Why Did The IRS Revoke Friends Seminary’s Tax-Exempt Status?

by NYC Firm Schools on September 11, 2013

The NYC Firm Schools Blog has been focusing on Form 990 for all nonprofit NYC Firm Schools for the past few days. These schools are required by law to make the forms from the last three years available to anyone who requests them. Many websites such as GuideStar, Charity Navigator, and the Foundation Center provide copies of the 990 Forms for all nonprofit organizations, including NYC Firm Schools. Some non-NYC Firm Schools (e.g., Phillips Exeter Academy) post their 990 Forms on their own school websites.

So far, we have covered the forms for the following schools: Horace Mann, Collegiate, Dalton, Riverdale, Poly Prep, Brearley, Trinity, Spence, Chapin, Ethical Culture Fieldston.

When began researching the 990 Forms for Friends Seminary, “the oldest continuous coeducational school in NYC” (founded in 1786), we were surprised to find that the school did not have publicly available 990 Forms. Further research in Guidestar, discovered the following statement:

“This organization’s exempt status was automatically revoked by the IRS for failure to file a Form 990, 990-EZ, 990-N, or 990-PF for 3 consecutive years. Further investigation and due diligence are warranted.”

Through Friends Seminary’s EIN (13-5562223), we then confirmed this information through the IRS website, which indicated that schools’s federal tax-exempt status was revoked on May 15, 2013 and was posted to the IRS website on August 12, 2013.

We then reached out to Friends Seminary to clarify this situation and they provided the following statement (printed in its entirety):

Friends Seminary educates students from kindergarten through twelfth grade under the care of the New York Quarterly Meeting of the Religious Society of Friends.

Friends Seminary has the status of an organization described in sections 509(a)(1) and 170(b)(1)(A)(ii) of the Internal Revenue Code. The School has been classified as an organization exempt from Federal income tax under section 501(c)(3) of the Internal Revenue Code, and a letter dated November 1, 2007 confirmed this status. This letter re-confirmed that as the School is “a school below college level affiliated with a church or operated by a religious order”—the New York Quarterly Meeting of the Religious Society of Friends—it is not required to file Form 990.

Nevertheless, on April 15, 2013, a letter was received from the IRS inquiring as to why Friends had not filed Form 990 in 2011. Our external auditors promptly replied with a copy of the 2007 tax determination letter (referred to above) and offered to provide all other necessary information detailing our status. Unfortunately, this did not prevent the IRS from automatically revoking Friends’ tax-exempt status on August 12, 2013.

Our tax advisors from Loeb and Troper have determined that the revocation is an error by the IRS, activated by the inadvertent use of the School’s Employer Identification Number (EIN) by the Friends Seminary Teachers Association (FSTA) on a tax filing. The FSTA is an organization financially and administratively independent of the School. Our accountants have initiated the process for restoration of the School’s tax-exempt status.

Our auditors are working actively to ensure the restoration of our 501(c)(3) status with their counterparts at the IRS and have assured us that once the restoration of the section 501(c)(3) status has been made, it will be retroactive to the posting date of August 13, 2013. We are informing our community of this situation and will continue to provide updates as we move to restoration.

Our school is the same school it was on April 15, 2013, and Friends Seminary continues to meet the statutory definition of a tax-exempt organization. Friends is an outstanding school with a wonderful community of students, faculty, staff and families. We are excited to welcome 750 new and returning smiling faces today.

Our Mission
Friends Seminary educates students from kindergarten through twelfth grade, under the care of the New York Quarterly Meeting of the Religious Society of Friends. Through instruction and example, students follow their curiosity and exercise their imaginations as they develop as scholars, artists and athletes. In a community that cultivates the intellect through keen observation, critical thinking and coherent expression, we strive to respond to one another, valuing the single voice as well as the effort to reach consensus. The disciplines of silence, study and service provide the matrix for growth: silence opens us to change; study helps us to know the world; service challenges us to put our values into practice. At Friends Seminary, education occurs within the context of the Quaker belief in the Inner Light – that of God in every person. “Guided by the ideals of integrity, peace, equality and simplicity, and by our commitment to diversity, we do more than prepare students for the world that is: we help them bring about the world that ought to be.”

We will inform readers of the NYC Firm Schools Blog once Friends Seminary tax-exempt status has been restored.

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