In their haste to set up a fund for families of the five federal firefighters killed in a Riverside County arson fire in October, officials from the county and a local charity overlooked one major detail that has kept them from writing checks: IRS tax law.
After the five men of U.S. Forest Service Engine 57 were killed in a burn-over near Twin Pines on Oct. 26, the Riverside Board of Supervisors asked the Central County United Way in Hemet to handle the donations that were pouring in.
But neither the county supervisors nor officials at the United Way consulted tax attorneys, in part because they had never expected to receive more than a million dollars in donations.
When Central County United Way's chairman, Bob Duistermars, made a cautionary call to the Internal Revenue Service after the fund hit the half-million mark, he was stunned to learn that tax-exempt charitable organizations cannot raise money for a group as small and specific as the families of the five firefighters. Doing so could jeopardize the organization's tax-exempt status, particularly if it parceled out the money without first documenting the financial needs of each family.
"A lot of this probably has do with our ignorance about the process," Duistermars said. "We were all moved by the fact that we had lost friends and family; now we just need to catch up with the law."
Duistermars said much of his confusion stemmed from the fact that Congress had passed a special law exempting the families of the Sept. 11 terrorist attacks from most of those IRS regulations.
Riverside County Supervisor Marion Ashley, whose district encompasses much of the area burned by the wildfire, known as the Esperanza fire, said he was outraged when he learned about the tax-law complications.
"This was a spontaneous effort -- there wasn't time to go to a bunch of tax attorneys and CPAs," Ashley said. "We feel like the IRS is the Grinch that stole Christmas."
On Wednesday, an IRS spokesman said he could not comment on the specific case but said the IRS has clear restrictions on how financial aid can be provided by tax-exempt charitable organizations such as the United Way, which is classified as a 501 (c)(3) group.
Under federal law, such groups can give money to a group of individuals only if those individuals or families are part of a broader class that is "large and indefinite" and if giving the money ultimately benefits the community -- as was the case for money raised for the victims of Hurricane Katrina.
The IRS guidelines state that a charitable group "cannot target and limit its assistance to specific individuals" and that donors cannot earmark contributions to a charitable organization for an individual or family.
"The group of beneficiaries has to be open-ended," said Marcus Owens, a Washington, D.C., tax attorney who used to oversee tax-exempt organizations at the IRS and specializes in the laws governing those groups.
To say, "We're going to raise money to help those five families -- it's not an open-ended class," he said. "It's an appealing and appropriate cause, but there were missteps" in setting up the fund.
Owens said that the IRS and the state attorney general's office, which also oversees the activities of 501 (c)(3) groups, prefer charities "to describe the purposes so that no donor is potentially misled into thinking their $10 is going to help those families."
Owens said one way the Central County United Way could remedy the situation is to redefine the purpose of the fund so the money is available, for example, not just for the families of the five firefighters, but for families of fallen firefighters in the future.
But both Duistermars and Ashley balked at that idea.
"We're not willing to stand for that," Ashley said.
"This money was raised on the premise that these firefighters families would get the money."
Members of the Board of Supervisors have appealed to California's congressional delegation asking for special legislation to allow the money to be specifically designated to the five families.
Duistermars said expanding the fund's reach would be "a last resort" but that his organization intends to work within the guidelines set by the IRS and follow the law.
If the fund is broadened, the United Way chapter will allow donors to get their money back, he said.
Duistermars said he was also deeply troubled that IRS regulations ask charitable organizations to determine the "need" of each family receiving assistance, which he considers an invasion of their privacy.
Pat Boss, the retired U.S. Forest Service spokesman who has been speaking on behalf of slain Fire Capt. Mark Loutzenhiser, agreed. "To go to the families and say 'What is your need?' -- I don't think it's right," Boss said.
"This money was collected on their behalf, not on what their needs are.... How do you put a value of someone's life?"
The Wildland Firefighter Foundation, a tax-exempt charitable organization based in Boise, Idaho, has received more than $250,000 since the Esperanza fire and has already directed about $80,000 to the families of the five firefighters. The organization is also struggling through the IRS guidelines.
But the organization's executive director, Vicki Minor, noted that her organization never solicited funds specifically for the Esperanza firefighters; the money just poured in, she said.
"This is the largest amount we have had come in for a fire," she said. "We didn't solicit it, but it has come in earmarked for that, and I just want to make sure that this money gets right where it's supposed to go and everyone's clean on it."