The Internal Revenue Service has restored Ham Lake, Minnesota-based charter school operator Parnassus Building Company’s tax-exempt status after it was revoked in May 2022.
The reinstatement indicates that $27.1 Charter School Lease Revenue Bonds Series 2016A, whose tax-exempt status was in jeopardy following the revocation, will remain unchanged.
“The Borrower and PPS hereby provide notification to the Trustee that, on July 29, 2022, the Borrower was notified by the Internal Revenue Service (IRS) that the Borrower’s tax-exempt status had been reinstated,” the EMMA disclosure said.
The issuer did not respond to repeated requests for comment on the change to its status.
The matter likely arose from out of date Form 990 filings, which is common among charter schools. Matthias Edrich, tax partner at Kutak Rock noted that the IRS has had to issue warnings in the past to charter schools for not filing their Form 990s on time.
“We want to make sure everyone in the exempt sector understands their obligations, Robert Malone, director of Exempt Organizations and Government Entities at the IRS said in a notice. “The IRS offers an interactive walkthrough of the annual Form 990 filing process and other courses that board members and volunteers can take to learn about maintaining their charity’s tax-exempt status.”
On March 28, 2022, Parnassus Building Company then filed a Form 1023, seeking retroactive reinstatement on its 501(c)(3) status.
Edrich said that if the IRS thinks the issuer qualifies under Form 1023, then it will apply retroactively and the issuer will be up to date on its filings.
Parnassus Preparatory School is owed $430,000 from operator Parnassus Building Company and its board approved a large payment during its monthly board meeting on June 21.
“The Board unanimously approved the request to the Building Company to pay $300,000 of the existing account receivable of $430,000 owed to the School,” the meeting minutes said.