Tax Issue Fuels Calabasas Project Dispute

A dispute over construction of a 698-unit apartment development in Calabasas may be headed for the courtroom--and the tax auditor’s conference room.

Homeowners living next to the proposed 56-acre apartment project have sued Los Angeles County in hopes of nullifying building permits and blocking construction, scheduled to begin next week.

But supporters of the huge rental project are fighting back by threatening to seek tax audits of residents who are contributing supposedly tax-deductible donations to the nonprofit homeowners association that brought the suit.

According to tax officials, contributions to the association’s legal fund cannot be written off, as association leaders had told their members.

Procedure Violations Alleged

The Malibu Canyon Homeowners Assn. filed suit a week ago in Los Angeles Superior Court, complaining that the county violated proper procedure May 9 when it authorized the apartment construction.

County supervisors’ approval followed months of debate over homeowners’ charges that the project site was prone to flooding and landslides and that its density was out of character with the rural neighborhood. Developers had sought approval for 800 units and promised to reserve 160 apartments as “affordable” rentals for low- and moderate-income families.

The homeowners allege in their suit that the county failed to consider the environmental impact that the apartments will have on the canyon site, at the northern end of Las Virgenes Road, about five miles west of the San Fernando Valley. They also charge that the project is in conflict with the county master plan for the area and violates access rules that require more than one route out of a large development.

County officials could not be reached for comment on the suit Friday.

$3,200 Collected

Association leaders have collected about $3,200 from residents to cover legal costs. An association flyer circulated within the 600-home neighborhood stated that contributions would be tax-deductible.

Apartment proponents alerted tax officials of the promised tax write-off on Thursday. Federal Internal Revenue Service and state Franchise Tax Board administrators confirmed Friday that such donations are not tax-exempt.

IRS spokeswoman Lowell Langers said there is frequent confusion over tax exemptions for groups such as homeowners associations that hold nonprofit corporation status.

She said the federal government maintains a list of charitable organizations that do religious, literary, scientific, educational and animal cruelty prevention work that can accept tax-exempt donations. But the Malibu Canyon group is not one of them.

State Tax Rules

Will Bush, public affairs officers with the Franchise Tax Board, said that state rules require tax-exempt donations to go for charitable, educational or religious purposes--not for lawsuits. “An organization can be nonprofit and tax-exempt, but donations to it are not necessarily tax-deductible,” Bush said Friday.

Apartment project supporter Louis Melson, a resident of the Malibu Canyon neighborhood, said he plans to ask officials for a list of Malibu homeowner association members that can be used in auditing tax returns. That way, he said, illegal lawsuit write-offs can be detected.

Spokesmen for both tax agencies said that such deductions would be excluded if discovered. But, Langers said, “the IRS does not do audits on demand.”

The tax officials’ rulings were viewed with surprise late Friday by association president Phil Ramuno.

“We’ll notify our members of this,” he said. “I’m also going to talk to my accountant. He told me that being a California nonprofit organization made our donations tax-deductible.”

But Ramuno said the tax situation would not stop his group’s lawsuit. He said his neighbors overwhelmingly support the fight. Contributors who want their donations back will get them, he said.

Ramuno said that leaders of the homeowners group will meet next week to discuss a lower-density design for the apartments that can be suggested if developer Jack Bravo is willing to consider a compromise before the suit comes to trial.

“This is the biggest project built in the Las Virgenes area,” Ramuno said. “We’re not opposed to development, we just want a good project down there.”

Bravo said Friday there is no room for negotiation, however.

‘Not Going to Stop Us’

“They’re not going to stop us,” he said. “I’ve got my approvals, and I’m ready to go. We’re starting in a week. The county brought out every little thing that could be brought out during the hearings they had on this. The county has protected itself.”

Bravo said the tax-exemption mix-up is proof that leaders of the homeowners group “are talking people into things that will never happen.”

“If I lived there,” he said, “I wouldn’t give a dime for that suit because I know I’d be wasting my time and my money.”