About four months after it applied, the Center for the Arts announced that its tax-exempt 501(c)(3) status has been reinstated by the Internal Revenue Service.
The Center’s revocation was triggered after the IRS failed to receive three consecutive years of Form 990 returns, documents that serve as tax returns for nonprofits. In separate documents submitted to the IRS for the purpose of reinstatement, the Center described its failure to file as mismanagement and a lack of communication on the part of its former certified public accountant, the regional firm Rudd and Company, PLLC.
Rudd and Company did not respond by press time to several requests for comment.
The reinstatement, effective Oct. 24, is retroactive to the date of the revocation, May 15, 2018.
“We’re clean as a whistle here,” President and CEO David Rothman said, there’s “not one minute when we have to account for not being a 501(c)(3).”
Donors are unable to make tax-deductible contributions to nonprofits during a period of revocation or to organizations that have their status permanently revoked. Retroactive reinstatement, Rothman said, allows the Center to collect donations received during its revocation, which were funneled into a designated fund overseen by the Community Foundation of Jackson Hole.
Karen Coleman, the foundation’s executive vice president and chief financial officer, said this was the first time her organization had set up such a fund.
“There hasn’t been a need before to step in in this manner,” Coleman said. “We felt it was important to support the Center as an important nonprofit in our community, both in and of its own right, but also for all of the resident nonprofit organizations” housed inside.
At the end of the Center’s 2017 fiscal year it was managing nearly $30 million in assets.
The Center was able to conduct business as usual during its revocation. It held a summer of “Center Presents” concerts and participated in the Old Bill’s Fun Run for Charities.
Center says CPA at fault
The Center laid out its “reasonable cause” for failing to file three consecutive years of returns in an IRS document Rothman sent to the News&Guide. Fault was, more or less, pinned on Rudd and Company, the Center’s former CPA. See the online version of this article to access the full 100-plus page document.
In 2016 the Center retained the firm to, among other things, prepare and file its yearly 990s.
While preparing the first return in question — the 2015 990 — the CPA claimed to have sent a paper copy of the return to the nonprofit for review, signature and mailing, according to the “reasonable cause” document. In that report the Center claims it had “no record of this request, nor a record of a signed return or delivery receipt.” The Center also claims similar events happened while filing the 2016 return, which the CPA said it submitted but the IRS has no record of, and the 2017 return, which was submitted over a month past an extended deadline.
“The CPA apparently failed to file two returns [and] missed the extended deadline of the last return by over a month,” the nonprofit’s “reasonable cause” document reads, failing to “inform the Center of any problems in filing” in a “timely” manner.
New system, new CPA
In the same statement the Center stated it “reasonably believed that the professional accounting firm it had retained to prepare and file the 2015 return had done so, as its accountants had in the past.” The nonprofit said the same about its 2016 and 2017 filings.
But returns in all three years weren’t filed by the appropriate deadline, which begs the question: Why wasn’t a system in place to ensure returns were filed appropriately?
Rothman — who was named the Center’s president and CEO in January 2019, after these reports were due — chalked that oversight up to a lack of process common in younger organizations. The Center has been operating in its current location since 2007. It is over a decade old.
“I think it’s pretty clear we had to institute a very careful document-tracking policy,” he said, adding that, as the Center becomes a “more mature organization,” there’s need for “more mature mechanisms for policy and protocol and procedure to make sure everything’s getting done the way it should be.”
The “reasonable cause” document outlines some steps the Center is planning to prevent a recurrence of such problems, including policies to oversee the work of CPAs. Rothman, who said the Center is working on its 2018 return, provided a specific example.
That document will be reviewed by the finance committee and board before being voted on and signed. Each step of the process will be documented.
“All of our document-retention and tracking and organization policies are — I promise you — as tight as a drum now,” Rothman said. If he doesn’t get a response from someone about the yearly tax filings, the CEO quipped that he is “going to go out and superglue that 990 to the windshield of their cars.”
The Center signed the accounting firm Eide Bailly LLP as its new CPA. Rothman said the new firm has been closely involved in preparing the 2018 990.
Rothman said his vision for the Center is to move from executing day-to-day activities — hosting concerts and art exhibits as well as housing other nonprofits — to “management 2.0,” a period in which more attention will be paid to the organization’s behind-the-scenes operations, as well as long-term strategic planning.
“We’re incredibly grateful to everyone for all of their support, moral and material, throughout the whole process,” he said. “If anything, it’ll help us become a stronger organization.”