by Kevin Dicciani
A split appeared in the board of the Chestnut Hill Community Association as its directors failed to approve a new set of bylaws needed to finalize the organization’s nonprofit 501(c)(3) status.
At the March 26 board meeting, Bob Rossman, board treasurer and co-chair of the Bylaws Committee along with Julie Byrne, moved that the bylaws be adopted, only to have the proposal spiral into nearly an hour and a half discussion that revolved around the level of control the organization will retain over the Chestnut Hill Local when it becomes a nonprofit.
If the CHCA were to become a 501(c)(3), it would split with the Local, which would remain a Delaware corporation, while the community association would become a new Pennsylvania corporation. In this new organizational structure, the CHCA would qualify for tax-deductible donations and grants, and would be exempt from certain federal income taxes.
Because of this, the CHCA would not be able to transfer funds with the Local as easily it does now, although, in its proposed bylaw changes, the CHCA board would be entitled to approve the Local’s annual budget and receive two budgetary reports from it twice a year.
Ceding complete control over the Local has been a major point of concern for the board throughout the process of changing the bylaws.
Board member Richard Snowden said that just having oversight and not being able to take action with regard to the Local’s finances is a “real concern.”
“What we are really doing here is spinning off our most valuable asset for stock,” Snowden said. “It’s an asset with a substantial amount of cash on its books right now, and from my reading on this, I don’t see a lot of it coming to this organization.”
Snowden said that, at this time, the CHCA can direct the Local’s finances. If the CHCA is in need of money, they can request money from the Local. Conversely, Snowden said, if the Local were to ever be in need of financial support, the CHCA would have the ability to give the organization money.
Under the new structure, Snowden said, this would no longer be a possibility.
John Falco, a Hill resident and attorney with the firm Pepper Hamilton, who provided guidance for the CHCA as it worked towards 501(c)(3) status, said throughout this whole process there was the knowledge that, in order to get the benefit of a tax-exempt status and to receive grants and donations, “you could not run two organizations.”
“So, it really is a fundamental question that you’re asking,” Falco said. “Do you want the benefit of tax-exempt status and having to cede the control that this board has, or do you want to operate as it is?”
Snowden said the board was willing to cede control, but that it “needs to receive a return on our investment.” Continuing, he said “no one is in more favor of 501(c)(3)” than him, the first person to make a motion to become a 501(c)(3), and that he was only concerned with the terms of the deal.
One idea that was proposed would take the form of a one-time, lump sum settlement. When two organizations, one that has a fiduciary responsibility to the other, there can be a contribution made from one to the other. The settlement would be directed to transfer over from the Local to CHCA, before it becomes a nonprofit.
With time being cut short, and a surplus of information still left on the floor, a motion was made to terminate the discussion, which needed two-thirds of the votes to pass. The motion didn’t carry, with 11 members opposed to terminating the discussion and only eight in favor of it.
A special meeting will be called to carry on the bylaw discussion before the CHCA membership casts its vote for or against the 501(c)(3) on April 23.
Ed. Note: In the print version it read that the CHCA would not be legally permitted to transfer funds with the Local if it became a 501(c)(3). It can, in fact, but it cannot simply give the Local money, instead requiring that the organization formally loan it the funds.