by Wesley Ratko
Moving the Chestnut Hill Community Association toward 501(c)(3) tax-exempt status moved closer to reality Thursday night after board members reacted positively to a presentation by attorney John Falco, from the law firm of Pepper Hamilton LLP. Under Falco’s leadership, Pepper Hamilton has agreed to represent the CHCA pro bono in this matter.
While details about the plan for the change in tax status are still being finalized by Falco and his team, the overall concept presented to the board involves splitting the two operating divisions of the CHCA – the Chestnut Hill Local and the Physical and Operating division – into two separate corporate entities.
Under this plan, the Local would continue to operate under the existing corporate body, and a new CHCA that would operate under a newly formed Pennsylvania nonprofit membership corporation and function as a tax-exempt public charity.
In order to obtain approval from the IRS, the community association’s bylaws will have to be modified and submitted to the IRS for review. Falco said that modification is a simple matter of removing any mention of the Local from the current bylaws.
“I don’t think it would change the way you operate,” Falco said.
The move toward establishing 501(c)(3) status is driven by a desire to expand the community association’s fund-raising efforts and make the CHCA eligible to receive grants and tax-deductible contributions, hold auctions and fund drives. According to Community Manager Celeste Hardester, the community association’s activities already include practices that are in keeping with those of a 501(c)(3), such as regular public meetings, transparent finances, providing public services, and no endorsement of political candidates or issues.
“I don’t know whether all of this is necessary,” said board member and former president Walter Sullivan, “but it may make it easier, quicker, and less controversial when dealing with the IRS.”
Both Sullivan and board member Mike Chomentowski expressed concern about whether the CHCA would retain control of the Local, something Falco said would not be an issue. The Local would operate with the new 501(c)(3) CHCA as its sole member, which would also appoint the governing board.
Board member Art Howe said that the easiest thing for the CHCA to do would be to set up the Local as a for-profit asset managed by the CHCA.
Howe believes that as a 501(c)(3) charitable organization, the community association would be eligible for to apply for journalism grants and foundation support.
“I’m thrilled that we could set up an organization that can apply for grants, get some resources, do some journalism,” said Howe. “It’s fantastic.”
Falco agreed with all that Howe said, saying it’s precisely what the Pepper Hamilton team is preparing for the CHCA.
Chomentowski asked about the Chestnut Hill Community Fund and whether there was any potential for conflict having two 501(c)(3) entities under the same umbrella organization.
“Funds can be received by either entity,” Falco said, “but there will need to be some communication between the two entities.”
“We should immediately move forward on this,” board member Richard Snowden said. “This is exactly the ticket.”
Falco said he would prepare a calendar of events that will take start the process. That will include a formal proposal that will need the board’s approval, creating a new Pennsylvania nonprofit corporation to be named the Chestnut Hill Community Association, submit the paperwork to the IRS, enter into cost sharing agreements between the Local and the CHCA, transfer assets from the existing entity to the new one, and rename the existing CHCA to reflect its activities as a newspaper.
Based on his past experience, Falco told the board he estimated a total of two years to complete the process, though he admitted it may not take as long.
The proposal will be presented to the board for formal approval next month.