a year, with the average time being less than nine months.
Barlow said her organization has “provisional status” with the IRS and that she calls every week to check on the status of her nonprofit paperwork. However, the IRS recognizes two application statuses on its website: pending and accepted; no “provisional” status is mentioned.
“They just called me and said you can say it’s provisional,” Barlow said.
She could not name the IRS person who pronounced her organization “provisional” and she said there is no associated paperwork from the IRS.
At the event in February, Barlow detailed what she called the “saga.”
”We’ve been confirmed by the IRS that yes we’re going to get it (tax-exempt status), but we’ve had a little saga with getting it. Our paperwork was lost by the IRS twice, then got delayed with the IRS scandal, then the check was six months out of date so we had to re-issue it,” she explained.
In February, NWAAF co-founder Donna Hamilton agreed with Barlow that the “saga” was almost over.
“The 501(c)(3) is almost finished, finally, thank the Lord. We got the notice the other day that the check time had expired because it had been so long. She sent them another one and they said it would be very shortly so we’re in good shape,” Hamilton said.
Still sans paperwork two months later in late April, Barlow claimed to hate the “limbo” she is in.
“We’re supposed to have it (paperwork proving nonprofit status) here any day, but with it being tax time, it might take longer,” she said.
In 2012 she told a Northwest Arkansas Business Journal reporter that construction on the performing arts center was planned by that year’s end. In April she said the plans now are to open a testing facility the summer of 2014, and the performing arts center a year after that. The NWAAF is just now starting a “capital campaign” to raise money for the building, Barlow said.
The NWAAF is not registered as a charitable organization with the Arkansas Attorney General’s office.
“When The City Wire brought this group to the attention of our office, the Attorney General’s office (said it will) send a letter to the NWAAF stating that it has come to our attention that they are raising money and thus may be required to register under the state’s charitable registration statutes,” said Aaron Sadler, spokesman for the office.
The Attorney General oversees state law related to the required filing of charitable organizations operating in the state.
“Arkansas law requires a charitable organization to register with the Attorney General prior to engaging in any of the following: soliciting contributions, using fund-raising counsel, paid solicitors, or professional telemarketers, or conducting a sales promotion,” notes a PDF from the AG explaining the process.
Charitable organizations filing with the office are required to submit the following items:
• Charitable Organization Registration Form (Form CR-01);
• A copy of the appropriate Internal Revenue Service tax-exempt status form or pending
• A copy of the organization’s Articles of Incorporation;
• An executed Consent for Service (Form CR-02), if applicable;
• A copy of Arkansas’s Annual Financial Reporting Form (Form CR-03), including all required documents; and
• A copy of current contracts with any paid solicitors, fund-raising counsel, or commercial coventurers.
Sadler said there is no penalty to an organization if they are not claiming that donations are tax-exempt. However, any organization not properly filed yet tells donors that the donation is tax exempt may be in violation of Arkansas’ deceptive trade practice rules. Depending on the merits of the case, a civil penalty of up to $10,000 could be levied for each violation.
Barlow and Donna Hamilton told The City Wire in an interview that the donations will be tax deductible, even for prior year donations, once the IRS approves their 501(c)(3) status.
Arkansas law also requires a charitable organization, irrespective of its status with the IRS, to file annual financial reports with the Attorney General’s office. Again, no such records have been filed with the office related to the NWAAF.
There are exemptions to filing as a charitable organization with the state. For example, an organization may be exempt if it receives less than $25,000 during a calendar year and the fund raising is managed by those who receive no benefit from the fund raising or “no part of its assets or income inures to the benefit of, or is paid to, any officer or member.”