SFAI, Isn't It About Time You File Your Tax Return?

June 17, 2009.  To ensure tax exempt status and to avoid penalties, organizations exempt from federal income tax must comply with federal tax law, including the requirement of filing annual information returns.  (See IRS Publication 4221-PC).  The annual tax return of a tax exempt organization -- the 990  -- is a public document that must be made available for public inspection and copying.  (See Exempt Organizations -- Documents Subject To Public Disclosure.)  A 990 reflects a tax exempt organization's revenue, expenses, balance sheet, and the compensation of its officers, key employees and its highest compensated employees, as well as other information. 

Despite requests for disclosure, the San Francisco Art Institute has not released its most recent 990 for the fiscal year ending June 30, 2008.  SFAI, through one of its officers, has represented that its 990 is not complete yet.  This news is troubling.  Based on our research (see below), SFAI's 990 was due already.  Why the hold up? 

The unavailable 990 is a point of concern for many reasons.  If the 990 has not been filed on time, SFAI is subject to a $100 a day penalty.  SFAI is a well established institution that has the professional help of an outside auditor and in-house accounting employees.  It should have no problem timely filing its tax return. A late filing indicates that SFAI may need a more prudent fiscal management and organization, and that it would benefit from implementing sufficient procedures to ensure the review and approval of its 990 for timely filing.  

A late filing has resulted in a lack of disclosure.  A lack of disclosure undermines the process of accountability, oversight and public scrutiny.  The Concerned Students and Alumni of SFAI (SFAI Action Group) urge SFAI Administrators -- specifically SFAI President Chris Bratton, CFO/COO Espi Sanjana and SFAI Trustee Chair John Sanger and his Trustee colleagues -- to arrange for the filing of SFAI's tax return and make it available to the public.    

Requests for SFAI's Recent 990

If a request to inspect or copy a 990 is made in person, the organization must generally honor the request on the same day.  (See Exempt Organizations -- Disclosure Required.) 

On April 30, 2009, a SFAI student requested a copy of SFAI's 990 for the fiscal year ending June 30, 2008.  Espi Sanjana, SFAI's Chief Financial Officer/Chief Operating Officer, told the student that the 990 was not available.  Mr. Sanjana advised the student to check back in a few weeks, and said he did not know when the 990 would be finished.  It is unusual that a CFO would not have more information.     

On June 16, 2009, a SFAI alumnus asked CFO/COO Sanjana for a copy of SFAI's 990 for the fiscal year ending June 30, 2008.  Mr. Sanjana told him that the 990 was not done, and that it may be available "next month."  Mr. Sanjana also told the alumnus that SFAI would not provide him with a hard copy if he asked again in person, but that a copy could be obtained from a website.  Mr. Sanjana did not provide the address of the website. 

SFAI's 990 Due Date

Basically, a Form 990 is due on the 15th day of the 5th month after the end of an organization's accounting period.  An organization can only receive up to two extensions, an automatic 3-month extension if requested, and an additional 3 month extension if requested and approved.   (See Annual Exempt Organization Return: Due Date.)  With a fiscal year ending on June 30, 2008, SFAI's 990 was initially due on November 15, 2008.  If SFAI requested an automatic 3 month extension, its 990 was due on February 15, 2009.  If it requested and was approved another 3 month extension, its 990 was due on May 15, 2009.  The IRS does not appear to provide three extensions, a fact confirmed by calling the IRS and speaking with them directly.  Therefore, based on our research, the latest possible due date for SFAI's 990 was May 15, 2009, over a month ago.  

Late-Filing Penalties

If an organization has gross receipts in excess of $1,000,000 for the year, the penalty for failure to file a required return by the due date (with extensions of time) is $100 per day with a maximum penalty of $50,000.  (See Annual Exempt Organization Return: Penalties For Failure To File.) SFAI's gross receipts for the fiscal year ending June 30, 2007, according to its 990 for that period, was $24,275,047.  Therefore, if it is penalised, SFAI most likely will be subject to the $100 a day penalty.  SFAI students and alumni are very concerned about monetary penalties that may be assessed on SFAI for the late filing of a tax return.  To date, this can be as much as $3300.  Money that is used to pay penalties should instead be used to fund scholarships, pay for much needed on-campus resources, or otherwise be used to advance the educational purposes of SFAI.   

SFAI's Past 990s

Below are copies of SFAI's past 990s: