A federal court has barred an Illinois-based downpayment assistance organization from promoting contributions to its program as tax deductible.
Partners in Charity Inc. and its president, Charles M. Konkus, agreed to the civil injunction order that permanently bars the organization from making false and misleading statements in promoting the downpayment assistance program to sellers, the U.S. Department of Justice announced Wednesday.
Under the program, Partners and home sellers enter into a contract in which the West Dundee, Ill.-based organization agrees to provide the downpayment for borrowers who purchase the sellers' homes and sellers are required to reimburse Partners for the amount of the downpayment plus pay an administrative fee, according to the department.
In marketing and operating the "scheme," however, the department says Partners falsely advised sellers and others that charitable deductions could be claimed on federal income tax returns for the amounts paid to Partners under these contracts.
A significant portion of sellers participating in the contractual program improperly claimed a charitable deduction on their federal income tax returns, the department added.
But the sellers' payments are not deductible charitable contributions, as such payments do not proceed from "detached and disinterested generosity," but rather are made in order to "facilitat[e] the sale of the seller's house," the department reported.
In an e-mailed statement to MortgageDaily.com, Konkus noted there will be no fines or penalty resulting from the settlement agreement.
The settlement will be signed this week, with Partners agreeing, "as we always have stated its not a charitable de[d]uction" to sellers participating in the program, Konkus said.
In addition to refraining Partners and its president from falsely stating the contributions are tax deductible, the injunction also requires the tax-exempt organization to post a copy of the injunction on Partners' Web site and to give the Justice Department relevant information about participants in the program.
"The Tax Division of the Department of Justice has made it a high priority to put an end to the business of providing false tax advice," said Eileen J. O'Connor, assistant attorney general for the division, in the announcement. "Anyone receiving tax advice should verify the motives and qualifications of those giving it, even those claiming to be charitable organizations."
As of Wednesday evening, Partners' site stated, "As a seller, you will generally receive an income tax deduction as selling expenses for fees paid for using the Partners In Charity program. You should discuss your tax situation with your tax advisor. The deduction does not qualify as a charitable income tax deduction."
In a second e-mail to MortgageDaily.com, Konkus said the department now comes restating "our message with no other findings."
"Look at the Web sit[e], its the same as always, stating check with you[r] CPA we do not give tax advise," he said.
Down Payment Assistance Under Fire
The federal government is seeking an injunction against an Illinois-based downpayment assistance organization that it says wrongly promotes seller-paid assistance as tax deductible.