What happens when a club loses its non-profit status?
January 19, 2023 | 50,00 EUR | answered by Siegfried Eckstein
Dear tax consultant,
My name is Gerald Köhler, and I am the chairman of a non-profit organization. Over the past few years, we have made a concerted effort to maintain the tax-exempt status of our organization and comply with all tax regulations. Unfortunately, we have recently learned that there may have been irregularities in the accounting and use of the organization's funds.
These news are causing me great concern, as I fear that our organization may lose its tax-exempt status. I am wondering what specific consequences a loss of tax-exempt status would have for our organization. Would we have to pay back taxes retroactively? Or could we even face criminal charges?
I am willing to do everything in my power to maintain the tax-exempt status of our organization and avoid any potential legal consequences. Are there any possible solutions or steps that we can take as an organization now to clarify the situation and prevent any damage?
I thank you in advance for your help and advice on this matter.
Sincerely,
Gerald Köhler
Dear Mr. Köhler,
Thank you for your inquiry and your trust in my expertise as a tax consultant for association taxation and non-profit status. It is understandable that you are concerned about possible irregularities in the accounting and use of association funds and the consequences this may have for the non-profit status of your association.
The loss of non-profit status can have serious consequences for your association. Firstly, in this case, your association would become retroactively liable for taxes. This means that you would have to pay taxes on all income and expenses of the association that were previously tax-exempt. These back payments can be substantial and financially burden your association.
Furthermore, there could be further legal consequences, especially if the violations are intentional or grossly negligent. In such cases, both the association and the responsible board members could face criminal charges. Therefore, it is very important to clarify any possible irregularities as soon as possible and, if necessary, take appropriate measures to prevent damages.
To maintain the non-profit status of your association and avoid possible consequences, I strongly recommend conducting a comprehensive internal review of the accounting and use of association funds. You should review all relevant documents and consider involving external experts to uncover and rectify any violations.
Furthermore, you should immediately contact your tax office and disclose any irregularities. Together with the tax office, you can then develop possible solutions to maintain the non-profit status of your association and avoid legal consequences.
I am available to support you in this process and recommend further concrete steps. Please do not hesitate to contact me to arrange a consultation appointment.
Best regards,
Siegfried Eckstein
