IRS Revokes Avon Township Community Foundation Tax Exempt Status

Avon Township Food Pantry loses 501(c)(3)

Due to repeated and continuous failure to file annual IRS returns or notices for a consecutive three-year period, the Avon Township Community Foundation had their 501c3 tax exemption revoked on May 15, 2012. This information was only recently made public including the notice being hand-delivered to the Foundation on March 20th. The Foundation has been scrambling to get reinstated since April 5, 2013. The biggest problem with losing the 501c3 status is that the Northern Illinois Food Bank may elect not to participate with them until they are reinstated. The reinstatement process is quite involved including “demonstrating that it had reasonable cause for failing to file a return or notice not only for each of the three years but also over the entire three-year period. Thus, for example, showing reasonable cause for failing to file a required return or notice for the first of the three years by the date it was due would be insufficient; an organization also would have to show reasonable cause for not filing that return or notice at any later time during the three-year period and for not filing required returns or notices for the second and third years of the three-year period”

Revocation of 501c3 May 15, 2012
Revocation of 501c3 May 15, 2012

Before I continue I want to mention that I first served a request on the “Foundation” that was originally rejected because they are not required to respond to FOIA requests. Knowing what I was seeking and after their attorney and board members had a discussion, it was decided to allow “full disclosure” within the limits required by public charitable organizations. Thus ATCF President Wendy Warden met with me at the recent Avon Township meeting and gave me a thick folder to review during the meeting, but no copies were given to me to retain. With about fifteen minutes to review them prior to videotaping the Township meeting, I was able to add some more valuable information in this article. Thank you, Wendy Warden and others who made a wise decision to be open and up-front.

During the handover of the packet of information, Warden continued to argue that “The AG (Attorney General) did not revoke their 501c3“. The problem with that argument is that neither the State nor the Illinois Attorney General issues the 501c3 exemption status but merely “refers” to them when a charitable organization files registration papers under the “Illinois Solicitation for Charity Act”. I had asked for a list of donors as well which was rejected by Warden saying that they were a “Private Foundation” and thus are exempt. Private foundations are the “exception” to the rule and must make donors names and addresses available upon request. Lucky for the ATCF they are actually categorized as a “Public Foundation” and ARE exempt from disclosing donors names. When the Foundation was notified of their acceptance, effective 3/24/2010, by the IRS, it clearly showed not only the type of foundation they were classified as but also mentioned an available 501(c)(3) Guide for Compliance which, like most owner’s manual, apparently went unread by the first three Directors, Sam Yingling, Wendy Warden, and Cynthia Haran.

Tagged as a Public Charity with reference to a 501(c)(3) Compliance Guide
Tagged as a Public Charity with reference to a 501(c)(3) Compliance Guide

The basic requirement of getting tax exempt status is that the organization is specifically limited in powers to purposes that the IRS classifies as tax exempt purposes. This limiting of the powers is crucial to obtaining tax exempt status with the IRS and then on the state level. You acquire 501(c)(3) tax exemption by filing IRS Form 1023. Even the Foundation’s By-Laws refer to the 501c3 as an IRS classification.
Purpose of Organization  refers to IRS code
Purpose of Organization refers to IRS code

March 2013 Avon Township Newsletter

At a recent hearing regarding the printing of the March 2013 Avon Township Newsletter, Lowell Jaffe reportedly made a comment that “Maybe the Avon Township Community Foundation paid for it”. If that had actually happened, which Warden strongly denies, they would have also been in violation of their exempt status “Section 501(c)(3) organizations are absolutely prohibited from supporting political candidates, and are subject to limits on lobbying. They risk loss of tax exempt status if violated”

Let’s Look at the Foundation’s Numbers

First I have included screenshots of the Form AG990-IL that are required by the State of Illinois. These summary forms merely pull numbers that an organization would normally end up with after filing the Federal forms, similar to when you file your IRS 1040 and only use the “Adjusted Gross Income” on the State tax form. They do not include any itemization or how the numbers were arrived at.

AG990-IL 2010 ~ $100 late fee paid
AG990-IL 2010 ~ $100 Late fee paid

AG990-IL for 2011 ~ $100 late fee paid
AG990-IL for 2011 ~ $100 late fee paid

I was shown the AG990-IL form sent in on March 15, 2013 for the fiscal year 2012 and the figures were as follows:
Year end amount: $19,390.17
Gross Revenue: $31,504.41
All Expenditures: $34,294.39

Keep in mind that the Board of Directors who serve for a period of ten years can also approve paying themselves a salary. With their records still not totally made public, those amounts if they exist, could be included in the above expenditures.

Recently Completed IRS Statement of Earnings & Expenditures

I’m not sure that is the title of the form I was shown but it included several years of income and expenditures. With little time to really examine its content I only grabbed the top figure in each column which showed gross donations amounts which were as follows:
7/23/2010 – 12/31/2010 = $16,577.93
1/1/2011 – 12/31/2011 = $44,616
1/1/2012 – 12/31/2012 = $31,505
1/1/2013 – 3/31/2013 = $1,538

Notice that the gross revenue being reported to the IRS for 2010 is $10,000 more than what was reported on the AG990-IL for the same year (screenshot above).

What Action Has Been Taken

As in most cases of mismanagement someone has to be the scapegoat. Keep in mind that when the Foundation received their IRS exemption back in 2010 the three then-current Directors were referred to the 501(c)(3) Compliance Guide. But it appears blame had to be placed somewhere. If you are a fan of The Apprentice you would know that in many instances The Trump places it directly on the team leader, which in this case would be the President of the Foundation, Wendy Warden. Instead, the attorney, R. Christopher Ditton (current Avon Twp. Assessor) was terminated on March 29, 2013 and replaced by a high priced attorney from 33 N. LaSalle Street in Chicago.

State Rep. Sam Yingling Receives Letter of Caution

The Foundation Treasurer, Sam Yingling (past Supervisor and now State Rep) was sent a “Letter of Caution for negligence while serving as Treasurer of the Foundation” for whatever that mild term means. In the letter, dated March 29, 2013, Yingling was also told the following: Your negligence may have impacted several thousand dollars of donations to the Avon Township Community Foundation that were made under the “auspices” of ‘non-profit’, including your own. Additionally your negligence may jeopardize our future fund raising abilities, our reputation, and most importantly our ability to help the most vulnerable.

Donors Claiming Charitable Deductions Ripe For IRS Audit

As the Foundation and their new LaSalle Street attorney scramble to get reinstated for the 501(c)(3) exempt status, many requirements (see item 5) must be met which again may put them in jeopardy of partnering with the Northern Illinois Food Bank. On April 5, 2013 the Foundation submitted a request to the IRS (notice I didn’t say the AG) asking for an expedited consideration for reinstatement. The IRS requires certain things for reinstatement including that “it had reasonable cause for failing to file a return or notice not only for each of the three years but also over the entire three-year period“. So, what was the excuse they used? The request said “Our (now former) attorney failed to notify me…..” and “The Foundation will make all restitution, pay fines, and file the appropriate forms to facilitate our exemption“.

What could those fees and fines amount to in addition to the already wasted $200 in late fee filing to the State? For organizations grossing more than $10,000 during the past four years, the amount could be as high as $850 plus the reinstatement fee of $100. The total loss to the community due to mismanagement could be in excess of $1,000 in fines and fees.

IRS 501(c)(3) Re-instatement fees
IRS 501(c)(3) Re-instatement fees

The Foundation will continue to appear on the revoked list even if they are reinstated. Before you consider donating to the Foundation in the future with the intent of writing off the amount on your tax return be sure to visit the IRS site that shows current as well as revoked organizations. You can switch between “eligible” and “automatically revoked” to see the results. Use their EIN number for your search which is 27-0478054

Exercise Due Diligence before you make a charitable contribution to any organization.

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