By Paul Kruze
Miriam Raftery contributed to this report.
September 8, 2017 (El Cajon) – With hurricanes in the headlines this week, El Cajon Councilman Ben Kalasho finds himself in the eye of a storm—or several--yet again. California Attorney General Xavier Becerra has sent Kalasho a letter of inquiry probing the Miss Middle East Beauty Pageant USA” run by Kalasho. The action follows questions raised by ECM with state regulators over the pageant's nonprofit status.
Nonprofits must account for where donations come from, and how funds are spent. The Attorney General’s letter suggests that Kalasho failed to file proper paperwork to receive designation as a non-profit organization for the pageant. The pageant was run for several years under the umbrella of the San Diego-East County Chaldean Chamber of Commerce also founded by Kalasho, but may be subject to ”registration and reporting requirements,” the letter states.
The Attorney General demands that Kalasho provide copies of documents including a registration form, bylaws, an Internal Revenue Service determination letter and a copy of the Application of Recognition of exemption within 30 days.
The Chamber was briefly incorporated with the California Secretary of State as a nonprofit but in November 2013 the Chamber's nonprofit status was suspended. The trade group represented Chaldean small businesses in El Cajon before it was suspended by the California Franchise Tax Board last year. Kalasho has previously told ECM that he converted the Chamber to a sole proprietorship, or for-profit venture, so that he could represent himself in court due to litigation.
Kalasho has told the San Diego Union-Tribune that he has paid taxes for the chamber using a Schedule C for sole proprietorships. “When we first set up the chamber, we planned on being a non-profit. We never completed that paperwork. We never operated a true nonprofit or completed that filing,” Kalasho further stated, the newspaper reported.
East County Magazine reported in June 2017 that the U.S. Patent and Trademark Office issued an order cancelling Kalasho’s trademark for the “San Diego-East County Chaldean American Chamber of Commerce” name. It said that the Kalasho’s trademark caused confusion with the “Chaldean American Chamber of Commerce” organization based in Detroit, which has been using the name since 2001 and recently sued Kalasho because of its use by him. (Although the website for “San Diego-East County Chaldean American Chamber of Commerce” has been removed because of the action, Youtube videos by Kalasho using the disputed name remain online.)
Kalasho has since launched a new Middle Eastern Chamber of Commerce which claims to be the “largest ethnic chamber in the world.“ However the U.S. Hispanic Chamber of Commerce claims to represent over 4.2 million Hispanic business owners; other ethnic chambers also tout very large memberships.
The State Franchise board says that although the San Diego-East County Chaldean American Chamber was suspended on June 1, 2016 for failing to pay fees, it remained registered on the state’s books at the time of the suspension.
That Kalasho had not formally terminated the non-profit could end up as collateral damage (like the damage from Hurricane Harvey) for the El Cajon businesses and individuals who may have claimed membership fees as a tax deduction on their federal tax forms, according to Miranda Fleisher, a University of San Diego law professor who teaches taxation subjects at its School of Law.
“That an organization has a tax-exempt status with the state does not mean that it has a tax-exempt status with federal law that gives individuals the ability to take a federal deduction when they make a donation,” Fleisher says. “I’m assuming that they did not receive a 501c3 exemption from the federal government. “
She says that when a non-profit is formed under state law, a group has 27 months to file for a federal tax exemption. Once it has been successfully granted, and most of them are, donations are deemed to be deductible. “If you form a non-profit, you know that you are going to get your tax exemption and you dot your I’s and cross your t’s, and do everything you are supposed to; donors should be able to rely that their contribution is tax deductible,” Fleischer says. “If your application is rejected, the people who made a contribution shouldn’t have been able to take a tax deduction for that year,” she adds. “If they did that, they essentially underpaid their taxes.”
Another proviso is if individuals who made contributions itemized their deductions. “That’s a big question, as only one-third of tax filers itemize deductions,” Fleischer notes. Most organizations will openly state on their website and materials that they are a federally certified non-profit organization, she points out, adding that potential charity donors should check whether an organization has this status before they make a contribution.
“If you ever make a contribution or donation to an organization that doesn’t say that their contribution is tax deductible as a 501c3 organization you should ask,” Fleischer advises. “…It is a matter of faith that if it is a new organization and they say that they have filed all of their paperwork and that `We have approval from the Secretary of State and we’ve filed our paperwork with the IRS.’”
One of the major corporate contributors to Kalasho’s beauty pageant entity, the Chamber, is Texas-based Waste Management, Inc., which operates waste disposal franchises throughout the United States and in the City of El Cajon. It has contributed $2,500 to the Chamber.
“Being part of the community is part of the DNA of Waste Management,” says Waste Management’s Sr. Communications Manager, Eloise Orozco. “Like a good and responsible member of the community, we contribute to many organizations so we can effectively reach out to them.”
But Waste Management’s reach may have suddenly fallen short when it comes to Kalasho’s charity. Late last week, Waste Management formally informed by letter to Kalasho that it has requested to withdraw as a member of the Middle East Chamber of Commerce, Orozco confirmed to East County Magazine, though she declined to provide a copy of the letter. “Whether Waste Management will request the money it has contributed to be returned “is too early to tell,” Orozco added. “We have taken the steps as we have because we’re not entirely comfortable contributing to an organization which is involved in a controversy.”
Another potential issue for Kalasho is that he recently participated in an El Cajon City Council vote on liens against property owners who did not pay Waste Management bills, instead of recusing himself to avoid a conflict of interest, since his organization received funding from Waste Management.
Kalasho is also facing civil suits filed by pageant contestants including claims that the pageant was fraudulent and claims of sexual harassment including a contestant who has accused Kalasho of offering to trade sex for the crown. Kalasho has denied those allegations and filed a countersuit.
East County Magazine reached out to Kalasho for comments for this article, but he did not offer a response.
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