Yesterday, you probably received an email from “SAEPOA Correspondence”. Although the email is signed by Richard Baker as President, recent history has shown that the likely authorship is Jerry Powers, our Vice President.
The email appears intended to create a panic in order get the members supportive of disbanding the Association in order to avoid problems with the IRS.
I believe that there are many flaws in the argument given, and I urge the members to avoid panicking and hasty action.
Let’s look at what is said and how it should be looked at soberly:
The email states that “the SAEPOA attorney has informed us” – in other words, we still only have the words of an attorney who only consults with Jerry (per his own words and the obvious statements from SAEPOA legal invoices). This is an attorney, not a court, nor the IRS. Futhermore, all information is filtered through Jerry, who has sought the dissolution of SAEPOA for years.
According to the lawyer hired by Jerry using the Association’s money, we are “at risk of fines, back taxes, interest and penalties that could well amount to hundreds of thousands of dollars.” What is very important to realize here is who is “we”. Is it us as individual property owners? No! Rather, it is we, as the not-for-profit incorporated SAEPOA. In other words, SAEPOA is running the risk, not us personally. Could SAEPOA be bankrupted? Yes, primarily if this board mismanages things! How does that affect us individually? Well, we would be no worse off than if we disband it and give the money away as Jerry wants. There is a chance that officers of SAEPOA could be held accountable if the IRS or a court finds some kind of malfeasance. However, this is the case whether SAEPOA is dissolved or not. To reiterate, this is what the alternatives look like:
- Dissolve – SAEPOA account is certainly and completely zeroed one way or another. Officers could still be held liable for their actions if the IRS decided we were in some kind of violation.
- Keep – SAEPOA continues operation — and only in the worst case, or by board decision — the accounts are zeroed or substantially diminished. Officers could also be held liable for their actions if the IRS decides there is a violation.
In the board email, the earlier statements are clarified, but in a way likely intended to alarm by stating that it “could result in the filing of liens against property and garnishment of funds from the Association’s bank accounts”. Please note that the action mentioned is against the Association, not individual lot owners. In other words, worst case, how is this any worse than dissolving the HOA and giving the assets away preemptively?
Perhaps one of the most egregious statements was how this “was discussed at our last member Zoom meeting on January 31.” The meeting was, frankly, designed to prevent any discussion of an open variety. Zoom was used as a tool to control dissent as many of us suspected. The link is included in the board email, and I suggest that you review it. In it you will see that:
- Richard, our president, only speaks for about two sentences, reading a prepared statement, and turning the meeting over to Jerry.
- From this point forward, Jerry does all presentation.
- The entire agenda and flow is oriented to move the membership towards panic, driven by the idea that the funds will be lost (by Jerry’s and the Board’s actions, which are likely not legal) and that there is a looming, if unclarified IRS problem.
- Dissolving SAEPOA is presented as the solution to the problem, although it is not made clear how it would really improve our situation.
- The only interaction allowed from the membership is through Zoom “hand raising”, and questions can be only be asked of Jerry.
- When Jerry responds, the members are muted, so that they can’t question or reply to Jerry’s responses.
- Chat was disabled to ensure no challenges there, either.
- At one point, Jerry even goes so far as to answer for the Attorney!
The authors of the email state that the board wanted to “reform the Association and get it back to legal operation and do some good things for the community.” This is just not credible. Any attempts to get back to legal operation were certainly not discussed with the membership (not surprising there). Regarding doing “good things for the community,” the statement is not in good faith. This board and the Working Group have shown a studious disinterest in community-oriented activities, whether that is starting a Young Eagles activity, or doing community events like the Santa Fly-In where not one board member or Working Group participant was even present.
The email goes on to very forcefully push for the dissolution of SAEPOA, claiming that we “risk the IRS fines, penalties and back taxes that all members will be responsible for.” This is intended to create panic–inappropriately. Again, worst case, the fines and penalties would only belong to the Association. Back taxes could potentially (and unlikely) be owed by individuals under the improbable scenario that the IRS decides to retroactively pursue individuals for claiming deductions for their dues as charitable donations. Such individuals would only owe tax on the adjusted amount. Since the dues is small, the deductions are small, and the backtaxes would be even smaller. Furthermore, it’s unclear if dissolving SAEPOA would remove that unlikely(and probably tiny) tax liability.
The board then goes to make the pitch that we are illegal, again, with the underlined statement that a “501(c)3 corporation can only spend money on the public at-large and must not benefit the members.” The IRS, however, can (and often does) interpret this fairly openly. Historically, the IRS has certainly not meant that doing action for public good must exclude the members. For example, the EAA is a 501(c)3, but it still does good for its members, all 250,000 of them! Jerry’s main objection is that the primary expense of SAEPOA was roads. Keep in mind, however, that even though we are a private airport, we are public use. Any aircraft can (and does) use the roads/taxiways, especially the aircraft residents of the commercial hangars. Harrison Ford nearly took off into me as he taxied out from one of roads/taxiways, and I don’t believe he is a SAEPOA member! We keep the roads open to the general public who regularly walk or drive through the neigborhood.
Consider that SAEPOA has operated for well over 30 years without problems from the IRS. Jerry questions whether we are in conformity with IRS requirements and is saying that we need to dissolve quickly. I am simply asking “why the panic now?” What is it that drives us to act with great haste and little discussion.
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