Originally published on Forbes.com Apr 16th, 2013
I really hate phony charities. There are a lot of reasons, but one of the main ones is that they jaundice the views of IRS agents making it hard to recognize the real thing when they encounter it. Rulings denying exempt status are a rich source of humor, but every once in a while, I’ll read one that screams at me that these people were legit and if I had been in charge the word would be to move on and fight crime some place else.
That is how I read PLR 201315037 . The ORG in question was dedicated to educating the public about feline retroviruses. It also took care of a lot of cats. The founder and president lived in the facility where the cats were cared for, which is what created the problems. The exempt status was revoked because there was a perception of inurement. Then there were the record keeping problems. A significant portion of the receipts documenting expenses were destroyed by cat urine. Given the nature of the facility that was understandable.
A tour of the residence yielded numerous felines with “free reign” of the apartment. The apartment consisted of 1160 square feet (ft 2 ) and included two (2) bedrooms, two (2) bathrooms, a kitchen, a living room, and a dining room. See EXHIBIT 2 for a copy of the floor plan from the complex’s website. Televisions were in both bedrooms and the living area. Only a minimum number of cats were confined to cages; the majority of the cats was not caged and was not confined to a specific room. The cats that were in cages were in the 13′ X 15′ bedroom; there were no other discernible uses for the bedroom.
Private letter rulings are anonymous, with large portions of the document redacted. This was absolutely the worst job of redacting ever. It took me about five minutes to identify the organization and just looking at the 990s really makes the inurement charge look pretty silly. According to the 2010 990-EZ, Joy Eubanks, the founder and executive director of Marley Fund, drew a salary of $9,000 from an organization that had over $400,000 in cash on hand at year end. The inurement issue was all about her living with the cats. The IRS did not think that the sick cats required 24 hour coverage. I guess they got that from the cat care instruction that came after the Star Trek video.
Ms. Eubanks IRS nightmare began as a dream come true. Since her cat Marley died while she was in graduate school, she had dedicated herself to the issue of feline retrovirus. You can learn a lot about it from this website. I have to say that if you are not a cat lover, you might find this video a bit over the top, but it gives a good idea of the sincerity behind the organization.
The dream come true was a large bequest from a man named Emil Campbell that was shared among several cat charities. That made the exempt status of Marley Fund of interest or “put it on the radar” as Ms. Eubanks put it. Ultimately, the bequest turned out to not be a blessing. As Ms. Eubanks put it:
Thank you for inquiring. In 2009 Marley Fund was left a bequest of well over a half million. The IRS came after it and between them and the horrid attorneys we had they got it all. The cats got nothing. They stomped all over my life’s work and heart. It was the saddest day of my life.
She has worked out a way to keep the work going:
We will never give up and will always help the cats, there is nothing I will not do to keep going, there are too many little furry faces to take care of.
Sadly, she does not believe that there are enough resources to appeal the decision to Tax Court. I don’t know if there are any tax attorneys in my readership, but if there is one that loves cats, it would be great if you could step up.
You can follow me on twitter @peterreillycpa.
Planning Note
If you are thinking of making a large bequest to a small charity, you might want to consider whether they have the infrastructure in place to deal with it. It may be that if Mr. Campbell had left money to a community foundation with instructions to support the small charities, more would have ended up with the cats.
You can follow me on twitter @peterreillycpa.