Wednesday, January 1, 2014

IRS Scrutiny Of Non-Profits Penalizes Classic Car Enthusiasts

You don't really expect that the scandals that have plagued the Obama administration will hit close to home. But that's exactly what has happened to the Horseless Carriage Club of America (HCCA).

In May of 2011, the HCCA received word that the IRS would be revoking the HCAA's 501(c)(3) non-profit status and would now consider it a for-profit organization. The non-profit club, which was founded in 1937, had spent much of it's time as a social club for vintage car enthusiasts. It had 501(c)(7) status for many years, until it switched to a 501(c)(3) in 2007. What this did for the organization was to enable donations to the club to become tax deductible. Club organizers hoped that this would lead to larger donations, helping the organization reach out to more enthusiasts around the country.

What they didn't realize was that it would lead to a two year battle with the Internal Revenue Service, who objected to the organizations change in non-profit designation. While they still are a non-profit, what was in question was how the IRS would view the $26,000 in donations. Under the newer non-profit filing, these donations would be non-taxable. The IRS apparently does not want to view them as such, and the HCCA has withdrawn their request to change to the 501(c)(3), and stay a 501(c)(7) non-profit.

According to an article in Hemmings News, "Richard Cutler, who served as president of the HCCA in 2011 and has since sparred with the IRS on the club's behalf, wrote on the club's website that he and other club officials decided that the club wouldn't just roll over and die. They responded to the revocation with a formal appeal and in the meantime came up with a fallback plan that included the formation earlier this year of two spinoff organizations: the Horseless Carriage Education Institution, a 501(c)(3) non-profit dedicated exclusively to educating the public about horseless carriages and early automotive history, and the Horseless Carriage Club of America, a 501(c)(7) non-profit that would assume the club's ongoing social activities - its tours, meets, and conventions."

Cutler wrote on their website, "It has been suggested by some that we continue to fight the ruling. All evidence indicates that this will only result in more expense with no change in status. It is time to get this behind us and move on."

Guy Algar states, "It is unfortunate that a club designed to be a source of community to vintage car owners and enthusiasts, offering a variety of events, tours, and educational materials would need to spend two valuable years fighting a costly battle because it wanted to improve the services it could offer." This is not a political organization that has come under scrutiny. Do you think the HCCA should be allowed to make changes that better reflect it's mission?

RESOURCES FOR MORE INFORMATION
HCCA - Horseless Carriage Club of America
Hemmings - Horseless Carriage Club Shifts Away From Non-Profit Status To Satisfy IRS

ABOUT THE AUTHOR
Andrea L. Algar is co-owner of a classic car performance and restoration design shop in Leesville, Texas. Motorheads Performance specializes in repairs, maintenance, performance upgrades and restorative work on cars and trucks from the 1920's through 1970's. Her husband, Guy L. Algar, is a mechanical engineer with over 25 years experience. He holds 5 ASE Certifications from the National Institute for Automotive Service Excellence and has been working on old cars and trucks for over 37 years. Together they share their passion for old cars and trucks with other enthusiasts from around the country.
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