Karamu House Has Non-Profit Status Revoked; Organization Has Applied to IRS to Have It Reinstated

In another blow to the historic Karamu House's attempts to rebuild after drastic budget and staffing cuts earlier this year, the theater has also lost its tax-exempt status. At least for now.

There are many questions, as there tend to be with Karamu, but here's what we know right now:

The IRS revoked the status after having not received an income tax filing for the last three years — 2013, 2014 and 2015. Karamu House was first alerted to the problem when a Scene reporter inquired about tax filings earlier this year for a story on the fiscal turmoil surrounding the historic playhouse. Tony Sias, newly minted CEO of Karamu, inquired about the absence of the filings online and discovered the IRS's posting notifying Karamu of the status.  

It has several important implications.

First, it means the theater would have to start paying taxes out of their already cash-strapped budget, donations are no longer tax deductible for now, and certain means of gaining income only available to 501(3)c groups are no longer accessible — for instance, money from Cuyahoga Arts and Culture.

According to a report by cleveland.com, Karamu House is already working to reinstate their non-profit status. On May 7 they reapplied for 501(3)c status with the IRS and to have the status retroactively restored to May 9.

How did we get here?

Sias, who became Karamu's CEO in September 2015, calls the mix up a one-time "snafu."

"It is my understanding that this has never happened before."

Reynolds characterizes it as "an unfortunate administrative oversight" during a period of transition following the departure of executive director Gregory Ashe in 2013.

The tax returns in question – for the years 2013, 2014 and 2015 – were completed by an auditing firm working for Karamu, "but not mailed," according to Reynolds.

That's not how Dana Willett, Karamu's former chief financial officer, remembers it.

"I put them in the mailbox," he said, at least the returns for the years 2013 and 2014. (He left the organization in February 2015, when he moved to South Carolina.)

He says he sent the Form 990s by "snail mail," not "return receipt requested . . . because, hell, we didn't have any money. I didn't wanna spend another $5 on postage."

"I'm baffled," says Patricia Egan, who took the reins of Karamu as interim executive director after Ashe left.

In the meantime, Karamu House continues to work toward reopening later this year. Right now services are suspended through the fall.