Center for the Arts 501(c)(3)

The IRS revoked the Center for the Arts’ 501c(3) status in May 2018.

The Internal Revenue Service has revoked the Center for the Arts’ tax-exempt status after failing to receive returns from the nonprofit for three years. But despite the IRS’ revocation, Center President and CEO David Rothman said he’s confident staff and the board of directors acted appropriately — and the Center will get its status back.

“We believe that the board reviewed and submitted the returns in a timely and appropriate way,” he said.

The revocation was announced to the public May 29 in a press release issued by the Center, though the nonprofit’s 501(c)(3) status was officially revoked May 15, 2018. That was posted to the IRS’ website March 11, after which the arts nonprofit was no longer eligible to receive tax-deductible donations. The 2018 date remains the effective date of the revocation.

Rothman said he was not notified of the revocation until May 8 because the IRS’s notice wasn’t tagged “by whoever saw it as being significant.”

“It was a form letter,” Rothman said. “As soon as we found out about it we jumped on it.”

The Center for the Arts may be required to pay some forms of income tax due to its loss of status, according to IRS documents. The Center is not able to receive tax deductible contributions for the period of its revocation.

Lost filings

The Center for the Arts has provided the News&Guide with the three Form 990s in question, for 2015, 2016, and 2017. They were prepared by Rudd and Company PLLC, a Driggs, Idaho, accounting firm, and signed by then-treasurer Valerie Brown (2015), controller Stephanie Shankland (2016), and Bill Waterman (2017), the current treasurer on Center for the Arts board. None of the documents provided were time-stamped.

Over the weekend, the 2017 Form 990 was posted by GuideStar, a nonprofit that provides information on charities, showing it was received Dec. 26, 2018, by the IRS office in Ogden, Utah.

The News&Guide requested an interview with Waterman and other board members, who either declined to comment, didn’t respond or directed questions to Rothman, who was not employed by the Center for the Arts at the time of the filings.

Rothman said he doesn’t know how the 2017 form got to GuideStar, but he confirmed that the date was in line with Center’s records. The Center switched fiscal years in 2017, and, because of the change, the document was filed late, triggering revocation from the IRS.

The reason the IRS does not have the 2015 and 2016 filings on file is unclear, Rothman said, emphasizing that the Center’s board followed its filing process. Form 990s are reviewed by the Center’s treasurer and staff before being reviewed by the finance committee and the executive committee, approved by the whole board and signed by the treasurer.

“It’s a serious matter,” Rothman said. “We take it seriously, and we take our obligations to the community and to all of our stakeholders very seriously.”

The reinstatement process

The Center for the Arts is working with Adler and Colvin, a San Francisco law firm that specializes in nonprofit law, and Jim Coleman, a local attorney, to get its 501(c)(3) status reinstated. If successful, that process would restore the Center’s tax-exempt status retroactively, effective May 15, 2018, meaning the nonprofit would not have a gap in either its status as a tax-exempt nonprofit corporation or its ability to receive tax-deductible donations.

The Center is planning to submit the required paperwork to kick off the reinstatement process in coming days, Rothman said.

That paperwork will include four sets of documents: completed returns for the three years that caused the revocation, a statement confirming the Center filed those returns, an IRS Form 1023 — through which nonprofits originally apply for tax-exempt status — and a statement explaining the organization had “reasonable cause” for failing to file a return for at least one of the three years in question.

Rothman said he was not able to discuss the “reasonable cause” document until after reinstatement, saying it would be “unwise of us to discuss it before the IRS renders its judgment.”

That document will “only become a public document once the IRS renders its decision,” he said.

The IRS is expected to respond to the Center’s reinstatement package within 180 days.

The immediate future

In the meantime the Center will continue operating as usual. Summer programming, including this weekend’s opening of “All That’s Left Behind” (see page 8), will not be interrupted.

“The main thing is dealing with our ability to fundraise and work with our donors,” Rothman said.

The Community Foundation of Jackson Hole has established a designated fund for the Center, a type of charitable fund that the foundation will manage while the Center’s status is being reviewed.

In short, it’s a holdover fund. At a point when the organization’s 501(c)(3) status is reinstated, any tax-deductible donations held by the community foundation will be transferred to the Center for the Arts. The same goes for any donations the nonprofit receives through Old Bill’s, in which the Center will be allowed to participate, said Karen Coleman, executive vice president and CFO for the Community Foundation of Jackson Hole.

Though the details of that fund are still being ironed out, its goal is straightforward.

The fund will provide the Center “a mechanism by which their current donor base can confidently make a tax-deductible contribution ... while also knowing it will still support the work of the Center,” Coleman said.

She said she is “confident” the Center will regain its nonprofit status and that the revocation “might affect the timing of when they received [an Old Bill’s] grant check, not [whether] they would receive it.”

Lease implications

Aside from tax-deductibility and fundraising, the revocation of the Center’s 501(c)(3) status brought up another issue: Its lease from the town of Jackson and Teton County.

Under the restated version of the agreement, effective June 15, 2016, the town and county may terminate the Center’s lease for its property on Cache Street if the center’s designation as a 501(c)(3) nonprofit corporation is “revoked” by the U.S. Treasury Department, parent of the IRS, and it “fails to have such designation reinstated within one year thereafter.”

In 2003, Teton County School District No. 1 transferred the property that the Center leases from the town and county to both parties through a warranty deed, under which the property is restricted to be used for “public purposes only.” If that term is determined to have been breached, ownership may revert to the school district.

Teton County and Prosecuting Attorney Erin Weisman, who was heavily involved in the negotiation of the Center’s 2016 lease, said although the center’s 501(c)(3) status has been revoked, she was not concerned about the lease or future ownership.

“I don’t think this would be an issue unless there was a clear misuse of the property,” Weisman said. “We don’t have that at this point.”

Because the Center has a year to have its tax-exempt status reinstated, Weisman said, Teton County has no lease issues with the nonprofit at this time.

Larry Pardee, the town of Jackson’s town administrator, echoed that.

“We encourage and support them for a speedy resolution of this matter so we can get them back and fully functional within the parameters of the lease agreement,” he said. 

Contact Billy Arnold at 732-7062 or entertainment@jhnewsandguide.com.

Scene Editor Billy Arnold covers arts and entertainment. He apprenticed as a sound engineer at the Beachland Ballroom in Cleveland, Ohio before making his way to Jackson, where he has become a low-key fan of country music.

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