Forbes: Ark Encounter Local Tax Scandal Not Very Scandalous

I bit back I reported on the sale, not once but twice, of the Ark Encounter for $10 that, to all appearances, looked like a tax dodge gone bad.  Now Peter J. Reilly, who has written extensively about the Kent Hovind case, argues that, no it really was not that scandalous.  About the back and forth sale, he writes:

That had me a little excited, but as it turns out there is no federal tax issue. If you look at the Forms 990 filed by Answers in Genesis and Crosswater Canyon, you will find that Crosswater and AIG are both 501(c)(3) organizations and that Ark Encounter LLC is wholly owned by Crosswater making it, absent a special election, a disregarded entity. Transactions between the owner of a disregarded entity and the the disregarded entity are, for federal tax purposes, you know, disregarded. Status as a disregarded entity might not a apply for various local tax purposes. I wrote about an Orthodox Jewish school in Lakewood NJ that got tripped up by that. Apparently a similar rule applies in Kentucky, but I'm not equipped to dig deep there at this point.

Reilly sees that the coverage in the news about the transfer was very one-sided (and I did rely on that for my posts), but that there really was an ethical issue. He continues:

Ark Encounter's complaint of unfair treatment by the media might have some merit. Linda Blackford's coverage appears to me to be pretty solid and balanced, but some of what has been in the blogosphere has not been. For example, consider Dan Arel's headline - Ken Ham Sells Ark Encounter Land To Himself For $10 To Avoid Paying Taxes. I don't see that as a fair characterization as to what happened. Hemant Mehta's treatment on Patheos, though quite critical, is fairer and gives full credit to the new sources. Derek Welch of World Religion News got it backward saying that Ark Encounter sold the property to its subsidiary. The transfer was actually upstream.

On the other hand, I'm not displeased to see how they were hoist on their own petard when they transferred the property to beat the city tax. Overall the whole thing strikes me more as clumsy than smacking of deep conspiracy. All in, I think it was a mistake for the Ark to try to be frugal when it comes to supporting local services. Apparently, they think $500,000 is enough, but anything the city got over and above that would be from higher attendance.

The whole thing certainly left a bad taste in the mouths of the people of the Town, including the mayor. It also struck many, if legal, unethical. For someone like Ham, who decries the downfall of civilization because of moral failure, this seems a tad hypocritical.