April 30--Greenwood Hose Company 1 officials could have a federal tax bill in addition to trying to recoup nearly $400,000 that the hose company's former president is charged with stealing.
Internal Revenue Service records reveal that the Moosic-based volunteer fire company lost its tax-exempt status in 2011. The company's former president, William Sweeney, 36, did not file for several years a required annual form that provides information about the organization's finances. The IRS revoked the company's nonprofit status -- meaning it was exempt from paying taxes on income including donations -- because the forms, called 990s, had not been filed for three consecutive years, IRS records indicate. The last 990 was filed in 2007 -- which roughly coincides with when state police said the theft of hose company money began.
Mr. Sweeney, who waived his right to a preliminary hearing on Monday, was charged earlier this month with forgery and theft by unlawful taking, both felonies, for stealing $395,811.11 in fire company funds from September 2006 to January.
According to state police, Mr. Sweeney wrote several checks from the department's bank account payable to himself or his borough-based ice cream shop, Bitty Bill's. While he was authorized to sign the checks, he also forged the second required signature of the hose company treasurer, James Norton.
In addition, fire department officials discovered Mr. Sweeney jeopardized the department's tax-exempt status when he failed to file a required form to maintain their non-profit eligibility, which was one of his duties.
On Monday, the hose company's attorney, Christopher Powell, said he still has not independently confirmed that the IRS revoked the hose company's tax exemption. Without the exemption, the hose company may be subject to taxes on income, including the donations the company has received, Mr. Powell said.
He said he hopes the failure to file the forms is just a "technicality" that can be corrected, save the hose company from a large tax bill, and bring back their nonprofit status without issue.
"I am sure it will be reversed," Mr. Powell said. "We have volunteer CPAs (certified public accountants) working with us" now.
He did not know how much taxes could be owed or even how much money the department has collected in donations in recent years.
Efforts to reach Mr. Norton and the hose company's current president, Jason Mills, were unsuccessful on Monday.
Fire company officials are now in the process of sifting through the accounting books and determining how to put in place a better system of checks and balances to prevent the thefts and other financial improprieties, Mr. Powell said.
"This was a sophisticated method of theft that the rank-and-file firefighter could not detect," he said. "It is a very serious situation that will be taken care of in the future."
While the hose company's board met monthly to approve bills, its bank statements went directly to Mr. Sweeney, Mr. Mills told the newspaper last week.
Mr. Sweeney, who served as hose company president since 2005, resigned soon after the forged checks were discovered. In an interview, he told state police he used hose company money for his business and that he forged Mr. Norton's names on the checks.
Those who donated money to the hose company or dropped cash in the roadside boot may also want to take another look at their taxes, if they took a charitable deduction on their returns. Generally speaking, it could pose tax issues if someone takes a charitable deduction for an organization that is not a charity anymore, IRS spokesman David Stewart said.
"It's possible that it could put you in a circumstance where you would owe monies on that deducted cash," Mr. Stewart said, even if the person donating did not know about a charity losing its nonprofit status.
Contact the writer: smcconnell@ timesshamrock.com @smcconnellTT on Twitter
Copyright 2013 - The Times-Tribune, Scranton, Pa.
