IRS fines Steamboat’s Education Fund Board $168,700
Penalty is for failing to file for 4 years; members to consider hiring tax attorney to contest action
November 30, 2010
If you go
What: Education Fund Board meeting
When: 5:30 p.m. Wednesday
Where: George P. Sauer Human Services Center on Seventh Street
Steamboat Springs — The Education Fund Board has been penalized nearly $170,000 by the Internal Revenue Service for failing to file its annual tax return for four consecutive years.
The Fund Board revealed after an executive session June 2 that its accountant did not file the nonprofit's annual Form 990. It was revealed the next day that the return had not been filed for tax years 2006, 2007, 2008 and 2009.
Since that time, all returns have been filed for the group, which allocates the city of Steamboat Springs' half-cent sales tax for education.
According to a Nov. 22 letter to the IRS signed by Fund Board President Kristi Brown, the IRS notified the volunteer group that it owed penalties totaling $168,700. The information came in four notices dated Nov. 8.
"It's not at all what the taxpayers or the Fund Board members want to see this money get spent on," Brown said Tuesday.
As a nonprofit group, the Fund Board does not pay taxes, but it is required to file an annual tax return that includes reporting information such as revenue and contributions, according to the IRS website.
The website indicated that a nonprofit group with receipts in excess of $1 million could face $100 daily penalties for late tax return filings, with a maximum of $50,000 annually. Brown said the Fund Board is forecasting the tax to generate about $2 million for the 2011-12 budget cycle.
The board's letter asks the IRS to rescind the penalties based on the Fund Board's creation as a nonprofit that provides funds to enhance K-12 education; its lack of awareness that the returns weren't filed; and its quick action to file the returns, relieve former accountant Paul Strong of his duties, hire a new accountant and hire a new auditor.
Since it was revealed the returns weren't filed, Strong has not returned telephone calls requesting comment. He couldn't be reached Tuesday.
Brown said the letter is the first step in getting the penalties reduced or waived, which is a possibility, according to the Fund Board's attorney and new accountant. She said if the IRS maintains the penalties, the next step is a formal appeal.
At tonight's meeting, the Fund Board is scheduled to consider hiring tax lawyer Christopher D. Freeman, of Rothgerber Johnson & Lyons LLP in Denver. According to a letter from Freeman, his hourly rate is $230. The letter stated that colleagues or legal assistants, who range in cost from $65 to $500 an hour, could assist him if the appeal is necessary.
If the IRS waives the penalties, Brown said Freeman's services won't be needed.
"We definitely don't want to overreact," she said. "I would hate for everybody to get all worked up about it and upset about it when our penalties could be reduced or eliminated."