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Brunswick Downtown Association likely to manage rail station, despite state tax status

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Brunswick Downtown Association likely to manage rail station, despite state tax status

BRUNSWICK — A local business organization is slated to manage tenants at a town-leased portion of the Maine Street Station development, but only if it re-establishes its non-profit status with the state.

According to Tim Poulin, director of the Division of Corporations in the office of the secretary of state, the Brunswick Downtown Association allowed its state non-profit status to lapse in 2006 after failing to file an annual report.

Poulin said the state in 2006 sent three notices to the BDA warning the group that neglecting to submit the report would force the state to administratively dissolve the BDA as a non-profit corporation.

U.S. Internal Revenue Service records show the BDA has stayed current in its federal filings. But the state status raises questions for Maine residents who have recently claimed contributions to the BDA as deductions on their state tax returns.

"If they're current with the IRS, then it's OK for individuals to claim the deduction on their federal returns," said Peggy Riley, a spokeswoman for the IRS in New England. "But people probably shouldn't claim the deduction on the state returns."

Riley added that although the state's revocation of the non-profit license doesn't necessarily impact the BDA's federal tax-exempt status, the situation could subject the BDA to additional IRS scrutiny.

"They do risk losing their status if an audit turns up something," Riley said.

Rob Jarratt, who sits on the BDA board of directors and is the state contact for the annual filings, said the organization is still trying to figure out how the lapse occurred. 

"Nobody recalls having received that notice," Jarratt said. "I'm not excusing it or pointing fingers. It's obviously an embarrassment."

According to Poulin, the BDA can apply for reinstatement and its status would be retroactive to 2006. But, he said, the reinstatement clause does not address individuals who contributed to the BDA and claimed deductions on state tax returns in the interim.

The BDA's vow to regain its state status appears to have satisfied a Town Council subcommittee that has been negotiating with the organization to become the property manager of the train station in the $23.5 million Maine Street Station development.

The committee voted Dec. 3 to recommend that the council approve a sublease agreement with the BDA, provided that the organization reclaims its non-profit state status.

Town Manager Gary Brown said the BDA's license with the state was a "non-issue."

If approved by the Town Council on Dec. 21, the agreement will allow the BDA to manage the train platform and collect 15 percent of rent from other subtenants, such as banks seeking to put ATMs at the platform or kiosks for businesses. 

Town officials said the agreement will generate only modest revenues for the BDA, which has said it plans to staff the train station with volunteers.

Jarratt said Monday that the BDA has already taken steps to reclaim its non-profit status. 

Although the situation is correctable, it's a misstep for an organization that has been trying to increase its influence on town issues.

Last year the BDA obtained a $50,000 appropriation from the town so that it could hire a full-time executive director. Since then, it has embarked on a series of high-profile efforts to minimize the impact on its members of the 2011 closure of Brunswick Naval Air Station: a buy local campaign, a restaurant festival and a campaign to market Brunswick to tourists.

The BDA's quest for added influence has also raised questions about the organization's impact on the November election.

Recent campaign finance reports reveal no direct BDA contributions to specific candidates running for Town Council. However, some BDA board members made no secret of their preferences during a BDA-sponsored candidates forum held a week before the election.

Councilor Karen Klatt, who had irked some business owners and BDA members during her tenure, later claimed she was attacked during the forum by BDA members. During an exchange of several e-mails, her supporters also criticized BDA member David Knight, the husband of Town Councilor Margo Knight, of "bullying" Klatt over the destruction of her opponent's campaign signs.

According to IRS election regulations, all non-profits with 501(c)(3) status are "absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office."

The prohibition includes the endorsement of candidates at the federal, state and local level.

On its Web site, the BDA boasted that, "Numbering over 100 businesses, we are active in everything from legislative affairs to specific downtown improvement projects and the promotion of BDA members."

Still, it's unclear if such efforts by the BDA meet the IRS definition of prohibited lobbying. The law says non-profits may "involve themselves in issues of public policy without the activity being considered as lobbying" by conducting "educational meetings" and the distribution of "educational materials" without jeopardizing their tax-exempt status.

Interpreting the threshold for allowable activity, however, is difficult, as seen most recently in the campaigns of religious organizations during Maine's recent gay marriage referendum.

Several organizations clearly supported repealing the state's gay marriage law, an effort that has triggered national petition efforts to revoke the non-profit status of some churches. But it appears those religious organizations are in no danger of losing their tax-exempt status.

The BDA's influence in the election of town councilors, in comparison, seems minimal and there is no public record indicating the organization endorsed a particular candidate.

Steve Mistler can be reached at 373-9060 ext. 123 or smistler@theforecaster.net