A columnist who writes for Forbes has ridiculed a recent series headlines purporting to address a tax liability issue for the Christian Ark Encounter tourist attraction in Kentucky that features of replica, built according to biblical dimensions, of the Ark.
In fact, he notes that the Ark Encounter’s complaint of unfair treatment in the media “might have some merit.”
One headline cited by Forbes’ columnist Peter J. Reilly said, “Ken Ham Sells Ark Encounter Land To Himself for $10 To Avoid Paying Taxes.”
But Reilly said, “I don’t see that as a fair characterization as to what happened.”
It all developed because of negotiations between the city of Williamstown, where the Ark is located, and the ministry project.
“The city has a population of 4,000 and the park doubles that during the week and triples it on weekends,” Reilly explained. That means an increase in police, fire and EMS staffing.
He columnist explained the Ark Encounter organization transferred the title to another entity of the ministry, and Ark spokesman Ken Ham said the transfer was “an attempt to get the county to change the wording [of the safety tax ordinance] as it currently stands, which would exempt the Ark Encounter. It was not to avoid paying its fair share, as some articles have suggested.”
He explained the Ark wanted to assure a payment of $500,000 a year for the tax, but cap it there, but the city refused.
But when the title was transferred, the state got involved because the ministry earlier had won a federal court case giving it permission to participate in a tax rebate program in which tourist locations are returned a small portion of the tax revenue they generate for the state as an incentive.
Ham said there has been “false speculation” over the issue.
“The Ark Encounter, LLC, operates as a non-profit because it is wholly owned by a non-profit (the LLC is a pass-through entity for tax purposes), which is in turn owned by non-profit Answers in Genesis. To resolve any issues over the recent change in title for the Ark Encounter property, the property has been conveyed back to the Ark Encounter, LLC, and that deed has been recorded.”
Wrote Reilly, “The structure they are using is actually pretty straight forward. One of the members of my brain trust indicated that he was poking at it wondering whether there might be inurement, as the Huff Post headline implies, but there really is not. Everything stayed in the same not for profit (for federal purposes) chain. That the LLC at the bottom is considered for profit for local tax purposes is really not that unusual.”
His investigation, he wrote, found “no federal tax issue. If you look at the Forms 990 filed by Answers in Genesis and Crosswater Canyon, you will find that Crosswater and AIG are both 501(c)(3) organizations and that Ark Encounter LLC is wholly owned by Crosswater making it, absent a special election, a disregarded entity.”
Ham explained to WND that it’s a little complicated because of the relationships between the various branches of the organization that owns the Ark.
“When you’ve got for-profit wholly owned by a non-profit, from an IRS perspective, its viewed as a non-profit. That’s why any donations that are given to the Ark are tax deductible,” Ham explained. “People just see for-profit, but if you don’t understand the legal ways in which things can be set up, they just don’t get it and that’s the complex aspect of it.”
He said the city blindsided the Ark organization with the new 50-cent per ticket tax.
“We didn’t know about it until it was already an ordinance the city council had instituted. They didn’t talk to us, the city blindsided us,” he said.
Thus, the disagreement with the city over the tax, and the subsequent attempts to negotiate a cap.
“Someone told us one of the council members said something like, they bring in a million dollars – they are not going to miss fifty cents a ticket. The thing is that person has no idea what our costs are, what our daily running costs are. In fact, we have a $62 million bond offering that we have to pay back and some other loans we have to pay back. We actually need every cent that we bring in to pay back the money to our bond holders,” Ham said.
He explained the city wrote the tax to target the Ark specifically, and taxes are not supposed to do that.
He said as a non-profit the group is exempted from taxes, but they agreed to pay a safety fee anyway.
He also pointed out that emergency calls to the Ark location amount to two a week.
“That is a pretty small drain on their services,” he said.