Spencer Heath Archive

Item 3103

Typed letter to Heath from Spencer MacCallum at 11 Waverly Place, followed by letter from Heath to Bartlett, Poe and Claggett

August 28, 1960

 

11 Waverly Place

August 28, 1960

Dear Popdaddy:

 

Here are the points about Bartlett, Poe and Claggett:

 

1. Failed to advise that book would not be allowed as a tax-exempt activity. Thinking that it would be, we went ahead and put our major emphasis on that. Publica­tion and promotion of materials written by one of the directors and founders is specifically ruled out as a deductible item in a case ruling published in the Internal Revenue Bulletin for January-June, 1955, on page 501 (Rev. Rul. 55-231).

 

2. We also emphasized the Suez proposal as a major Foundation activity and were not advised that this could not pos­sibly qualify because it advocated treaty legislation and attempted to influence foreign policy of the govern­ment.

 

3. We were not advised in drawing up the incorporation papers that family relationship among the trustees would be prejudicial to our gaining tax exemption.

 

4. Failed to include a required clause in the incorporation papers providing for disposition of funds to another 501 (c) organization in the event the Foundation is dissolved.

 

5. The immediate application for tax exemption filed for us by Bartlett, Poe & Claggett was returned as premature with the notice that application must be filed after one year of operation. Our lawyers notified us, thus shifting their obligation. However, we did not understand (or remember) their letter to this effect and failed to apply when the year came around, thinking that application had been made and that it would be acted upon by the Government sometime after the first year of operation. We did not discover our error until after two years of operation, and so lost a full year which was crucial because during the lost year we had some staff and could have carried on qualifying activities had we been advised what kind of activities would be looked on favorably by the Government. The lawyers’ mistake in filing prematurely, their failure to remind us at the proper time for filing, and their failure to advise us during this two-year period as to what kind of activities we should have been pursuing in order to qualify ourselves, resulted in our failure to obtain tax exemption.

 

The letter to Mr. Patterson went off yesterday as per file copy enclosed.

 

Best wishes,

 

/s/ Spencer

 

___________________________________

 

 

PROPOSED REVISION OF PURPOSES of the Science of Society Found.

 

Section I

   To remain as it now is.

 

Section II  Cancel this as it now is and substitute the following:

To promote knowledge and understanding of the existing sys­tem of property, contract and free enterprise in all its aspects and

implications and thereby its further growth and its continuous

development and evolution.

 

Section III

   To remain as it now is.

 

Section IV

   To remain as it now is.

 

Section V

   To remain as it now is.

 

Section VI and. Section VIII

   To remain as they now are

 

Section VIII

   To remain as it now is. With the possible exception of chang­ing “business organizations” to other organizations as particu­larly suggested at the conference.

 

Section IX

   Cancel Section IX as it now stands and substitute the following:

No dissolution, liquidation, forfeiture of its charter or other termination of this Corporation shall be of any effect while it is

in possession of any property or other assets, except such prop­erty or other assets be thereupon transferred to another organiza­tion or other organizations having tax-exempt status under Section 501 (c) of the United States Internal Revenue Code of 1954.

 

Section X

   To remain as it now is.

 

 

 

_____________________________________________________________________________

 

 

Spencer Heath Archive

Item 3103

Letter from Heath to Bartlett, Poe & Claggett, Southwest Corner Calvert & Redwood Sts., Baltimore 2, Maryland, Att. Mr. Willian O. Doub. Penciled by Heath, “This letter showed to Mr. Doub but not delivered. S.H. Keep as record. Pay $268.71.”

August 31, 1960

 

Dear Mr. Doub:

Returning to Maryland early this week I find your letter of August 18th enclosing bill for services to The Science of Soci­ety Foundation, Inc. in its efforts to qualify for tax exemption.

When in 1956 this Corporation was formed expressly to estab­lish a tax-exempt agency through which I, as its principal foun­der, and others like minded, could devote ourselves and substan­tial funds to some certain scientific and educational purposes free from Federal taxation, the matter was discussed with a num­ber of interested persons in New York, among them Mr. George S. Montgomery, Jr. of the well-known law firm of Coudert Brothers, who at a second conference and after full discussion with three of us advised that we incorporate in the State of Maryland and under the guidance of legal counsel to assure that all neces­sary forms and requirements would be properly complied with.

Accordingly, we put the matter confidently into your hands and, upon incorporation, proceeded in good faith with what we believed to be scientific, educational and, above all, non-political activities as set out in our stated purposes and described in our application for tax exemption that was prepared and filed by our attorneys. It turned out that this application was filed prematurely and necessitated a further filing after the lapse of another year. This, however, was not done, resulting in a loss of some two years before an acceptable application was filed.

From the beginning and during all this time we were not advised that under a Case Ruling published in the Bureau of In­ternal Revenue Bulletin for January-June 1955 (Rev. Bul. 55-25l) our major activity, the publication in book form of a scholarly research report by one of our founders, so accepted and approved by highest academic authorities (see circular enclosed), would be specifically ruled out or that it was against the Government policy to permit the naming in our corporate Purposes of other books and their authors for their value to the activities and the chartered Purposes of our Foundation.  And, moreover, we were not advised in the beginning or at any time that the close family relationships among all of our trustees would be very prejudicial to our obtaining tax-exempt status.

Further, relying on our attorneys to keep our application for tax exemption properly in order, we carried on a full two years of the above ill-advised activities instead of properly qualify­ing ones which, had we then known what would be required, we could have carried on. This lack of information has been injurious indeed, for we then had funds which we were confident would become tax-exempt, and also an adequate personnel, neither of which are now available to us by reason of our present poor prospect of tax exemption and the long and costly delays during which I have paid income taxes amounting to almost five thousand dollars which, by reason of our failure to obtain tax-exemption, has now become a total loss not recoverable by me.

Furthermore, in the forming of our Corporation we were not advised of the necessity to include in our articles of incorpora­tion a provision for the disposition of all its properties to some other tax-exempt organization in case our foundation should ever be dissolved (Section 50lc). This omission alone would have disqualified us under our charter as it now stands.

In view of all the above, I am taking the liberty of returning your bill for five hundred dollars plus expenses of $18.71(prob­ably made out from your Office records without special considera­tion) with my request that you take into account not alone the time and attention you have given but also the heavy loss and dis­appointment suffered and perhaps fatal results to the foundation from so long acting under a charter that proved prejudicial and insufficient for its tax-exemption purposes and without informa­tion as to the Bureau of Internal Revenue’s previous rulings and practices in connection with the granting of tax-exempt status.

I make the above request with reluctance and the utmost dis­taste, for it has been my practice over many years to pay all just bills promptly and without question or delay and on at least one important occasion in the past (which your firm perhaps may have forgotten) when the services were highly efficient and valuable to me I have been happy to pay double the amount charged. I trust therefore that you and your associates will take this letter in the kindly spirit in which it is written to you and as conscience may guide.

Sincerely yours,

/s/ Spencer Heath President

THE SCIENCE OF SOCIETY FOUNDATION, Inc.

 

                         

Enclosures:                 

Circular of ‘Distinguished Appreciations.”

Circular on “A free-Enterprise Solution for the Suez.”

Bartlett, Poe & Claggett’s bill for services