Comic-Con May Lose Tax-Exempt Status if IRS Forms Aren’t Filed by June, State Says

Analicia Duell from Toledo, Ohio, dressed as the Silver Surfer at Comic-Con 2017. Photo by Chris Stone

Comic-Con is in danger of losing its non-profit status, the state says, just days after the giant tourist event was signed with IMG in a licensing deal amid reported $ 8 million loss in 2020 affected by COVID-19.

Letter from Attorney General Boda to Comic-Con. (PDF)

In a letter Thursday, California Attorney General Rob Boda warned organizers of the San Diego Comic Con that nonprofit 501 (c) (3) risks losing its tax exemption status if it does not meet a deadline or receive an IRS extension.

“An organization that is delinquent, suspended or withdrawn is not in a good position and is prohibited from engaging in conduct for which registration is required, including attracting or disbursing charitable funds,” Bonta wrote.

It was not immediately clear what the loss of nonprofit status would mean for the city or the hugely popular event, whose annual turnover exceeded 130,000 a year for the decade before 2020 and brought in hundreds of millions of dollars for nearby shops and hotels.

Comic-Con, who allegedly filed IRS 990 Form as of December 31, did not immediately respond to requests for comment.

Neither the San Diego city officials, the tourism authorities, nor the San Diego Convention Center – which is hosting the next Comic-Con in late July.

But last November 18, Comic-Con submitted its annual registration renewal fee report, which reported gross revenue of $ 3.97 million in 2020, when a pandemic forced the suspension of Comic-Con. Its gross expenses that year were $ 11.98 million. (Her total assets were $ 42.4 million.)

The letter to Comic-Con stated that it had until May 15 to submit IRS forms or receive an extension. But the date may be wrong printing, as the letter mentions Sacramento Voice of the Youth Inc.

Boda said that if such forms are not sent to the state Register of Charitable Trusts within 60 days of April 7th – or June 6th – two things would happen:

  • His office will notify the California Franchise Tax Council not to allow Comic-Con tax exemption. (“The Franchise Tax Board may revoke the agency’s tax exemption status, in which case the agency will be treated as a taxable company… and may be subject to the minimum tax penalty.”)
  • Delay fees would be charged for each month or part of the month for which the reports were infringing. “Managers, managers, executives and refund preparers who are responsible for the failure to submit these reports on time are also personally liable for payment of any arrears.”

Boda’s letter arrives three days after agent in corporate & Hollywood stars IMG announced that it would work with Comic-Con to “identify partners who can develop products, retail destinations and experiences for the millions of fans who can not attend the Comic-Con’s annual experience.”

In a statement, “More than 50 years ago, the founders of Comic-Con just wanted to draw attention and recognition to the comics and other art forms they loved,” said IMG Licensing President. In this way, they discovered a common interest in it and the related content of science fiction, fantasy and genre wider than they could possibly have imagined. “

The Comic-Con deposit shows a loss of $ 8 million for 2020. (PDF)

The official, Bruno Maglione, continued: “Today, this comic book culture is the dominant entertainment culture thanks in large part to the advocacy of this art form by Comic-Con and its outstanding creators, and Comic-Con is the premier brand of curators and guide in this area. , enabling it to secure consumer attention and offer consumer value in more ways. “

At least one Comic-Con observer thought the announcement meant the team would justify itself – to extract more Comic-Con.

Writing on bleedingcool.com, Rich Johnston said: “San Diego Comic-Con may be the most famous comic book conference in the world. “But there is only one of them.”

He said that while ReedPOPone for-profit venturehas big shows around the world, the San Diego Comic-Con “as long as it stays where it is, with only WonderCon in Anaheim” as a spin-off from the organizers Comic-Con International and its new museum in Balboa Park.

“The San Diego Comic-Con brand is big, but its true physical footprint is small,” said Johnston.

Lloyd Hitoshi Mayer is a law professor at Notre Dame Law School who has written extensively for nonprofits.

He says it’s hard to say if Comic-Con is trying to franchise.

“Comic-Con could only investigate the licensing of its name, other trademarks and other intellectual property for use by others for royalties, or it could investigate the establishment of subsidiaries that could be considered legal franchises (which would “It involved state franchise laws,” Mayer told the Times of San Diego.

An IMG licensing agreement is okay under IRS nonprofit legislation, Mayer says.

“A charity is allowed to hire a for-profit broker for a reasonable fee to explore generating revenue from its own name and other intellectual property, in the same way that it is generally permissible to hire third parties to work on its behalf, if any. “The fees paid are reasonable,” he said via email.

A charity is allowed to license its intellectual property to others if it receives reasonable royalties – and those royalties are generally exempt from federal income tax, he said.

“The issues that arise with such agreements tend to be not legal but public relations – for example,… a licensing agreement from the American Medical Association that broke out in them,” he said.

In 1997, the American Medical Association signed an approval agreement with Sunbeam Corp., the small home appliance company. AMA will receive large rights from Sunbeam in exchange for using its stamp on Sunbeam’s healthcare products.

But the agreement to place the AMA emblem (a snake curled on a stick) on healthcare products in exchange for a percentage of sales sparked reactions as a conflict of interest.

“Proponents of her case have been working to make the actual transcript of this statement available online. Proponents of her case have been working to make the actual transcript of this statement available online. “In addition, the agreement would be beneficial for patients because it encouraged people to monitor their health.”

However, the Sunbeam deal collapsed within days and the AMA admitted “mistakes in the crisis”.

Notre Dame’s Mayer noted that most charities are skeptical about licensing their names and other intellectual property to others because of the potential public relations problems it may create.

“Often the most valuable asset of a charity is its name and its relative reputation,” he said. “That being said, many charities enter into licensing agreements, but they are careful to limit those agreements to situations where their reputation will not be damaged.”

Many private colleges and universities license the use of their names and logos to credit card companies that then sell affiliate credit cards, he said. But schools must approve missions and other ads related to credit card credit.

“What Comic-Con is exploring here seems to be more extensive than what most charities believe, although Comic-Con has not yet committed to anything,” Mayer said.

Mayer suspects the IMG deal was the result of Comic-Con’s financial losses during the pandemic.

“Licensing his name and other intellectual property is a legal way for a Comic-Con, as a charity, to raise additional revenue,” he said. “The biggest problem Comic-Con faces when doing so is to ensure that it does not harm its brand by associating it with products, retail destinations or experiences that are of poor quality, inconsistent with its mission or create negative perceptions of Comic-Con. . . »

Many nonprofits have licensing agreements, including the American Heart Association (under the heart-Check mark), the American Red Cross, the US Scouts, the US Girl Scouts, the National FFA, and the National Wildlife Federation.

In an IMG press release, Comic-Con spokesman David Glanzer said the SDCC began talks with IMG about six months ago.

“During these discussions, we were struck by the fact that we were able to use our know-how to serve the growing community of fans in more ways, places and times than ever before.” He said. “In 2021 we launched the new Comic-Con Museum and now, with IMG know-how working with specialist partners to deliver authentic branding experiences, we can pursue an exciting new phase for the Comic-Con brand.”

Ricardo Yoselevitz, senior vice president of licensing, said IMG would work with Comic-Con to “identify products and destinations that create new ways and means to engage with this passionate community, while further strengthening Comic-Con’s position.” as the leading curator of this form of popular art and culture “.

He said: “Through its annual meetings, it is clear that Comic-Con has become a strong consumer brand without even trying.”

Comic-Con May Lose Tax-Exempt Status if IRS Forms Aren’t Filed by June, State Says Source link Comic-Con May Lose Tax-Exempt Status if IRS Forms Aren’t Filed by June, State Says

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