The U.S. Justice Department has filed a civil injunction lawsuit seeking to bar West Dundee, Ill.-based Partners in Charity from making false and misleading statements in promoting its down-payment-assistance program, the department said today.
The department filed a lawsuit in the U.S. District Court for Northern District of Illinois, in Chicago, seeking to bar PIC from making such statements to house sellers promoting a program that assists buyers to fund the purchase of a house.
PIC company officials were not immediately available to comment on the suit.
PIC is a tax-exempt organization that enters into contracts with house sellers under which PIC agrees to provide funds to assist house buyers in making down payments on the purchase of a house, a practice known as “down-payment assistance,” according to the government’s complaint.
Funds for down payments on houses are often cited as a major hurdle keeping many prospective home buyers from buying a home.
PIC advertises that its program benefits sellers by providing home sellers with a larger pool of potential buyers, the complaint said. In consideration for sellers’ participation in the program, PIC requires sellers to “reimburse PIC for the amount of the down payment…assistance plus an administrative fee,” according to the complaint.
The suit alleges that in marketing and operating this program, PIC falsely advises house sellers and others that the sellers may claim charitable deductions on their federal income tax returns for amounts they are contractually obligated to pay PIC.
According to the court filing, seller’s payments are not deductible charitable contributions, because they do not proceed from “detached and disinterested generosity,” but rather the payments are made in order to “facilitat[e] the sale of the seller’s house.”
The government complaint alleges that a significant portion of house sellers participating in the PIC program have improperly claimed a charitable deduction on their federal income tax returns. The suit asks the court to order PIC to provide the government with a complete list of the sellers’ names, addresses, telephone numbers, e-mail addresses, and Social Security numbers.
“Putting a stop to abuse of tax-exempt status is a high priority for the IRS and the Justice Department’s Tax Division,” said Eileen J. O’Connor, assistant attorney general for the Department of Justice’s Tax Division. “The IRS will not tolerate schemes that mislead honest home sellers and tarnish the image of charities,” said IRS Commissioner Mark W. Everson.
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