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Fund that paid for Wainstein report refused to release budget information

While taking advantage of the privacy from public record requests granted by its status as a nonprofit, the Chapel Hill Foundation has used its connection to the University to exempt itself from filing tax forms required of nonprofits.

The Chapel Hill Foundation — which paid for the $3.1 million Wainstein report — classifies itself as a nonprofit under the IRS’s definition of a 501(c)3 nonprofit entity, according to the University’s public records office.

In a response to a public records request for the foundation’s working budget, the public records office said the group’s budget was not a public document because of its tax status.

“That foundation is a North Carolina nonprofit corporation and is exempt from tax under Internal Revenue Code section 501(c)3,” the public records office said in its response.

But the foundation has also not filed a Form 990 since fiscal year 2007-08 — a document the IRS requires 501(c)3 non-profits to file to maintain their status.

Mike McFarland, a spokesman for the University, said the foundation has not had to file the form because of an exemption — IRS Revenue Procedure 95-48 — which allows the foundation to request that the IRS rule that the entity is an affiliate of a governmental unit like UNC.

“Because the IRS has deemed the foundation to be an affiliate of a governmental entity, Procedure 95-48 excepted the foundation from the requirement to file an IRS Form 990,” McFarland said in an email.

Yet, under North Carolina’s public records law, the foundation’s working budget, like almost every University record, should be accessible to the public — especially if the foundation is exempt from filing a Form 990 because of its affiliation with the University.

McFarland said audited financial statements submitted to the University are available upon request, but the budget is not.

“Because the foundation is a private, nonprofit corporation, other internal documents of the foundation that are not submitted to the University, such as a budget, are not a public record,” McFarland said in an email.

He also said Chancellor Carol Folt pushed the foundation to publish a Form 990 this year — which will be published by May 15. Folt is an ex-oficio member of the foundation’s board of directors.

The foundation has been in this limbo state since before former Chancellor Holden Thorp rose to the position.

Former Chancellor James Moeser, who was an ex-officio member of the board of directors for the Chapel Hill Foundation until he stepped down from the chancellor position in 2008, said he did not recall discussing the foundation’s Form 990 or a decision to stop publishing them.

“I have no idea what a Form 990 is,” he said in an email.

McFarland said the foundation’s auditors were the ones to decide to stop filing the Form 990 to save time and money.

“Foundation auditors pointed out that this exemption from filing was available, and the foundation leadership at that time concluded that not filing under the exemption would save time and money,” he said.

McFarland said he doesn’t know how much it will cost the foundation to file a Form 990 for this fiscal year.

He said donors were not notified of the decision to stop filing.

“Throughout this period, the Foundation has continued to be listed on the IRS website as a tax-exempt public charity. That designation is what’s vitally important to donors,” he said.

Tom Kelley, a professor at the UNC’s School of Law, said he has never heard of organizations that have started publishing Form 990s and then stopped.

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“If the foundation is in fact supposed to be filing annual Forms 990 and is not, the penalty would be loss of 501(c)3 status,” he said. “Normally, the IRS will automatically revoke an organization’s exempt status after three successive years of failing to file a required 990.”

UNC avoided losing its status by claiming the exemption McFarland referenced.

Kelley said most nonprofits would agree to make budgetary information available.

“Many (c)3 organizations do a comprehensive annual report, which includes financials, and post that on their website,” he said.

university@dailytarheel.com