Fire company tries to avoid tip jar tax trouble

March 23, 1998|By LAURA ERNDE

Fire company tries to avoid tip jar tax trouble

In an effort to prevent the Internal Revenue Service from taxing tip jar profits at fire companies, gamblers at the Williamsport Fire Co. now join a special club.

"We're just trying to find ways to cover the bases," said fire company President Jay Grimes.

What has Grimes and other fire company officials concerned is a $30,000 tax bill received by the Vigilant Hose Co. of Emmitsburg, Md.

The IRS has told the Frederick County fire company that its tip jar revenues are taxable, said Vigilant Hose Co. Chief Frank Davis.


That runs contrary to what fire companies in Frederick and Washington counties have been told by their accountants, Grimes and Davis said.

IRS spokesman Dom LaPonzina said tip jar gambling profits at nonprofit organizations might be taxable if non-members are playing the popular games of chance.

"Each is a case-by-case judgment," he said.

LaPonzina wouldn't confirm or deny whether specific fire companies are being investigated.

Vigilant Hose Co. has decided to fight the IRS ruling and has hired lawyers and accountants, Davis said.

"We've just taken the lead to hopefully protect everybody," he said.

Davis believes the IRS is targeting Frederick County, Md., clubs because of where the tip jars are played.

There, the tip jars are sold at restaurants and bars instead of at the fire company itself. Each establishment keeps 30 percent of the profits to cover costs and gives the rest to charity.

In Washington County, fire companies can run their own tip jars. The fire and rescue association also receives 40 percent of all tip jar gambling money collected by the Washington County Gaming Commission.

Grimes, who also is president of the Washington County Fire and Rescue Association, said he believes county fire companies comply with IRS rules.

But Williamsport's fire company doesn't want to take any chances.

The fire company had accountants double check their tax records, Grimes said.

The fire company began a bingo club in January, Grimes said.

All bingo players join the club, and those who also play tip jars would, in a sense, be considered members of the fire department, Grimes said.

If the IRS decides that tip jar profits of Washington County fire companies are taxable, Halfway Volunteer Fire Co. stands to lose the most.

Halfway Volunteer Fire Co. sold 1,931 tip jars from July 1996 to June 1997, more than any other fire company in the county, according to Washington County Gaming Commission records.

The company reported $476,065 in gross profits.

Halfway fire company President Jim Kimble said he wasn't familiar with the tax dispute between the IRS and the Emmitsburg, Md., fire company.

Kimble said he would be more concerned if a Washington County fire company were being investigated.

Tom Altman, chairman of the board at Clear Spring Volunteer Fire Co., said his organization doesn't have anything to worry about from the IRS.

"I am not afraid of an audit. They can come any time they want to," Altman said.

The fire companies have U.S. Sen. Barbara Mikulski on their side.

Mikulski is urging the IRS to work with volunteer fire companies and veterans' organizations, which she said also have been investigated for the past four or five years.

"I find it troubling that any of our government agencies would be accused of treating the men and women who protected our country as if they were tax evaders and tax cheaters," she said in a press release. "I find it equally troubling that the members of our community who give of their time to protect us also have to defend their contribution to the community."

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