Attorney-at-Law

MEMBERS ONLY

In Uncategorized on 09/09/2020 at 17:04

This non-uncommon feature of mutual-benefit organizations puts the kibosh on The Korean-American Senior Mutual Association, Inc., 2020 T. C. Memo. 129, filed 9/9/20.

KASMA was supposed to provide funeral expenses for the poor, but they had to be dues-paying members. They were also supposed to provide scholarships for worthy needy students, but never did. They were also supposed to provide social opportunities for the elderly, but their activities consisted of one (count it, one) dinner at a Korean restaurant.

STJ Diana L (“The Taxpayer’s Friend”) Leyden finds this is not 501(c)(3)-worthy.

” KASMA argues that it serves a recognized charitable class: the elderly. However, because KASMA did not provide burial benefits to the elderly without regard to their ability to pay their funeral expenses or establish that the membership application fee of $150 and the other annual fees of $300 to $350 constituted nominal charges, KASMA did not operate to serve the recognized charitable class of the elderly.” 2020 T. C. Memo. 129, at p. 18.

Now helping out old folks is a real 501(c)(3) purpose. But KASMA didn’t.

“… KASMA’s primary activity was not directed towards meeting the special needs of the charitable class, the elderly, by relieving distress or providing a community benefit. KASMA provided burial benefits only to its members who paid dues, not to non-dues-paying seniors in the community. If a member failed to pay the required membership dues for 90 days after receiving a written notice requesting payment, KASMA’s board of directors could terminate the membership and its obligation to pay any burial benefits.

“Additionally, the amount of the burial benefit paid was calculated on the basis of the number of years the deceased member had paid the other fees rather than the inability of the deceased member to pay burial expenses.” 2020 T. C. Memo. 129, at p. 21. (Citations omitted). Nor were these charges shown to be nominal.

KASMA argues equitable estoppel, because they amended their organizational documents like IRS told them. But that’s a mistake of law on IRS’ part, not misleading facts.

KASMA argued that taking away its 501(c)(3) status would hurt its goodwill and also cause it to be liable for NYC real estate taxes on its high-priced condominium.

I feel their pain. “KASMA purchased a new office condominium in Flushing, New York, on February 24, 2008, and paid the full price without a mortgage. On its Form 990 KASMA listed the book value of this condominium as $817,362.” 2020 T. C. Memo. 129, at p. 11.

I called STJ Di “The Taxpayer’s Friend.” As a NYC taxpayer, I think I got that right.

 

 

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