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September 26-October 2, 2002 city beat Secret Service
Nonprofit group Citizens Alliance keeps it on the down-low when it comes to its for-profit enterprises. Getting information out of Citizens Alliance for Better Neighborhoods, the secretive multimillion-dollar nonprofit controlled by staffers and allies of State Sen. Vincent J. Fumo, is like pulling teeth. The organization’s response to inquiries into its real estate holdings in South Philadelphia is no exception. In the past two years, Citizens Alliance has set up for-profit subsidiaries that have purchased 16 properties along Passyunk Avenue. As reported in the Daily News last week, the real estate purchases are noteworthy because a City Council bill was recently introduced by Fumo allies Frank DiCicco and James Kenney to create a business improvement district in the area. Citizens Alliance is a nonprofit whose official goal is improving public health and safety in Philadelphia. In the past it accomplished its mission with an arsenal of street sweepers and an endowment of nearly $10 million in anonymous contributions and state grants. So why is it setting up for-profit subsidiaries to invest in real estate? After all, it is not uncommon for nonprofit organizations to directly invest in real estate as well as stocks and bonds. According to Bennett Weiner, Chief Operating Officer of the Better Business Bureau Wise Giving Alliance, a national charity watchdog based in Arlington, Va., setting up for-profit subsidiaries is not unusual. And it's ethical, Weiner says, as long as the for-profit entity is "free of any conflict of interest." In keeping with Wise Giving Alliance's voluntary standards, Weiner says, "we would certainly be interested in finding out about a transaction if it involved a family member of someone on the board, say a spouse or son or daughter." Weiner was speaking in generalities, not knowing that Citizens Alliance founder Frank DiCicco's son Christian is the CEO of CA Holdings, Inc., the for-profit subsidiary of Citizens Alliance, or that Fumo staffer Ruth Arnao serves as both executive director of Citizens Alliance and as secretary-treasurer of CA Holdings. Although IRS spokesman William Cressman is prohibited by law from discussing specific taxpayers, he offered a general explanation regarding tax-exempt organizations that engage in business activities with taxable for-profit organizations. "Tax-exempt organizations are not prohibited from engaging in business activities with for-profit taxable organizations -- even when the leadership of those organizations are closely affiliated. Although business activity of this type is not common, it would be wrong to presume that it is inappropriate. Facts and circumstances, and an analysis as to how such a relationship furthers the organization's exempt purpose, play a critical role in evaluating the propriety of such activities. Form 990, Schedule A, Part III requires exempt organizations to disclose these activities so that the IRS is better able to evaluate the specific facts and circumstances." But according to Citizens Alliance's most recent Form 990, the IRS filing required of tax-exempt organizations, no explanation is given. The tax form asks whether the nonprofit has, "either directly or indirectly, engaged in any of the following acts with any of its trustees, directors, officers, creators, key employees, or member of their families, or with any taxable organization with which any such person is affiliated as an officer, director, trustee, majority owner, or principal beneficiary." While the tax form requires that filers "attach a detailed statement" explaining such transactions, Citizens Alliance did not attach such a statement even though the son of the organization's creator, Frank DiCicco, heads CA Holdings and Ruth Arnao serves on both the board of the for-profit and the nonprofit. Citizens Alliance spokesman Ken Snyder -- who is also a Fumo consultant -- said the organization's accountants maintained that the attached statement was unnecessary since all compensation to Citizens Alliance board members was reported elsewhere in the tax filings. But Schedule A, Part III does not ask about compensation of board members of the nonprofit. It asks about transactions between the nonprofit and for-profit organizations with whom the leadership overlaps or shares close affiliations. When this was made clear to Snyder, he responded simply that the accountant for Citizens Alliance "follows the letter of the law" and that all information in the returns was "reported properly." "It's entirely legal," he said. Snyder also refused to name the officers of CA Holdings, Inc., though the company's filings with the Pennsylvania Department of State list Christian DiCicco and Ruth Arnao as officers. Queries about this issue for Christian DiCicco and Arnao were handled by Snyder. Steve Kobasa, a partner at Stockton Bates, the 100-year-old Philadelphia accounting firm that handles Citizens Alliance tax filings, declined to discuss the matter. While the 2001 tax filings for Citizens Alliance may include an explanation of the links between the two organizations, it is not available. Citizens Alliance has a history of filing government oversight documents at the last minute and its latest tax returns are no exception. Two years ago, Citizens Alliance turned in audits for more than $500,000 in state grants a year after they were due. More recently, the group waited until March 2002 to turn in its 2000 tax returns. As with the 2000 returns, the group's 2001 IRS filings appear to be headed for a string of delays. Citizens Alliance applied for a three-month extension from the original May 15 deadline, the normal filing date for nonprofits. According to the IRS's Cressman, the IRS grants a brief extension as a routine practice. "Tax-exempt organizations, much like individuals, can get a virtually automatic extension of the initial due date," he says. "Basically you just fill out a form." Citizens Alliance was subsequently granted a longer extension, pushing their tax due date back to Nov. 15. IRS spokesman Cressman explains, "As a general rule the second extension requires some cause. In general terms it is usually considered because of some kind of significant hardship. For example, if files were stolen or the accountant's office had a fire. Simply inconvenience or lack of ability to get it done is not an acceptable excuse." So what's Citizens Alliance's excuse? According Snyder, the nonprofit asked for an extension simply "to make sure [the tax return] is as accurate as possible. We asked for an extension and the IRS offered an extension to Nov. 15 under no unusual circumstances." No stolen files? No fire? When notified, Cressman explained that the feds don't always enforce the letter of the law when dealing with tax-exempt organizations. "The IRS is not in the business of making it tough for nonprofits, which are usually charities, to exist," he says. Dan Shah, who runs the Center for Community Nonprofit Organizations at Temple Law School says the IRS's enforcement for tax-exempt groups is "really lax," not because of a soft spot for charities but because "the IRS is way understaffed." Shah says the lax enforcement "is not fair to those charities that are doing what they're supposed to be doing because the other ones can slack along and get away with it." When asked what it means when a charity routinely turns in its tax forms late, Shah replied, "There's no reason for it. A 990 is an exceptionally easy form to fill out. It would certainly, for me, raise a red flag." 
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