IRS Pulls Tax Status of Slom's Nonprofit

By Essoyan, Susan | Honolulu Star - Advertiser, January 20, 2015 | Go to article overview

IRS Pulls Tax Status of Slom's Nonprofit


Essoyan, Susan, Honolulu Star - Advertiser


STAR-ADVERTISER / 2013

Sen. Sam Slom

A nonprofit foundation headed by state Sen. Sam Slom had its tax-exempt status revoked last year by the Internal Revenue Service for failing to file its federal tax return for three years.

Slom, the sole Republican in the state Senate and a staunch opponent of new taxes, is president of the Small Business Hawaii Entrepreneurial Education Foundation. He did not return phone calls to his office and cellphone seeking comment.

The foundation actually owed no taxes because it was a charitable entity, exempt from paying taxes as a 501(c)(3) organization recognized by the IRS. But it was required to file annual federal tax forms, which are open to public inspection to help ensure charities use their beneficial tax status appropriately.

Although the foundation hasn't filed a tax return since reporting $287,000 in revenues on its 2010 Form 990, it has continued to conduct business. Slom kept its registration up to date at the state Department of Commerce and Consumer Affairs, filing annual reports as recently as July, and holding events such as the annual SBH Business All Stars Awards Banquet in September 2013.

The foundation was a plaintiff along with Hono­­lulu­­Traffic.com and others in a lawsuit against the government over the Hono­lulu rail system in 2011 and actively solicited donations for that cause. That prompted a written complaint to the IRS by Hannah Miya­moto, who alleged that the foundation was abusing its favorable tax status by soliciting tax-deductible donations but using the money to benefit individuals, a non-exempt organization and a political campaign.

"The tax-deductible status is a privilege granted by Congress to encourage activities which are considered publicly beneficial, but you have to do what's required to qualify for those benefits," Miya­moto, a Hono­lulu attorney, said when informed about the revocation.

"Organizations that get decertified because they haven't filed 990 forms usually simply are not active and everyone dropped out," she said. "This is different. It's inexplicable. As a prominent legislator, he should know better."

In its last federal tax filing, for the 2010 calendar year, the SBH Entrepreneurial Education Foundation listed $287,853 in contributions and grants, and $225,928 in expenses. Its biggest payment was $101,100 to the online site Hawaii Reporter.

Malia Zimmerman was a founder, editor and owner of Hawaii Reporter as well as a director and secretary of the SBH foundation.

The foundation spent $60,000 on business forums that year. It described its mission as to "provide entrepreneurial information, training and education through publications, radio and television, public meetings, conferences, seminars and an interactive website in Hawaii."

With the revocation, the foundation is no longer eligible to receive tax-deductible contributions and may have to pay taxes on any income it receives.

Bob Sigall, vice president and director of the SBH Foundation, told the Hono­­lulu Star-Advertiser he was unaware that the organization had not filed tax returns because Slom handled its finances, and he referred questions to the legislator. …

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