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Benzaiten Center, Lake Worth Arts Project, Played Tax Status Puffery with Public [UPDATED]

Misrepresenting your tax exempt status when dealing with the public and public officials? Not cool. Having the IRS make whole your puffery after the fact? Priceless. Just ask the folks at the Living Arts Foundation -- the Florida non-profit that is sponsoring the Benzaiten Center for the Arts, a $1.75 million project that inked a contract earlier this week with the City of Lake Worth.

The Benzaiten sounds terrific: Take an abandoned beer warehouse by the FEC railroad tracks on the city's struggling west side and turn it into 22,000 square feet of exhibition and work space for sculptors, ceramicists and glassblowers. Living Arts Foundation founder JoAnne Berkow described it to Lake Worth city officials as "one of Florida's most innovative arts development, economic development, and community development projects."

Still, Lake Worth has a history of great-sounding plans going awry and, all respect to city officials and the Palm Beach Post, we wondered how deeply they'd dug into the proposal. We decided to have a look-see.

Call us cynical, but when we noticed Elizabeth Fago's name on the board of directors of the Living Arts Foundation our crap detector lit up. Fago's wheeling and dealing among local power brokers is legendary. But Betsy isn't the story, it turns out.

The other thing that caught our eye, and that turned weird, was LAF's tax status. (We also noticed, for what it's worth, that Berkow's husband, Steven Tendrich, is a big time real estate developer.) The Benzaiten website describes LAF as a 501(c)(3), which means contributors can write donations off their federal income tax. Very important for fundraising.

LAF said the same thing about its tax status to West Palm Beach officials when they pitched the Benzaiten Center idea there in 2012. They also had discussions with the City of Boynton Beach in 2011. (Berkow and company sure are persistent.)

Tax-exempt status is easily verified. The IRS website hosts a database listing all such entities; the website Guidestar does too. Neither LAF nor Benzaiten were anywhere to be found on either.

 

So we called JoAnne Berkow, who turns out to be quite the chatty Hattie. She readily admitted that LAF did not, in fact, have 501(c)(3) status and that such status is a key element of LAF's plans. She dismissed it as "a technicality," though, and blamed the IRS for foot-dragging.

"We applied to two years ago," Berkow said. "We're pretty sure we'll get approval any day now. It took a year and a half just to get to an agent."

Asked if the lack of tax-exempt status was problematic for the Lake Worth project, she said, "I don't minimize it. I'm on the phone to the lawyers every week...We should get approval any day now. All you gotta say is you gotta go through the process. We are waiting patiently."

When we suggested that it was, at the very least, somewhat misleading to claim tax-exempt status while it was only pending, she replied, "If we don't get a response [from the IRS] really soon we'll get an agency to fill the gap."

We asked what that meant and Berkow told us LAF has a parallel entity that is "under the umbrella" of the Gulf Coast Community Foundation, a well-established 501(c)(3). How tax-exempt contributions could come to LAF through Gulf Coast was not explained, however, and our queries to Gulf Coast about the matter were not returned.

That's where matters stood until late yesterday afternoon, when we got a phone call from LAF's chief fundraiser, Charlotte Pelton (wife of former PB County Business Development Board chief Larry Pelton -- it sure is chummy in the upper crust). Good news!, she announced: The IRS letter of certification had just arrived! It is with the lawyers!

We've asked Charlotte Pelton to provide us a copy of the IRS letter. (Gawd. Is there no trust left? After all, Pelton raises funds for virtually every major civic entity in Palm Beach County.) She has promised to do so. We assume she will.

The troubling facts that remain are these: 1) Tax exempt status is a critical element of LAF's plans, since the contributions on which the plans depend would be that much harder to solicit if contributors are not free to write them off on their taxes. LAF misrepresented that status, hoping for the best. 2) No public officials appear to have taken the time to confirm that LAF was, in fact, tax exempt -- and it was not, in fact, tax exempt at the time Lake Worth signed off on its deal.

[UPDATE: As promised, Charlotte Pelton provided us a copy of the IRS letter. She asked us to note the date on the letter, which she described as "well in advance of the approval by the LW City Commission." We note that the IRS letter is stamped Oct. 28. So the fact remains LAF's claims of 501(c)(3) status greatly predate the IRS certification: Their proposal to WPB was made in mid-2012, the proposal to the LW CRA Aug. 1. Beyond that, LAF founder/director JoAnne Berkow was unaware of the IRS letter when we spoke to her Friday, as was Pelton when we first spoke with her -- so it stands to reason the LW Commission was uninformed when it voted Tuesday. The commission took a shot in the dark and got lucky.]

All's well that ends well? This time. But to quote one of our great heroes, "Trust, but verify."

Fire Ant -- an invasive species, tinged bright red, with an annoying, sometimes-fatal sting -- covers Palm Beach County. Got feedback or a tip? Contact Fire.Ant@BrowardPalmBeach.com.




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