On chess discussion Mr. Brock call for the resignations of both Mr.
Truong and Mr. Goitchberg. Mr. Truong, reacting to Mark Nibblin's
suggestion that Mr. Truong resign, noted that Mr. Brock called for Bill
G's resignation but neglected to note the call for his own resignation.
In case Mr. Truong missed the post (or pulls it), here is what Mr.
Brock wrote:
by billbrock on Wed Mar 12, 2008 12:10 am
As I have recently learned that my statements are being quoted here, it would be appropriate for me to supply essential context: I believe Mr. Truong's resignation from the USCF Board is overdue.

Reasonable people can disagree on this point.

I wish Mr. Truong well, and I sincerely thank him for his kind words.


Mr. Goichberg's resignation would also be appropriate, and brokering a dual resignation might be an appropriate solution. Each side can cite the fiduciary duty to rid the Board of the cancerous other or whatever.

All parties need to put this fiduciary duty ahead of their personal interests.

I hope attendance at the Chicago Open is not affected by this matter.

Now someone else can explain why my idea is nutty & this thread can be locked.

I thank Mr. Brock for calling on Mr. Truong to resign. I do not support
a call for Bill G's resignation.

.

I thank Mr. Brock for calling on Mr. Truong to resign. *I do not support
a call for Bill G's resignation.

Why not? Isn't his being an officer of the USCF as well as a
contracted service provider a confilct and in violation of USCF rules
and Federal tax law?

On Mar 12, 9:38 am, Rob wrote:
.



I thank Mr. Brock for calling on Mr. Truong to resign. I do not support
a call for Bill G's resignation.

Why not? Isn't his being an officer of the USCF as well as a
contracted service provider a confilct and in violation of USCF rules
and Federal tax law?

I can't speak for tax law or USCF rules, but I've pointed out for
years there's a conflict.

Rob wrote:
.
I thank Mr. Brock for calling on Mr. Truong to resign. I do not support
a call for Bill G's resignation.

Why not?

Because, to my knowledge he has not broken any laws nor has he violated
his fiduciary duty to the USCF. If you have evidence to the contrary,
please produce it.


Isn't his being an officer of the USCF as well as a
contracted service provider a confilct and in violation of USCF rules
and Federal tax law?

No. As long as the relationship is fully disclosed to the board of the
organization there is no inherent problem, in and or itself.

First, some necessary context. To summarize my previous post at

http://groups.google.com/group/rec.g...f7f48078dd2ef6

1. Sloan claimed, in the course of USCF business [USCF BINFO
200603590, dated September 26, 2006, and more fully on January 5,
2007, in response to a USCF ethics complaint], to have had an intimate
relationship with Polgar in the US, and to have done so at a time when
Polgar was age 17, a minor under both US and Hungarian law, and at a
time when Sloan claims to have had fiduciary responsibilities towards
Polgar.

2. Polgar denies such a relationship took place, but claims that she
was propositioned by Sloan in Hungary circa her age 16, when she was a
minor under both US and Hungarian law.


BEGIN CITED EMAIL

From: [Bill Goichberg]
Sent: Tuesday, June 05, 2007
To: Bill Brock
Subject: Continental Chess Bulletin

[...]

[Brock wrote on 6/5/07]:

[...]

Sloan claims to have had sexual relations with Polgar (while
she was a minor, while he claimed to be acting as a fiduciary, in
the course of USCF business). He made this claim twice. As
fiduciary, you are silent.

[Goichberg replied on 6/5/07]

I have seen no such claim. I believe he said she was his girlfriend
many years ago at an age which would make her a minor in the US but an
adult in Hungary. She has denied having relations with him and he has
told people they didn't really have relations but did have foreplay.
I don't know who to believe but think they did not have sexual
relations.

END CITED EMAIL

On Mar 12, 9:51*am, Brian Lafferty wrote:
Rob wrote:
.
I thank Mr. Brock for calling on Mr. Truong to resign. *I do not support
a call for Bill G's resignation.

Why not?

Because, to my knowledge he has not broken any laws nor has he violated
his fiduciary duty to the USCF. *If you have evidence to the contrary,
please produce it.

Isn't his being an officer of the USCF as well as a
contracted service provider a confilct and in violation of USCF rules
and Federal tax law?

No. *As long as the relationship is fully disclosed to the board of the
organization there is no inherent problem, in and or itself.


Sorry this is so long, but I would appreciate your professional legal
interpretation.
-------------------------------------------------------------------------------------------------------------
Intermediate Sanctions
By Jeffrey S. Tenenbaum
Dec 1, 1999

In 1996, the so-called "intermediate sanctions" law was passed by
Congress and signed into law. The intermediate sanctions law penalizes
insiders of Section 501(c)(3) and 501(c)(4) organizations - and those
nonprofit managers cooperating with them - who get more out of an
organization than they put in. The sanctions are "intermediate" in
that they allow the IRS to penalize private inurement through excise
taxes without revoking an organization's tax-exempt status.


1. Applicability to Other Tax-Exempt Organizations.
While the direct applicability of the intermediate sanctions law is
limited to Section 501(c)(3) and 501(c)(4) organizations, associations
exempt from federal income tax under Sections 501(c)(5) and 501(c)(6)
should be familiar with the law for two principal reasons. First, an
association with a related educational or charitable foundation or
other affiliated Section 501(c)(3) or 501(c)(4) organization can be
considered a "disqualified person" under the new law, making the
association itself subject to potential excise taxes in the event of
"excess benefit transactions."

Second, Section 501(c)(5) and 501(c)(6) organizations are subject to
the same prohibition on private inurement as their 501(c)(3) and 501(c)
(4) brethren (see Section I(B) above). Consequently, the guidelines
imposed by the intermediate sanctions law as to who is a "disqualified
person," what constitutes an "excess benefit transaction," and how to
establish a "presumption of reasonableness" with respect to
compensation arrangements and property sales or rentals, should be
considered by Section 501(c)(5) and 501(c)(6) organizations in light
of the statutory and regulatory prohibition on private inurement.
Doing so should help ensure that compensation practices and property
sales and rentals will withstand IRS scrutiny.


2. Overview.
Under the intermediate sanctions law, excise taxes are imposed on
"excess benefit transactions" occurring on or after Sept. 14, 1995.
The taxes do not apply to any transaction made pursuant to a written
contract that was binding on Sept. 13, 1995, and continued in force
through the time of the transaction.

An excess benefit transaction is any transaction in which a Section
501(c)(3) or 501(c)(4) organization provides an economic benefit to a
"disqualified person" that has a greater value than what it receives
from the person. This would include providing compensation to a person
in excess of the value of the services rendered or selling or renting
property to a person for less than the property's sale or rental
value. The excess benefit equals the difference of the value of the
benefit provided to the person over the value of the consideration
received by the organization.

There are two types of excise taxes. The first is imposed on
disqualified persons who receive an excess benefit. The tax is equal
to 25% of the excess benefit. There is an additional tax equal to 200%
of the benefit if it is not corrected before the date an IRS
deficiency notice is mailed for the 25% tax or the date the 25% tax is
assessed, whichever comes first. The second tax is imposed on
"organizational managers" who knowingly, willfully and without
reasonable cause participate in the excess benefit transaction. This
tax is equal to 10% of the excess benefit, but no more than $10,000.


3. Disqualified Persons.
A disqualified person is defined as someone who, at any time during
the five years preceding an excess benefit transaction, was in a
position to exercise substantial influence over the affairs of the
organization.

If an individual is a disqualified person, then certain related
parties are also considered disqualified persons. These include
spouses, brothers or sisters, spouses of brothers or sisters, direct
ancestors, direct descendants and their spouses, and corporations,
partnerships and trusts in which the disqualified person has more than
a 35% interest.


4. Specifically Included.
Certain individuals within an organization are specifically labeled as
disqualified persons. These include any individual who serves as a
voting member of the governing body of the organization; any
individual who has the power or responsibilities of the president,
chief executive officer, or chief operating officer of an
organization; and any individual who has the power or responsibilities
of treasurer or chief financial officer of an organization.


5. Specifically Excluded.
An employee of the organization is not considered a disqualified
person if he or she: (i) receives less than $80,000 of direct or
indirect benefits from the organization for the year (adjusted for
inflation); (ii) is not a member of a specifically included category
above; and (iii) is not a substantial contributor to the organization.


6. Substantial Influence Test.
Facts and circumstances tending to show that a person has substantial
influence include the following:


the person founded the organization;
the person is a substantial contributor;
the person's compensation is based on revenues derived from activities
of the organization;
the person has authority to control or determine a significant portion
of the organization's capital expenditures, operating budget, or
compensation for employees; or
the person has managerial authority or serves as a key adviser to a
person with managerial authority. Facts and circumstances tending to
show that a person does not have substantial influence include:


the person has taken a bona fide vow of poverty;
the person is an independent contractor (e.g., an attorney) who would
not benefit from a transaction aside from the receipt of professional
fees; or
the person is a donor who receives no more preferential treatment than
other donors making comparable contributions as part of a solicitation
intended to attract a substantial number of contributions.
7. Organization Managers.
An individual can be liable for the 10% penalty on organizational
managers if he or she is an officer, director or trustee of the
organization, or is a person with powers or responsibilities similar
to those of officers, directors or trustees. Attorneys, accountants
and investment advisers acting as independent contractors are not
considered organizational managers. Any person who has authority
merely to recommend particular administrative or policy decisions, but
not to implement them without approval of a superior, also is
excluded.

An organization manager will be considered to have "participated" in
an excess benefit transaction not only by affirmative steps, but also
by silence or inaction when the manager is under a duty to speak or
take action. However, a manager will not be considered to have
participated in a transaction when he or she has opposed it in a
manner consistent with the manager's responsibilities to the
organization.

Organization managers can avoid the 10% penalty if they can show that
they did not act willfully or knowingly. They can meet this
requirement if, after disclosing all facts to an attorney, they
receive a reasoned written legal opinion that a transaction does not
provide an excess benefit. This will protect them even if a
transaction is later determined to be an excess benefit transaction.


8. Economic Benefits.
Certain economic benefits provided to a disqualified person are
disregarded for purposes of the excise tax.

For example, there is no problem with paying reasonable expenses for
board members to attend board meetings (this does not include luxury
travel or a spouse's trip). Also excluded are benefits provided to a
disqualified person solely as a member of the organization if the same
benefits are given to other members in exchange for a membership fee
of $75 or less per year.

The payment of a premium for an insurance policy covering a potential
excise tax liability is not an excess benefit transaction if the
premium is treated as compensation to the disqualified person and his
or her total compensation is reasonable.


9. Compensation.
Compensation for services rendered will not be considered an excess
benefit if it is an amount that would ordinarily be paid for similar
services in a similar situation. The fact that a government body or a
court has approved a particular compensation package does not
necessarily make it reasonable.

For purposes of the excise tax, compensation includes, but is not
limited to, salary, fees, bonuses, severance payments, and all forms
of deferred compensation that are earned and vested, whether paid
under a tax-qualified plan or not. If deferred compensation is paid in
one year for services performed in two or more years, then that
compensation will be allocated to the years in which the services are
performed.

Compensation also includes all benefits, whether or not included in
income for tax purposes, such as medical, dental, life insurance, and
disability benefits, and both taxable and nontaxable fringe benefits
(other than job-related fringe benefits and fringe benefits of
inconsequential value).

An economic benefit will not be treated as reasonable compensation
unless the organization clearly indicates its intention to treat it as
compensation at the time it is provided. For example, if the
organization fails to include compensation or other payments to
disqualified persons on a Form W-2 (for employees) or Form 1099 (for
board members and other non-employees) and does not treat the payments
as compensation on its Form 990, then the payments will be considered
an excess benefit.

Revenue-sharing arrangements. A special rule applies to arrangements
that compensate a disqualified person in proportion to revenue
generated by the organization. Such compensation may be considered an
excess benefit even if it does not exceed the fair market value of the
services provided. This can happen if, at any point, the arrangement
permits a person to receive additional compensation without providing
proportional benefits to the organization. Whether such compensation
is an excess benefit will depend on the facts of the individual case,
taking into account such factors as the relationship between the size
of the benefit provided and the quality and quantity of the services
provided, as well as the ability of the party receiving the
compensation to control the activities generating the revenues.


10. Avoiding the 200% Tax.
To avoid the 200% tax, the excess benefit must be undone to the extent
possible. In addition, other steps may be necessary to place the
organization in the same position it would have been in if the
transaction was made under the highest fiduciary standards.

An excess benefit can be corrected if the disqualified person repays
the organization an amount equal to the excess benefit, plus an
interest element for the period the excess benefit was outstanding. A
correction may also be accomplished, in some situations, by returning
property to the organization and taking any additional steps necessary
to make the organization whole.


11. Presumption of Reasonableness.
An important "escape hatch" exists that every organization subject to
the intermediate sanctions law should endeavor to take advantage of -
a presumption in favor of the organization that a compensation
arrangement or property sale or rental is not an excess benefit.

To qualify for this presumption, three requirements must be met:


(i) The compensation arrangement or property sale or rental must be
approved by the organization's governing body or a committee of the
governing body composed entirely of individuals who do not have a
conflict of interest with respect to the transaction;
(ii) The governing body or its committee must have obtained and relied
upon appropriate data as to comparability prior to making its
decision; and
(iii) The governing body or its committee must have adequately
documented the basis for its decision at the time it was made.
These three requirements are discussed in further detail below:


a. Conflict of Interest. A member of a governing body or its committee
will be treated as not having a conflict of interest if he or she:
Is not the disqualified person benefiting from the transaction or a
person related to the disqualified person;
Is not an employee subject to the control or direction of the
disqualified person;
Does not receive compensation or other payments subject to approval of
the disqualified person;
Has no financial interest affected by the transaction; and
Will not receive any economic benefit from another transaction in
which the disqualified person must grant approval.
b. Appropriate Data. This includes such things as compensation levels
paid by similarly situated organizations, both taxable and tax-exempt,
for similar positions; independent compensation surveys compiled by
independent firms; actual written offers from similar organizations
competing for the services of the disqualified person; and independent
appraisals of the value of the property. There is a special relief
provision for organizations with annual gross receipts of less than $1
million. An organization will be automatically treated as satisfying
the data requirement if it has data on compensation paid by five
comparable organizations in similar communities for similar services.
c. Adequate Documentation. To meet this requirement, the governing
body or its committee must have written or electronic records showing
the terms of the transaction and the date it was approved; the members
of the governing body or committee who were present during debate on
the transaction and the names of those who voted on it; the
comparability data obtained; and what was done about the members who
had a conflict of interest. For a decision to be documented
concurrently, records must be prepared by the next meeting of the
governing body or committee occurring after the final action is taken.
Records must be reviewed and approved by the governing body or
committee as reasonable, accurate and complete within a reasonable
time period thereafter.
For purposes of this presumption of reasonableness, a governing body
is a board of directors, board of trustees, or equivalent controlling
body of the organization. A committee of the governing body may be
composed of any individuals permitted under state law to serve on such
a committee, and may act on behalf of the governing body to the extent
permitted by state law.

Organizations should note that if a committee member is not on the
governing board and the presumption is utilized, then the committee
member becomes an "organization manager" for purposes of the 10%
penalty. In other words, committee members are treated like members of
the governing body if the presumption is rebutted by the IRS.

A person will not be treated as a member of the governing body or its
committee if he or she meets with other members only to answer
questions and is not present during debate and voting on the
transaction.

Finally, organizations subject to the intermediate sanctions law
should note that this presumption of reasonableness is only a
presumption. The IRS can rebut the presumption if there is additional
information showing that the compensation was not reasonable or that
the property transfer was not at fair market value. However,
satisfying these three requirements should go a long way toward
helping organizations avoid further IRS scrutiny in this area.


12. Conclusion.
The intermediate sanctions law did not replace the old rules - it
merely supplemented them. If there is evidence of private inurement -
if an organization is not operated "exclusively" for tax-exempt
purposes - then the IRS still retains the power to revoke the
organization's tax exemption. Whether private inurement rises to a
level justifying loss of tax exemption will depend on a number of
factors. These include whether the organization has been involved in
repeated excess benefit transactions; the size of the excess benefit
transaction; whether, following an excess benefit transaction, the
organization has implemented safeguards to prevent future recurrences;
and whether there was compliance with other applicable laws. The
intermediate sanctions law permits the IRS to punish nonprofit
insiders without imposing the death penalty on the nonprofit
organization itself.

Rob wrote:
On Mar 12, 9:51 am, Brian Lafferty wrote:
Rob wrote:
.
I thank Mr. Brock for calling on Mr. Truong to resign. I do not support
a call for Bill G's resignation.
Why not?
Because, to my knowledge he has not broken any laws nor has he violated
his fiduciary duty to the USCF. If you have evidence to the contrary,
please produce it.

Isn't his being an officer of the USCF as well as a
contracted service provider a confilct and in violation of USCF rules
and Federal tax law?
No. As long as the relationship is fully disclosed to the board of the
organization there is no inherent problem, in and or itself.


Sorry this is so long, but I would appreciate your professional legal
interpretation.

My professional legal opinion (interpretation) is normally billed at the
rate of $450 per hour with a minimum retainer of $10,000 if I agree to
be retained. I decline the opportunity to provide you with professional
advise.

-------------------------------------------------------------------------------------------------------------
Intermediate Sanctions
By Jeffrey S. Tenenbaum
Dec 1, 1999

In 1996, the so-called "intermediate sanctions" law was passed by
Congress and signed into law. The intermediate sanctions law penalizes
insiders of Section 501(c)(3) and 501(c)(4) organizations - and those
nonprofit managers cooperating with them - who get more out of an
organization than they put in. The sanctions are "intermediate" in
that they allow the IRS to penalize private inurement through excise
taxes without revoking an organization's tax-exempt status.


1. Applicability to Other Tax-Exempt Organizations.
While the direct applicability of the intermediate sanctions law is
limited to Section 501(c)(3) and 501(c)(4) organizations, associations
exempt from federal income tax under Sections 501(c)(5) and 501(c)(6)
should be familiar with the law for two principal reasons. First, an
association with a related educational or charitable foundation or
other affiliated Section 501(c)(3) or 501(c)(4) organization can be
considered a "disqualified person" under the new law, making the
association itself subject to potential excise taxes in the event of
"excess benefit transactions."

Second, Section 501(c)(5) and 501(c)(6) organizations are subject to
the same prohibition on private inurement as their 501(c)(3) and 501(c)
(4) brethren (see Section I(B) above). Consequently, the guidelines
imposed by the intermediate sanctions law as to who is a "disqualified
person," what constitutes an "excess benefit transaction," and how to
establish a "presumption of reasonableness" with respect to
compensation arrangements and property sales or rentals, should be
considered by Section 501(c)(5) and 501(c)(6) organizations in light
of the statutory and regulatory prohibition on private inurement.
Doing so should help ensure that compensation practices and property
sales and rentals will withstand IRS scrutiny.


2. Overview.
Under the intermediate sanctions law, excise taxes are imposed on
"excess benefit transactions" occurring on or after Sept. 14, 1995.
The taxes do not apply to any transaction made pursuant to a written
contract that was binding on Sept. 13, 1995, and continued in force
through the time of the transaction.

An excess benefit transaction is any transaction in which a Section
501(c)(3) or 501(c)(4) organization provides an economic benefit to a
"disqualified person" that has a greater value than what it receives
from the person. This would include providing compensation to a person
in excess of the value of the services rendered or selling or renting
property to a person for less than the property's sale or rental
value. The excess benefit equals the difference of the value of the
benefit provided to the person over the value of the consideration
received by the organization.

There are two types of excise taxes. The first is imposed on
disqualified persons who receive an excess benefit. The tax is equal
to 25% of the excess benefit. There is an additional tax equal to 200%
of the benefit if it is not corrected before the date an IRS
deficiency notice is mailed for the 25% tax or the date the 25% tax is
assessed, whichever comes first. The second tax is imposed on
"organizational managers" who knowingly, willfully and without
reasonable cause participate in the excess benefit transaction. This
tax is equal to 10% of the excess benefit, but no more than $10,000.


3. Disqualified Persons.
A disqualified person is defined as someone who, at any time during
the five years preceding an excess benefit transaction, was in a
position to exercise substantial influence over the affairs of the
organization.

If an individual is a disqualified person, then certain related
parties are also considered disqualified persons. These include
spouses, brothers or sisters, spouses of brothers or sisters, direct
ancestors, direct descendants and their spouses, and corporations,
partnerships and trusts in which the disqualified person has more than
a 35% interest.


4. Specifically Included.
Certain individuals within an organization are specifically labeled as
disqualified persons. These include any individual who serves as a
voting member of the governing body of the organization; any
individual who has the power or responsibilities of the president,
chief executive officer, or chief operating officer of an
organization; and any individual who has the power or responsibilities
of treasurer or chief financial officer of an organization.


5. Specifically Excluded.
An employee of the organization is not considered a disqualified
person if he or she: (i) receives less than $80,000 of direct or
indirect benefits from the organization for the year (adjusted for
inflation); (ii) is not a member of a specifically included category
above; and (iii) is not a substantial contributor to the organization.


6. Substantial Influence Test.
Facts and circumstances tending to show that a person has substantial
influence include the following:


the person founded the organization;
the person is a substantial contributor;
the person's compensation is based on revenues derived from activities
of the organization;
the person has authority to control or determine a significant portion
of the organization's capital expenditures, operating budget, or
compensation for employees; or
the person has managerial authority or serves as a key adviser to a
person with managerial authority. Facts and circumstances tending to
show that a person does not have substantial influence include:


the person has taken a bona fide vow of poverty;
the person is an independent contractor (e.g., an attorney) who would
not benefit from a transaction aside from the receipt of professional
fees; or
the person is a donor who receives no more preferential treatment than
other donors making comparable contributions as part of a solicitation
intended to attract a substantial number of contributions.
7. Organization Managers.
An individual can be liable for the 10% penalty on organizational
managers if he or she is an officer, director or trustee of the
organization, or is a person with powers or responsibilities similar
to those of officers, directors or trustees. Attorneys, accountants
and investment advisers acting as independent contractors are not
considered organizational managers. Any person who has authority
merely to recommend particular administrative or policy decisions, but
not to implement them without approval of a superior, also is
excluded.

An organization manager will be considered to have "participated" in
an excess benefit transaction not only by affirmative steps, but also
by silence or inaction when the manager is under a duty to speak or
take action. However, a manager will not be considered to have
participated in a transaction when he or she has opposed it in a
manner consistent with the manager's responsibilities to the
organization.

Organization managers can avoid the 10% penalty if they can show that
they did not act willfully or knowingly. They can meet this
requirement if, after disclosing all facts to an attorney, they
receive a reasoned written legal opinion that a transaction does not
provide an excess benefit. This will protect them even if a
transaction is later determined to be an excess benefit transaction.


8. Economic Benefits.
Certain economic benefits provided to a disqualified person are
disregarded for purposes of the excise tax.

For example, there is no problem with paying reasonable expenses for
board members to attend board meetings (this does not include luxury
travel or a spouse's trip). Also excluded are benefits provided to a
disqualified person solely as a member of the organization if the same
benefits are given to other members in exchange for a membership fee
of $75 or less per year.

The payment of a premium for an insurance policy covering a potential
excise tax liability is not an excess benefit transaction if the
premium is treated as compensation to the disqualified person and his
or her total compensation is reasonable.


9. Compensation.
Compensation for services rendered will not be considered an excess
benefit if it is an amount that would ordinarily be paid for similar
services in a similar situation. The fact that a government body or a
court has approved a particular compensation package does not
necessarily make it reasonable.

For purposes of the excise tax, compensation includes, but is not
limited to, salary, fees, bonuses, severance payments, and all forms
of deferred compensation that are earned and vested, whether paid
under a tax-qualified plan or not. If deferred compensation is paid in
one year for services performed in two or more years, then that
compensation will be allocated to the years in which the services are
performed.

Compensation also includes all benefits, whether or not included in
income for tax purposes, such as medical, dental, life insurance, and
disability benefits, and both taxable and nontaxable fringe benefits
(other than job-related fringe benefits and fringe benefits of
inconsequential value).

An economic benefit will not be treated as reasonable compensation
unless the organization clearly indicates its intention to treat it as
compensation at the time it is provided. For example, if the
organization fails to include compensation or other payments to
disqualified persons on a Form W-2 (for employees) or Form 1099 (for
board members and other non-employees) and does not treat the payments
as compensation on its Form 990, then the payments will be considered
an excess benefit.

Revenue-sharing arrangements. A special rule applies to arrangements
that compensate a disqualified person in proportion to revenue
generated by the organization. Such compensation may be considered an
excess benefit even if it does not exceed the fair market value of the
services provided. This can happen if, at any point, the arrangement
permits a person to receive additional compensation without providing
proportional benefits to the organization. Whether such compensation
is an excess benefit will depend on the facts of the individual case,
taking into account such factors as the relationship between the size
of the benefit provided and the quality and quantity of the services
provided, as well as the ability of the party receiving the
compensation to control the activities generating the revenues.


10. Avoiding the 200% Tax.
To avoid the 200% tax, the excess benefit must be undone to the extent
possible. In addition, other steps may be necessary to place the
organization in the same position it would have been in if the
transaction was made under the highest fiduciary standards.

An excess benefit can be corrected if the disqualified person repays
the organization an amount equal to the excess benefit, plus an
interest element for the period the excess benefit was outstanding. A
correction may also be accomplished, in some situations, by returning
property to the organization and taking any additional steps necessary
to make the organization whole.


11. Presumption of Reasonableness.
An important "escape hatch" exists that every organization subject to
the intermediate sanctions law should endeavor to take advantage of -
a presumption in favor of the organization that a compensation
arrangement or property sale or rental is not an excess benefit.

To qualify for this presumption, three requirements must be met:


(i) The compensation arrangement or property sale or rental must be
approved by the organization's governing body or a committee of the
governing body composed entirely of individuals who do not have a
conflict of interest with respect to the transaction;
(ii) The governing body or its committee must have obtained and relied
upon appropriate data as to comparability prior to making its
decision; and
(iii) The governing body or its committee must have adequately
documented the basis for its decision at the time it was made.
These three requirements are discussed in further detail below:


a. Conflict of Interest. A member of a governing body or its committee
will be treated as not having a conflict of interest if he or she:
Is not the disqualified person benefiting from the transaction or a
person related to the disqualified person;
Is not an employee subject to the control or direction of the
disqualified person;
Does not receive compensation or other payments subject to approval of
the disqualified person;
Has no financial interest affected by the transaction; and
Will not receive any economic benefit from another transaction in
which the disqualified person must grant approval.
b. Appropriate Data. This includes such things as compensation levels
paid by similarly situated organizations, both taxable and tax-exempt,
for similar positions; independent compensation surveys compiled by
independent firms; actual written offers from similar organizations
competing for the services of the disqualified person; and independent
appraisals of the value of the property. There is a special relief
provision for organizations with annual gross receipts of less than $1
million. An organization will be automatically treated as satisfying
the data requirement if it has data on compensation paid by five
comparable organizations in similar communities for similar services.
c. Adequate Documentation. To meet this requirement, the governing
body or its committee must have written or electronic records showing
the terms of the transaction and the date it was approved; the members
of the governing body or committee who were present during debate on
the transaction and the names of those who voted on it; the
comparability data obtained; and what was done about the members who
had a conflict of interest. For a decision to be documented
concurrently, records must be prepared by the next meeting of the
governing body or committee occurring after the final action is taken.
Records must be reviewed and approved by the governing body or
committee as reasonable, accurate and complete within a reasonable
time period thereafter.
For purposes of this presumption of reasonableness, a governing body
is a board of directors, board of trustees, or equivalent controlling
body of the organization. A committee of the governing body may be
composed of any individuals permitted under state law to serve on such
a committee, and may act on behalf of the governing body to the extent
permitted by state law.

Organizations should note that if a committee member is not on the
governing board and the presumption is utilized, then the committee
member becomes an "organization manager" for purposes of the 10%
penalty. In other words, committee members are treated like members of
the governing body if the presumption is rebutted by the IRS.

A person will not be treated as a member of the governing body or its
committee if he or she meets with other members only to answer
questions and is not present during debate and voting on the
transaction.

Finally, organizations subject to the intermediate sanctions law
should note that this presumption of reasonableness is only a
presumption. The IRS can rebut the presumption if there is additional
information showing that the compensation was not reasonable or that
the property transfer was not at fair market value. However,
satisfying these three requirements should go a long way toward
helping organizations avoid further IRS scrutiny in this area.


12. Conclusion.
The intermediate sanctions law did not replace the old rules - it
merely supplemented them. If there is evidence of private inurement -
if an organization is not operated "exclusively" for tax-exempt
purposes - then the IRS still retains the power to revoke the
organization's tax exemption. Whether private inurement rises to a
level justifying loss of tax exemption will depend on a number of
factors. These include whether the organization has been involved in
repeated excess benefit transactions; the size of the excess benefit
transaction; whether, following an excess benefit transaction, the
organization has implemented safeguards to prevent future recurrences;
and whether there was compliance with other applicable laws. The
intermediate sanctions law permits the IRS to punish nonprofit
insiders without imposing the death penalty on the nonprofit
organization itself.

On Mar 12, 10:23*am, Brian Lafferty wrote:
Rob wrote:
On Mar 12, 9:51 am, Brian Lafferty wrote:
Rob wrote:
.
I thank Mr. Brock for calling on Mr. Truong to resign. *I do not support
a call for Bill G's resignation.
Why not?
Because, to my knowledge he has not broken any laws nor has he violated
his fiduciary duty to the USCF. *If you have evidence to the contrary,
please produce it.

Isn't his being an officer of the USCF as well as a
contracted service provider a confilct and in violation of USCF rules
and Federal tax law?
No. *As long as the relationship is fully disclosed to the board of the
organization there is no inherent problem, in and or itself.


Sorry this is so long, but I would appreciate your professional legal
interpretation.


My professional legal opinion (interpretation) is normally billed at the
rate of $450 per hour with a minimum retainer of $10,000 if I agree to
be retained. *I decline the opportunity to provide you with professional
advise.




---------------------------------------------------------------------------*----------------------------------
Intermediate Sanctions
By Jeffrey S. Tenenbaum
Dec 1, 1999


In 1996, the so-called "intermediate sanctions" law was passed by
Congress and signed into law. The intermediate sanctions law penalizes
insiders of Section 501(c)(3) and 501(c)(4) organizations - and those
nonprofit managers cooperating with them - who get more out of an
organization than they put in. The sanctions are "intermediate" in
that they allow the IRS to penalize private inurement through excise
taxes without revoking an organization's tax-exempt status.


1. Applicability to Other Tax-Exempt Organizations.
While the direct applicability of the intermediate sanctions law is
limited to Section 501(c)(3) and 501(c)(4) organizations, associations
exempt from federal income tax under Sections 501(c)(5) and 501(c)(6)
should be familiar with the law for two principal reasons. First, an
association with a related educational or charitable foundation or
other affiliated Section 501(c)(3) or 501(c)(4) organization can be
considered a "disqualified person" under the new law, making the
association itself subject to potential excise taxes in the event of
"excess benefit transactions."


Second, Section 501(c)(5) and 501(c)(6) organizations are subject to
the same prohibition on private inurement as their 501(c)(3) and 501(c)
(4) brethren (see Section I(B) above). Consequently, the guidelines
imposed by the intermediate sanctions law as to who is a "disqualified
person," what constitutes an "excess benefit transaction," and how to
establish a "presumption of reasonableness" with respect to
compensation arrangements and property sales or rentals, should be
considered by Section 501(c)(5) and 501(c)(6) organizations in light
of the statutory and regulatory prohibition on private inurement.
Doing so should help ensure that compensation practices and property
sales and rentals will withstand IRS scrutiny.


2. Overview.
Under the intermediate sanctions law, excise taxes are imposed on
"excess benefit transactions" occurring on or after Sept. 14, 1995.
The taxes do not apply to any transaction made pursuant to a written
contract that was binding on Sept. 13, 1995, and continued in force
through the time of the transaction.


An excess benefit transaction is any transaction in which a Section
501(c)(3) or 501(c)(4) organization provides an economic benefit to a
"disqualified person" that has a greater value than what it receives
from the person. This would include providing compensation to a person
in excess of the value of the services rendered or selling or renting
property to a person for less than the property's sale or rental
value. The excess benefit equals the difference of the value of the
benefit provided to the person over the value of the consideration
received by the organization.


There are two types of excise taxes. The first is imposed on
disqualified persons who receive an excess benefit. The tax is equal
to 25% of the excess benefit. There is an additional tax equal to 200%
of the benefit if it is not corrected before the date an IRS
deficiency notice is mailed for the 25% tax or the date the 25% tax is
assessed, whichever comes first. The second tax is imposed on
"organizational managers" who knowingly, willfully and without
reasonable cause participate in the excess benefit transaction. This
tax is equal to 10% of the excess benefit, but no more than $10,000.


3. Disqualified Persons.
A disqualified person is defined as someone who, at any time during
the five years preceding an excess benefit transaction, was in a
position to exercise substantial influence over the affairs of the
organization.


If an individual is a disqualified person, then certain related
parties are also considered disqualified persons. These include
spouses, brothers or sisters, spouses of brothers or sisters, direct
ancestors, direct descendants and their spouses, and corporations,
partnerships and trusts in which the disqualified person has more than
a 35% interest.


4. Specifically Included.
Certain individuals within an organization are specifically labeled as
disqualified persons. These include any individual who serves as a
voting member of the governing body of the organization; any
individual who has the power or responsibilities of the president,
chief executive officer, or chief operating officer of an
organization; and any individual who has the power or responsibilities
of treasurer or chief financial officer of an organization.


5. Specifically Excluded.
An employee of the organization is not considered a disqualified
person if he or she: (i) receives less than $80,000 of direct or
indirect benefits from the organization for the year (adjusted for
inflation); (ii) is not a member of a specifically included category
above; and (iii) is not a substantial contributor to the organization.


6. Substantial Influence Test.
Facts and circumstances tending to show that a person has substantial
influence include the following:


the person founded the organization;
the person is a substantial contributor;
the person's compensation is based on revenues derived from activities
of the organization;
the person has authority to control or determine a significant portion
of the organization's capital expenditures, operating budget, or
compensation for employees; or
the person has managerial authority or serves as a key adviser to a
person with managerial authority. Facts and circumstances tending to
show that a person does not have substantial influence include:


the person has taken a bona fide vow of poverty;
the person is an independent contractor (e.g., an attorney) who would
not benefit from a transaction aside from the receipt of professional
fees; or
the person is a donor who receives no more preferential treatment than
other donors making comparable contributions as part of a solicitation
intended to attract a substantial number of contributions.
7. Organization Managers.
An individual can be liable for the 10% penalty on organizational
managers if he or she is an officer, director or trustee of the
organization, or is a person with powers or responsibilities similar
to those of officers, directors or trustees. Attorneys, accountants
and investment advisers acting as independent contractors are not
considered organizational managers. Any person who has authority
merely to recommend particular administrative or policy decisions, but
not to implement them without approval of a superior, also is
excluded.


An organization manager will be considered to have "participated" in
an excess benefit transaction not only by affirmative steps, but also
by silence or inaction when the manager is under a duty to speak or
take action. However, a manager will not be considered to have
participated in a transaction when he or she has opposed it in a
manner consistent with the manager's responsibilities to the
organization.


Organization managers can avoid the 10% penalty if they can show that
they did not act willfully or knowingly. They can meet this
requirement if, after disclosing all facts to an attorney, they
receive a reasoned written legal opinion that a transaction does not
provide an excess benefit. This will protect them even if a
transaction is later determined to be an excess benefit transaction.


8. Economic Benefits.
Certain economic benefits provided to a disqualified person are
disregarded for purposes of the excise tax.


For example, there is no problem with paying reasonable expenses for
board members to attend board meetings (this does not include luxury
travel or a spouse's trip). Also excluded are benefits provided to a
disqualified person solely as a member of the organization if the same
benefits are given to other members in exchange for a membership fee
of $75 or less per year.


The payment of a premium for an insurance policy covering a potential
excise tax liability is not an excess benefit transaction if the
premium is treated as compensation to the disqualified person and his
or her total compensation is reasonable.


9. Compensation.
Compensation for services rendered will not be considered an excess
benefit if it is an amount that would ordinarily be paid for similar
services in a similar situation. The fact that a government body or a
court has approved a particular compensation package does not
necessarily make it reasonable.


For purposes of the excise tax, compensation includes, but is not
limited to, salary, fees, bonuses, severance payments, and all forms
of deferred compensation that

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LOL Okay... how about just an opinion. You seem to have no problem
giving one about anything else. But I tend to think an honest
interpretation would cause you to render an opinion not to your liking

LOL Okay... how about just an opinion. You seem to have no problem
giving one about anything else. But I tend to think an honest
interpretation would cause you to render an opinion not to your liking

I agree that Goichberg should resign but I am sure that he will not do
so. However, my reasons for believing that Goichberg should resign are
entirely different than those suggested by Bill Brock.

In the first place, this entire situation was created by Goichberg.
After the votes were counted and I was declared to have been elected
to the board Goichberg started a series of desperate measures either
to prevent me from taking office or to have me immediately thrown off
the board.

This include writing find letters to the USCF's attorney Michael
Matsler, asking for advice on how to stop Sam Sloan from taking the
office to which I had been elected. The USCF paid legal fees of nearly
$5,000 to Mr. Matsler for responding to these five letters (about
$1000 per letter) and I believe that Bill Goichberg should reimburse
the USCF for this amount.

This entire controversy about my prior relationship with Miss Polgar
started because Bill Goichberg and Joel Channing repeatedly, over and
over again, demanded to know the details about my relationship with
her. I had never even revealed that I ever had a relationship with
her, much what the nature of the relationship was. I do not play "kiss
and tell". I still have not responded to questions about this. If you
could see the Confidential BINFOS (which fortunately remain
confidential) you could see how frequently Channing and Goichberg
(especially Channing) pressed me for information about this. As I
said, they were acting like a "bull in a china shop" because they did
not know what they were getting into.

This alone is enough reason for throwing Joel Channing and Bill
Goichberg off the board. What ever my relastionship was with Miss
Polgar twenty years ago (and I am not admitting that there even was
such a relationship) it was none of the business of Joel Channing and
Bill Goichberg and it was reprehensible of them to make a big public
issue over it.

Now that I was on the board and their efforts to stop taking office
had failed, Bill Goichberg started taking desperate efforts to make
sure that I would not be re-elected. I agree that he has every right
under freedom of speech to campaign against me. He does not have the
right to use the financial resources of the USCF or his position as
president of the USCF to stop me from being re-elected.

Among the things he did to insure that I not be re-elected we

1. Instructing the Chess Life editor not to publish my name in Chess
Life (other than listing me as a member of the board). There were four
times during my one year on the board that a Chess Life columnist or
news reporter included my name in a story or article submitted for
publication. Each time, my name was removed from the article by the
editor.

2. Giving a tremendous amount of publicity to Susan Polgar including
publishing free ads and pictures of her in every issue of Chess Life
when she had done absolute nothing noteworthy or news worthy during
that entire year. For example, she was given a cover photo in Chess
Life claiming that she had won the "Woman's World Cup" when all she
had actually done was win an unofficial exhibition event not rated or
recognized by either FIDE or the USCF in which all of her opponents
were weak players, whereas the real official Woman's World Cup was won
by Grandmaster Xu Yu Hua of China (who had not competed in the
exhibition event that Susan Polgar had won).

3. Appointing as moderators and "Forum Oversight Committee" members to
the USCF Forums vehemently anti-Sam Sloan and pro-Polgar moderators
including Herbert Rodney Vaughn and Gregory Alexander. These
moderators proceeded to repeatedly suspend Sam Sloan and anybody who
supported Sam Sloan or even agreed with Sam Sloan on one issue had
their postings pulled and they were suspended from posting.

4. Anybody who asked an embarrassing of Paul Truong or Susan Polgar
had their postings pulled. Anybody who questioned or disputed the
statements by Paul Truong and Susan Polgar had their posting deleted
and found themselves suspended. For example, posters were not allowed
to ask them whether they were married to each other or not, they were
not allowed to ask Truong what companies he had ever worked for, what
jobs he had ever held, nor could he be asked to name the "billion
dollar companies" that he claimed to have rescued or saved, nor could
he be asked to identify the 11 national chess championships that he
claimed to have won. In short, Truong was not allowed to be asked to
verify any of the outrageous claims that he was making about himself
or Susan Polgar. Susan Polgar was not allowed to be asked to identify
the four "World Chess Championships" that she claimed to have won. In
short, under the Goichberg Rules, the voting public was not allowed to
know that almost everything that Polgar and Truong said about
themselves during their election campaign was a lie.

Had the voting public been allowed to know that Polgar and Truong were
lying, Truong would never have been elected (since he just barely
squeaked in anyway) and the election of Polgar would have been a lot
closer.

It is ironic that after Bill Goichberg did all this to insure that
Polgar and Truong be elected so as to stop Sam Sloan from being re-
elected, Polgar and Truong started attacking Goichberg in the final
states of the election campaign in response to which Goichberg mailed
17,000 postcards to USCF members which primarily attacked me but was
also critical of Polgar and Truong.

What has happened is that Goichberg has created this monster and now
the monster is about to devour him. Goichberg is being attacked from
all sides, especially from the Trollgar side that he had helped elect.
I am not aware of anybody who supports Goichberg any more. The recent
surprising call by Bill Brock for Goichberg's resignation is just one
example of this.

Sam Sloan