Nonprofits face new IRS filing regulations

Doug Sauer is CEO of the New York Council on Nonprofits and chairman of the National Council of Nonprofits. He says many organizations were caught unaware of the change.

"There are legal responsibilities attached to creating the corporation, but sometimes people create the corporation and are not aware of the responsibilities, both tax reporting and liability to board members," he says. "That's why you're seeing this from the IRS."

The law passed in 2006 requires most tax-exempt organizations, other than churches, to file a yearly return or notice. Noncompliance for three consecutive years can result in the organization automatically losing its tax-exempt status, which in turn means an organization must file income tax returns and pay income tax and its contributors will not be able to deduct their donations.