Behind the Silver Screen: Deficits, Unfiled Tax Returns

About six weeks ago, Leo Redgate III, founder of the Community Theatre Foundation, appealed, in an open letter to residents, for contributions to the foundation, saying the landmark Community Movie Theatre in downtown Fairfield was in danger of closing.

About three weeks ago, Selectman James Walsh asked the Board of Selectmen in a public meeting to consider helping the foundation financially. "The town's got to think about what, if anything, they want to look at," Walsh said to First Selectman Ken Flatto and Selectman Sherri Steeneck. "I think it would be a horrendous thing if he had to close down."

"It's a serious situation. I'm their attorney, so I'm not going to vote on it, but I think you should sit down with Leo and see where it is," Walsh added.

Redgate and Walsh said the non-profit foundation, which Redgate recently renamed the "Community Film Institute," was having trouble financially.

But the foundation, as of a week ago, appeared to be years behind in filing 990 tax returns to the Internal Revenue Service. Spokesmen in the IRS' Tax Exempt/Government Entities department said the foundation, which lists an address of 111 Beach Road in Fairfield, was still recognized as tax-exempt by the IRS but they said 990 tax returns for 2007, 2008 and 2009 were not available to them and disclosure laws prohibited them from saying anything further.

The most recent 990 tax return available for the Community Theatre Foundation on Guidestar, a Web site that gathers and publicizes tax returns and information about non-profits, was from 2005.

Walsh said he didn't know if the foundation was up to date in filing the 990 tax returns. "I don't know if they're up to date on that or not. I'm only their attorney. I think it's probably out of date," he said about a week ago.

Walsh, who is listed on the Secretary of State's Web site as a former principal member of the Community Theatre Foundation, said he resigned as a principal member because he felt it was odd being both on the board and the foundation's attorney.

Redgate said about a week ago that he knew 990 forms had been done after 2005 but didn't know why they hadn't been filed because he didn't handle paperwork for the foundation. He said he didn't ask Walsh to talk to Flatto about the town helping the Community Theatre Foundation and spoke with Flatto after the July 7 Board of Selectmen's meeting and told Flatto not to do anything.

"I found out for the first time two weeks ago that they weren't filed. We have the 990s. I have them physically on pdfs," Redgate said on July 15. "I know they're done."

Redgate said the foundation lost $58,000 in 2007 and that he hadn't seen the 990s for 2008 and 2009. He e-mailed a copy of the 2007 990 to Fairfield Patch.

The most recent tax returns filed on Guidestar are for the time periods of Nov. 1, 2002 to Oct. 31, 2003; Nov. 1, 2004 to Dec. 31, 2004 (the tax return covers only two months); and the calendar year 2005.

The IRS says a non-profit would lose its tax-exempt status if it doesn't file 990 forms for three years, which was the timeframe inquired about by Fairfield Patch. But the IRS spokesmen said grace periods had been given due to changes in the law and that the Community Theatre Foundation was still recognized as a non-profit organization.

Guidestar on July 22 sent out an e-mail saying that the IRS on May 17 began revoking tax-exempt status from nonprofits that failed to file three consecutive annual 990 returns and that as many as 300,000 nonprofits may lose their tax-exempt status, shrinking the nonprofit sector by 25 percent.

When the Community Theatre Foundation started, Redgate said revenue that exceeded operating expenses would be donated to charities. On publicly available tax returns, the total amount given in scholarships and charity totals $4,364, out of $1.03 million in total revenue received.

The Community Theatre Foundation generated a profit according to the first two tax returns available on Guidestar, which the IRS said posts tax returns within a year of them being submitted to the IRS.

From Nov. 1, 2002 to Oct. 31, 2003, the foundation listed total revenue of $417,119, with total expenses of $353,387. On the revenue side, $52,000 was attributed to direct public support and $365,119 was attributed to gross sales of inventory, less returns and allowances.

The breakdown of expenses at the foundation, on the tax return for Nov. 1, 2002 to Oct. 31, 2003, were: Supplies ($8,505); postage and shipping ($206); occupancy ($83,600); interest ($11,225); depreciation, depletion ($28,487); projectionist ($20,703); film distribution ($83,545); food services ($22,040); cleaning services ($9,140); building services ($22,751); film services ($11,851); consulting ($10,679); management fees ($33,063); film delivery ($4,528); advertising ($200); and scholarships ($2,864.)

The next 990 form filed covered only Nov. 1, 2004 to Dec. 31, 2004.

On that form, the Community Theatre Foundation reported total revenue of $65,992 and total expenses of $58,437.

The breakdown of expenses during that two-month period in 2004 were: Occupancy ($14,000); equipment and rental maintenance ($3,324); depreciation, depletion ($1,538); projectionist ($4,418); film distribution ($14,022); food services ($3,982); cleaning services ($1,777); building services ($3,155); film services ($2,873); management fees ($8,747); film delivery ($481); and advertising ($120.)

On the 990 tax return for calendar year 2005, the Community Theatre Foundation ran a $47,955 deficit, listing total revenue at $245,126 and total expenses at $293,081. The tax return says its net assets or fund balances at the beginning of the year were $109,869, falling to $61,914 at the end of the year.

The breakdown of expenses in 2005 were: Supplies ($1,538); telephone ($5,073); postage/shipping ($275); occupancy ($86,137); equipment rental and maintenance ($1,286); printing and publications ($4,958); interest ($390); depreciation, depletion ($4,330); projectionist ($22,830); film distribution ($67,576); food services ($26,819); cleaning services ($8,045); building services ($3,629); film services ($3,548); management fees ($12,126); film delivery ($2,188); advertising ($580); sound support ($7,169); insurance ($7,168); state fees ($518); bank fees ($446); lighting services ($1,373); and utilities ($23,579.) The foundation says it gave $500 to St. Thomas School and $1,000 to Relay for Life.

On each of the 990 tax forms, an additional three-month extension was requested "in order to prepare a complete and accurate income tax return."

On the tax return provided by Redgate, which covered the 2007 calendar year, the Community Theatre Foundation listed total revenue of $301,470 and total expenses of $358,611, leaving a $57,141 deficit that year.

The net assets or fund balances at the beginning of the year were listed at $59,833, falling to $2,692 at the end of the year, according to the tax return.

The breakdown of expenses were listed as: Salaries and wages of employees ($41,544); payroll taxes ($3,779); accounting fees ($1,357); supplies ($4,965); telephone ($2,314); postage and shipping ($613); occupancy ($94,854); equipment rental and maintenance ($1,379); printing and publications ($1,678); management fees and projectionist ($9,193); film distribution and related ($84,248); food services ($29,176); building maintenance and cleaning services ($38,250); utilities ($22,407); insurance ($9,544); and minor miscellaneous expenses ($13,210.)

Revenue that year included $25,000 from Newman's Own in Westport, $50 from the Fairfield Police Department, $50 from Fairfield Teen Theatre and a loan of $39,827 from Redgate. The purpose of the loan was "to cover operating expenses" and repayment terms were "repay out of program revenue as able."

That tax return identifies total revenue from 2003 through 2006 at $352,654, $65,992, $245,126 and $281,699.