Tax troubles wedge church between rock and a hard place
MOUNT VERNON, Wash. -- If you're a child, it is a playground. If you're a church, it is a way to stay afloat.
"It is actually completely a nonprofit, 501(c)(3). It's a church," said Wayne Hawkins, treasurer with the Cascade Christian Center of Skagit Valley. "We're not out here trying to turn everybody into Christians; we're out here trying to help the community."
Hawkins says the Mt. Vernon-based church built Jungle Playland, a family entertainment center, in 1997, as a way to fund the church's charitable efforts - from food banks, to family counseling. All of the proceeds from admission to the indoor and outdoor playground pay for the church's many programs, which include counseling for substance abuse and relationship issues.
"I would've lost my life if it weren't for this place," said Beth Chilcote, a church member who turned to the center's programs to cope with being abused as a child. "I had treated that by self-medicating with alcohol and drugs. I would not be alive (if not for the church)."
"It was part of that idea that we said, you know, this is something the community needs," Hawkins added. "All of the revenue that is used is used in one way or another with that."
About two years after the Playland opened its doors, state law changed, limiting some sales tax exemptions for nonprofits, said Mike Gowrylow, spokesperson for the state Department of Revenue. The new regulations stated that if a fundraising activity included "the operation of a regular place of business from which services are provided or performed during regular hours" that sales tax must be collected and sent to the state.
"I think it's pretty clear to us that this is a money-raising business being operated here," Gowrylow said. "Regardless of whether a church is associated with it, it's still a business that should be collecting or remitting taxes."
The church believed it was exempt from collecting sales tax at the Playland, because it raises money for a nonprofit organization, but a recent state audit of the church classifies Playland as a business. The amusement center is open 39 hours per week year-round, and should have charged sales tax from the time it opened, said Mike Gowrylow, spokesperson for the state Department of Revenue.
"I think it's pretty clear to us that this is a money-raising business being operated here," Gowrylow said. "Regardless of whether a church is associated with it, it's still a business that should be collecting or emitting taxes."
The church didn't realize it should have been collecting sales tax, Hawkins said, and thought it was following state laws from when it opened in 1997, classifying it as nonprofit fundraiser. As a result, a 2008 audit revealed it owed about $180,000 in taxes and penalties.
"It was like, "OK I don't know how we're going to come out of this one,'" Hawkins added. "We have none of the funds."
The state agreed to lower the amount to about $58,000 and waive all penalties and interest if the center can commit to paying it, Hawkins said. Despite a $10,000 donation, the church still can't afford to pay the difference, and hopes that members of the community can help.
"(The state) doesn't have the money to fund these programs, so the charity organizations have to do it," Hawkins said. "So we step up to do this, and then they kind of pull the rug out from underneath us?
"This is our church. This is our mission. This is what we so much believe in."
"It is actually completely a nonprofit, 501(c)(3). It's a church," said Wayne Hawkins, treasurer with the Cascade Christian Center of Skagit Valley. "We're not out here trying to turn everybody into Christians; we're out here trying to help the community."
Hawkins says the Mt. Vernon-based church built Jungle Playland, a family entertainment center, in 1997, as a way to fund the church's charitable efforts - from food banks, to family counseling. All of the proceeds from admission to the indoor and outdoor playground pay for the church's many programs, which include counseling for substance abuse and relationship issues.
"I would've lost my life if it weren't for this place," said Beth Chilcote, a church member who turned to the center's programs to cope with being abused as a child. "I had treated that by self-medicating with alcohol and drugs. I would not be alive (if not for the church)."
"It was part of that idea that we said, you know, this is something the community needs," Hawkins added. "All of the revenue that is used is used in one way or another with that."
About two years after the Playland opened its doors, state law changed, limiting some sales tax exemptions for nonprofits, said Mike Gowrylow, spokesperson for the state Department of Revenue. The new regulations stated that if a fundraising activity included "the operation of a regular place of business from which services are provided or performed during regular hours" that sales tax must be collected and sent to the state.
"I think it's pretty clear to us that this is a money-raising business being operated here," Gowrylow said. "Regardless of whether a church is associated with it, it's still a business that should be collecting or remitting taxes."
The church believed it was exempt from collecting sales tax at the Playland, because it raises money for a nonprofit organization, but a recent state audit of the church classifies Playland as a business. The amusement center is open 39 hours per week year-round, and should have charged sales tax from the time it opened, said Mike Gowrylow, spokesperson for the state Department of Revenue.
"I think it's pretty clear to us that this is a money-raising business being operated here," Gowrylow said. "Regardless of whether a church is associated with it, it's still a business that should be collecting or emitting taxes."
The church didn't realize it should have been collecting sales tax, Hawkins said, and thought it was following state laws from when it opened in 1997, classifying it as nonprofit fundraiser. As a result, a 2008 audit revealed it owed about $180,000 in taxes and penalties.
"It was like, "OK I don't know how we're going to come out of this one,'" Hawkins added. "We have none of the funds."
The state agreed to lower the amount to about $58,000 and waive all penalties and interest if the center can commit to paying it, Hawkins said. Despite a $10,000 donation, the church still can't afford to pay the difference, and hopes that members of the community can help.
"(The state) doesn't have the money to fund these programs, so the charity organizations have to do it," Hawkins said. "So we step up to do this, and then they kind of pull the rug out from underneath us?
"This is our church. This is our mission. This is what we so much believe in."
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