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CSC Backup 03/01/1991 Children ' s Services Council of Collier County Backup Documents March 1 , 1991 d CUMMINGS & LOCKWOOD ATTORNEYS AT LAW JOE B. COX POST OFFICE BOX 413032 BOARD CERTIFIED TAX LAWYER BOARD CERTIFIED ESTATE PLANNING 3001 TAMIAMI TRAIL NORTH KEVIN G. COLEMAN AND PROBATE LAWYER J. THOMAS CONROY, III LAWRENCE A. FARESE NAPLES, FLORIDA 33941-3032 KAREN R. GARDINER" BOARD CERTIFIED CIVIL TRIAL LAWYER CHARLES R. GEHRKE J. DUDLEY GOODLETTE (813) 262-8311 VICTORIA M. HO BOARD CERTIFIED REAL ESTATE LAWYER FACSIMILE (813) 263-0703 F. EDWARD JOHNSON KENNETH D. KRIER PAMELA S. MAC'KIE BOARD CERTIFIED ESTATE PLANNING DAVID N. MORRISON AND PROBATE LAWYER CATHY S. REIMAN WILLIAM R. O'NEILL JAMES C. STEWART, JR. HOWARD S. TUTHILL" February 19, 1991 ""ADMITTED IN CONNECTICUT GEORGE A. WILSON &WASHINGTON, D.C. ONLY BOARD CERTIFIED ESTATE PLANNING AND PROBATE LAWYER "ADMITTED IN CONNECTICUT& NEW YORK ONLY Paul C. Pinson, Executive Director Children's Services Council of Collier County Grand Central Station, Suite 366 Goodlette Road Naples, FL 33940 Re: Children's Services Council Dear Mr. Pinson: You have asked us to determine whether donations to the Children's Services Council of Collier County will be deductible for federal tax purposes. In our opinion, such contributions are deductible for federal income, gift, and estate tax purposes as charitable contributions. However, we would like to point out that even though a taxpayer may be entitled to a deduction, there are limitations, not discussed here, on the amount such taxpayer can deduct as charitable contributions. The Board of County Commissioners for Collier County (the "County") enacted the Children's Services Council Ordinance (the "Ordinance") on July 31, 1990, thereby creating an independent special district ("the District") within the State of Florida to provide services for children throughout Collier County. Collier County, Fla. , Ordinance No. 90-64 (July 31, 1990) . The Florida State Legislature enabled the County to create the District by a direct grant of authority. Fla. Stat. §125.901 (1989) . The governing body of the District is the Children's Services Council of Collier County (" the Council") , whose members are County and State officials and gubernatorial appointees. The members of the Council serve four-year terms. Collier County, Fla. , Ordinance 90-80 (October 23 , 1990) . The Council has the following powers and duties: 1. To provide and maintain in the County such child guidance, psychological, or psychiatric clinics for children as the Council determines are needed for the general public health, safety, and welfare of the County. TEN STAMFORD FORUM TWO GREENWICH PLAZA 250 ROYAL PALM WAY CITYPLACE STAMFORD,CT 06904 GREENWICH,CT 06830 PALM BEACH, FL 33480 HARTFORD,CT 06103 Mr. Pinson 2 February 19, 1991 2 . To provide for the care of dependent children and to provide such other services for all children as the Council determines are needed for the general public health, safety, and welfare of the County. 3. To allocate and provide funds for other agencies in the County which are operated for the benefit of children, provided they are not under the exclusive jurisdiction of the public school system. 4. To collect information and statistical data which will be helpful to the Council in deciding the needs of children in the County. 5. To consult with other agencies dedicated to the welfare of children to the end of that the overlapping of services will be prevented. (sic) . 6. To lease or buy such real estate, equipment, and personal property and to construct such buildings as are needed to execute the foregoing powers and duties, provided that no such purchases shall be made or building done except for cash with funds on hand. 7. To employ and pay, on a part-time or full-time basis, personnel needed to execute the foregoing powers and duties. 8. Books of account shall be kept by the Council or its clerical assistants, and the fiscal affairs of the Council shall be exclusively audited by state auditors as are assigned from time to time to audit the affairs of the County officials, and may be audited from time to time by the internal auditor for the Clerk of the Board of County Commissioners. 9. To levy taxes if approved by a referendum held pursuant to Section 125.901, Florida Statues. 10. To accept gifts, grants, and other sources of funding from public and private entities. Ordinance, section Five. Additionally, the Council must prepare and adopt an annual written budget of its expected income and expenditures, including a contingency fund. This budget must be certified and delivered to the County on or before July 1 of each year. The Council must estimate the millage rate necessary to be applied to raise funds budgeted for expenditure, except that this millage Mr. Pinson 3 February 19, 1991 rate must not exceed a maximum of fifty cents for each one thousand dollars of assessed valuation of all properties within the County which are subject to County taxes. This budget is not subject to change or modification by any authority. Ordinance, section Six. Subject to a majority vote of Collier County electors, the District may levy an ad valorem tax annually on all taxable property in the county in amount not to exceed one-half mill. This referendum may only be placed on the ballot by the County. Ordinance, section Seven. Furthermore, pursuant to section Eight (a) of the Ordinance, within ten days after the expiration of each quarter of an annual period, the Council shall prepare and file with the County a financial report which must include the following: 1. The total expenditures of the Council for the preceding quarter. 2 . The total receipts of the Council for the preceding quarter. 3 . A statement of the funds which the Council has on hand or in banks at the end of the preceding year. The County is given the option to fund the budget of the Council from its own funds after the first year of operation. Although the District was created pursuant to a County ordinance, independent special districts can only be created with legislative authorization. Fla. Stat. §189.404 (4) (b) (1989) . Independent special districts, such as the District, are empowered the Florida Legislature to carry out special governmental objectives in localized and cost effective ways to avoid overburdening other governmental entities and their taxpayers. Fla. Stat. §189.402 (3) (a) (6) (1989) . The powers and duties detailed above are not merely County imposed, they are directives mandated by the Legislature under the "Uniform Special District Accountability Act of 1989, " (which provides for the creation and regulation of independent special districts. Fla. Stat. §189.401 (1989) ) and Florida Statute section 125. 901. In order to ensure a minimum level of accountability to the public and regulation by the state, the District is obligated, in addition to complying with the terms of the Ordinance, to notify the County of its regular meetings and to publicize these meetings in a newspaper of general paid circulation. Additionally, the meetings must be held in a public Mr. Pinson 4 February 19, 1991 building. Fla. Stat. §189.417 (1989) . The District may be dissolved and its governing board sanctioned if it unjustifiably fails to file the reports described in the Ordinance. Fla. Stat. §§189.419 (1989) , 189.421 (1989) , and 189.422 (1989) . Finally, the Legislature or the Council may dissolve the District for any reason. Fla. Stat. §§189.4043 (1989) and 189.4044 (1989) . Generally speaking, Section 170 (a) of the Internal Revenue Code of 1986 (the "Code") , subject to certain limitations, provides a deduction for any "charitable contribution" made within the taxable year. The term "charitable contribution" is defined with reference to the recipient of a gift and includes a gift or contribution to or for the use of "a state. . . or any [of its] political subdivisions. . . , but only if the contribution or gift is made exclusively for public purposes. " The Internal Revenue Service has interpreted this phrase to require that a governmental donee satisfy two requirements: 1) the donee must be a state, a political subdivision, or some other type of governmental entity which operates on behalf of the State or a political subdivision, and 2) the contributions be used exclusively for public purposes. Rev. Rul, 79-323, 1979-2 C.B. 106. We believe the District satisfies both requirements. With respect to the first requirement, the District is obviously not a State and does not appear to be a political subdivision. A political subdivision for tax purposes is a governmental entity possessing at least one substantial "sovereign" state power. These sovereign powers are: 1) the power to tax; 2) the power of eminent domain; and 3) the power to regulate the health, safety, and welfare of citizens. Rev. Rul. 77-164, 1977-1 C.B. 20. The District does not currently have any of these powers, although the District may have the opportunity to levy a tax sometime in the future. Although the District is not a state and may not be a political subdivision donations need not be made directly to either one to be deductible. Donations made to organizations and entities that act on behalf of a state or political subdivision will qualify for a charitable deduction. Rev. Rul. 79-323, 1979- 2 C.B. 106. In Revenue Ruling 79-323, the Internal Revenue Service held that contributions to a state commission created to study the problems of industrial life in a particular geographic area Mr. Pinson 5 February 19, 1991 were deductible as charitable contributions under Section 170 of the Code. A state established the commission and could terminate it at any time. Elected officials from a number of different municipalities which had chosen to participate in the commission's activities appointed the commission members. The members served for a limited period of time. Furthermore, the state and the member municipalities had the right to review all of the commission's activities including financial endeavors, to ensure that the commission properly spent its money. The Internal Revenue Service concluded that where there were sufficient assurances that the contributions would be used solely for the benefit of the general public, the contributions would be made to or for the use of a governmental entity. Where there is a substantial governmental check on the autonomy of an organization, such assurances will exist. The Internal Revenue Service believed that the commission satisfied this requirement because of governmental control. We are of the opinion that Rev. Rul. 79-323 controls the deductibility of contributions made to the Council. The Council is the governing board of the District and clearly acts on behalf of both the State and the County by performing functions within the realm of delegated governmental authority. The District was established by Florida Statute Section 125.901 and may be terminated by the Florida Legislature at any time. The members of the Council, who all serve limited terms unless removed from office, are County and State officials and gubernatorial appointees. Collier County, Fla. , Ordinance No. 90-80 (October 23, 1990) . Furthermore, pursuant to the Ordinance and State law, the Council must report its activities to the County, and to the State. We believe that the existence of these restrictions result in substantial control by the State and by the County. Therefore, these restrictions result in a substantial governmental check on the Council's autonomy. Donations to the Council will be to and for the use of a governmental entity. The inquiry into whether one has made a contribution exclusively for public purposes focuses in part on the existence of any restricitions regarding prospective beneficiaries, i.e. , a person makes a donation to the Council with the express purpose of benefitting a particular child. For example, in 1977 the Internal Revenue Service disallowed a deduction to persons who made contributions to a presidential inaugural committee which were used in part to sponsor an "invitation only" event. Rev. Rul. 77-283, 1977-2 C.B. 72 . In other words, only a selected group of people enjoyed the donation. Although a restriction on the ultimate beneficiary of a gift jeopardizes a particular Mr. Pinson 6 February 19, 1991 donor's deduction, donations to a governmental entity to aid in its regular functions would be considered used for an "exclusively public purpose. " Rev. Rul. 81-307, 1981-2 C.B. 78. It should be noted that the Ordinance does not contain any directions concerning the disposition of the District's assets if the District is dissolved. It might be beneficial to amend the Ordinance to explicitly state that the District's assets are to revert to the County or the State upon its dissolution. This provision would ensure that no private interests could ever be benefitted. In conclusion, we are of the opinion that donations to the Council will be tax deductible. Therefore it is not necessary for the Council to form a charitable organization in order to receive and distribute such contributions. Very truly yours, 111 J B. Cox 4000 :JJoa/X�O/ (pGt , COLLIER COUNTY GOVERNMENT COMPLEX • . Court Plaza, D-103 2663 Airport Road, South Naples, FL 33962-4855 February 22, 1991 Mr. Paul C. Pinson Children's Services Council of Collier County Grand Central Station, Suite 366 Goodlette Road Naples, FL 33940 Dear Mr. Pinson: Per your request, I am enclosing data regarding our services/programs with designated supervisory personnel indicated. If you need anything further from our office, please let me know. Sincerely, Pat Lehnhard, Sr. Secretary Collier County Cooperative Extension Service County Agriculture Department Enclosure 3301 TAMIAMI TRAIL EAST NAPLES, FLORIDA 33942-4977 813-774-8999 • Public Services Collier County Name:Cooperative Extension Service Court Plaza, D-103 2663 Airport Road, South Naples, FL 33962-4855 Pat Lehnhard, Senior Secretary 774-8370 4-H Program Same Address Linda Denning, 4-H Coordinator 774-8375 Balancing Work & Family Life Program Same Address Jan Bennett, Home Economist 774-8370 Extension Homemakers Same Address Jan Bennett, Home Economist 774-8370 Basic Homemaking Skills Program 310 Alachua Street Immokalee, FL 33934 Denise Coleman 657-3518