Sunday, March 09, 2008

Edith Wharton to IRS: "Mount This!"

Failure to report 'fringe benefits' could leave CEO, Trustees at The Mount liable.

Stephanie Copeland, president and CEO at Edith Wharton Restoration, Inc. (EWRI) has been associated with The Mount for years and years.
She's even had the honor of receiving a Preserve America Presidential Award given her in 2005 by Pres. George W. Bush.
She resides in Stockbridge, and during the long Berkshire winters when business at the Lenox attraction is slow, Ms. Copeland continues her organization's fund-raising efforts 150 miles to the south in mid-town Manhattan, where she stays for extended periods.
Ms. Copeland's annual salary at $97,116 is considered respectable for Berkshire County (median income for a household here is $39,047).
Yet, according to the Manhattan telephone directory, it is not Ms. Copeland but rather EWRI to which a phone at 500 West 56th Street is listed.
Trouble is the 20-story building at that address, The Westport, billed as "One of the Premiere Luxury Rentals in New York City," is a residential apartment complex.
(The Westport's units include studios starting at $2,695 up to 2-bedrooms starting at $5,595 monthly.)

Photo: President George W. Bush and Laura Bush present the 2005 Preserve America Presidential Award to members of the Edith Wharton Restoration in the Oval Office Monday, May 2, 2005. They are, from left, Barbara de Marneffe, Co-Chairman, Board of Trustees of Cambridge, Massachusetts, and Stephanie Copeland, President and CEO, of Stockbridge, Massachusetts. (White House photo by Eric Draper)

When a call was made today to The Westport, the fellow answering in the leasing department confirmed that the building is zoned residential, and that it is not an office building nor is it supposed to lease to commercial tenants.
Dialing EWRI's Manhattan number generates a series of different rings and ultimately forwards the caller to what sounds like a distant fax machine or computer.
First off, why is a not-for-profit organization maintaining an expensive NYC branch office when it's millions of dollars in the hole, and for years has had severe cash flow problems?
Next, since EWRI allegedly maintains this outpost for purposes of fund-raising, why are its offices in a residential building?
Finally, even were there a legitimate business rationale for The Mount to maintain an expensive perch so far from its Plunkett Street base, should the organization be subsidizing a space that doubles as overnight lodging (or longer-term accommodations) for a favored few?

Photo: Stephanie Copeland in front of The Mount, Lenox, Mass. -- Credit: Nathaniel Brooks for The New York Times.

Under regulations governing tax-exempts, accommodations bought and paid for by charity organizations aren't free for the personal use of organization officials.
They're considered a taxable fringe benefit.
Those getting use of them owe extra federal income tax, and all information relevant to those transactions is supposed to be reported to IRS.
If EWRI is not reporting such transactions, or is reporting them inaccurately, then EWRI is running afoul of IRS regulations (in addition to its other current woes).
In looking at EWRI's most recent annual Form 990 filings, for fiscal 2007, 2006, and 2005, EWRI has reported to IRS that it paid zero dollars towards 'expense account and other allowances' going to EWRI's "Current officers, directors, trustees and key employees".
IRS defines 'expense account' as including any taxable fringe benefit or perquisite paid to the recipient.
Organization-provided lodging has a value and it's supposed to be calculated using what it would cost to obtain similar lodging at fair-market prices in an arm's-length transaction.
Using The Westport's published rental figures above as an arm's-length, fair-market guide, that would mean the benefit recipient owes federal income taxes on the value of a month's stay as if that recipient were getting paid by EWRI an extra $2,700 to $5,600 monthly.
Like I said, all this data is supposed to be -- is required to be -- reported annually to IRS on EWRI's Form 990, Part V-A.
Likewise, it is supposed to be duly noted in another section of Form 990, specifically in 'Schedule A, Part III' where the preparer is asked whether the organization furnished 'goods, services, or facilities' to 'trustees,' 'officers' or 'key employees'?
EWRI has annually reported 'No'.

The Westport at 500 West 56th Street offers luxury residential apartments in Mid-town Manhattan.

In addition to the issue of providing faulty information to IRS (which is concerned with the obvious possibility of tax evasion by those whose perks are not being reported), there is also the matter of 'self-dealing', the furnishing of services to a foundation trustee or manager without charge or at a price below fair market value.
In cases where IRS determines that self-dealing has occurred, the agency can level on the offender an additional five percent excise tax on each act of self-dealing.
As additional punishment for allowing it to happen, the agency can level an excess benefits excise tax on an organization's entire board.
It is quite clear that EWRI's board of trustees, its CEO, and its auditor need to explain what exactly is going on with EWRI's mid-town pied-à-terre. <<<<<
(Editor's Note: The author's familiarity with IRS regulations as they apply to tax-exempt organizations came about as the result of an extensive investigative report written in 2006 about the failure of another Berkshire 'not-for-profit', WAMC Northeast Public Radio, to report to IRS the taxable fringe benefits and perks paid to its CEO over the course of twenty-plus years. See: "TAX CHEAT! How Alan Chartock conspired with WAMC to avoid paying IRS".)

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Blogger Hades said...

The writer seems oblivious to possibility of his/her remarks being deconstructed, baring motives like Freudian slips. Why does he/she care about Ms Copeland's residence in NYC--are readers not supposed to ask the question? What obvious animosity rather than disinterestedness toward the subject. And then, how does G.M. Heller know who pays for the New York residence in The Westport. That really is the crux of the matter--and that Heller doesn't seem to know, nor whether Ms Copeland uses it as a tax deduction. What bad karma Heller emits, and what suspicions he/she raises as to motives. If I were Ms.Copleland I'd look into a libel suit. In any case, to discerning readers, it may be Heller who raises questions.

Friday, April 04, 2008 10:55:00 PM  
Anonymous Anonymous said...

Alan Chartock of WAMC in Albany owns an apartment on the Upper West Side of Manhattan. He bought it a couple of years ago, while begging for bucks from the little guys in The Berkshires. When he said recently on the radio that he was staying in a place in New York, he carefully avoided saying that it is HIS place that he bought cut-rate from an elderly woman--tidy investment to make, using your community connections. He continues to carefully omit this ownership with his regularly self-serving anecdotes (I, I, I, Me, Me, Me). He's no poor guy looking out for the poor guy--he holds a grudge, determines people's worth by money and is a nasty little man to be around.

Wednesday, June 18, 2008 10:36:00 PM  

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