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A 501(c)(3) and Form 990 is Serious Business

Many people start a charitable organization under IRS Code section 501(c)(3) to legitimize the charitable, religious, or educational activities carried out in thier spare time. On the other hand, some charitable organizations are full  time enterprises that provide vital support for our society. Whether large or small, non-profit organizations must follow the rules as one local man found out the hard way. The FBI and the criminal investigation division of the IRS investigated the following case against W.G. Horn:

“According to charges filed on September 6, 2017, Horn was a sports marketing agent who operated charitable organizations associated with NFL and NBA athletes. He registered one of these, The Tommie Harris Foundation, with the Oklahoma Secretary of State in late 2006 and used his home as the Foundation’s principal office. Horn sought and received tax-exempt status from the IRS under Section 501(c)(3) of the Internal Revenue Code. He personally solicited donations for the Foundation, which held an annual celebrity golf event to raise money for those in need. He also managed the Foundation’s finances and filed its Forms 990, which are federal tax returns for tax-exempt organizations. According to the charges, Horn signed and filed Forms 990 for the Foundation for tax years 2007 through 2012. During those years, the Foundation was alleged to have reported total donations received of $1,840,495.00 and total distributions to other organizations of $705,699.00. The majority of the difference of $1,134,796.00 was reported as “functional expenses.””

Outright fraud or egregious mistakes can be minimized or eliminated altogether with professional help.

“Horn was charged with making false statements on Forms 990 for the 2011 and 2012 tax years.  He reported falsely on both returns that he received no compensation from the Foundation.  According to the charges, he actually diverted approximately $136,620.06 to personal bank accounts in 2011 and made approximately $39,205.42 in purchases for personal use on a Foundation credit card.  In 2012, according to the charges, he diverted approximately $129,451.04 to himself and made approximately $41,126.37 in purchases for personal use on a Foundation credit card.  He also allegedly made false statements on these returns about having distributed tens of thousands of dollars to other charities—Straight From the Heart Foundation, Mercy Church West Coast, and Opportunity Knox—when in fact he controlled those charities and spent the money on himself.”

Horn pleaded guilty to these charges on September 20, 2017 and was sentenced to fifteen months in prison, to be followed by three years of supervised release.   Horn will be required to pay restitution to The Boys & Girls Clubs of America in the amount of $697,842.69, which accounts for his diversion of funds from the Foundation’s charitable giving.