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If you google - "young earth creationism" "income tax" -, you won't have to scroll down far before you find me. So I could not resist requests from my readership to look into the current controversy swirling around Ark Encounter, a theme park which features a full size Noah's ark, that is ultimately controlled by Ken Ham's Answers in Genesis. To have any sort of employment at AE, you need to agree with a statement of faith which includes:
Scripture teaches a recent origin for man and the whole creation, spanning approximately 4,000 years from creation to Christ.
By definition, no apparent, perceived or claimed evidence in any field, including history and chronology, can be valid if it contradicts the scriptural record.
I figure that makes it something of an affirmative action program for a certain segment of the home schooled. At any rate, Ark Encounter was the focus of a federal case as the Kentucky Tourism, Arts and Heritage Cabinet sought to withdraw previously approved tax incentives on the grounds that they would be advancing religion. Ark Encounter won the case.
The latest tax dispute is with the City of Williamstown. Linda Blackford covered it for the Lexington Herald Leader. The city has a population of 4,000 and the park doubles that during the week and triples it on weekends, which requires an increase in police, fire and EMS budgets. The city created a fifty cent per ticket safety assessment fee. Organizations exempt from income tax under Internal Revenue Code Section 501(c)(3) are exempt from the levy.
Not coincidentally, it would seem, Ark Encounter LLC transferred the property where the Ark is parked for now to Crosswater Canyon Inc for a nominal sum. Since the tourism cabinet had made its deal with Ark Encounter LLC, it suspended the tax incentive. So Crosswater transferred the property back to Ark Encounter LLC.
Was There A Federal Tax Problem?
That had me a little excited, but as it turns out there is no federal tax issue. If you look at the Forms 990 filed by Answers in Genesis and Crosswater Canyon, you will find that Crosswater and AIG are both 501(c)(3) organizations and that Ark Encounter LLC is wholly owned by Crosswater making it, absent a special election, a disregarded entity. Transactions between the owner of a disregarded entity and the the disregarded entity are, for federal tax purposes, you know, disregarded. Status as a disregarded entity might not a apply for various local tax purposes. I wrote about an Orthodox Jewish school in Lakewood NJ that got tripped up by that. Apparently a similar rule applies in Kentucky, but I'm not equipped to dig deep there at this point.
Ark Encounter Statement
Ark Encounter issued a statement explaining its view of the controversy.
"Unfortunately, much misinformation and many falsehoods have been disseminated by reporters and bloggers about the Ark Encounter and its relationship with the Williamstown city council and a safety tax the council imposed on the Ark.
"The Ark has never stated it would not pay into the fund."In frequent discussions with the city over the last three months, Ark Encounter leadership had proposed that the fee be capped, and recently suggested a maximum of a half million dollars per year. Ark representatives made it clear that it had concerns about the fairness of the city ordinance, for it makes the Ark Encounter bear almost the entire load for the increased funding to cover Williamstown's budget for police, fire, and EMS. This is a city of 4,000 residents.
"Ark Encounter leadership has agreed to meet the requirement of the ordinance. Since July 1, the Ark has been adding 50 cents to each ticket purchase, to meet the requirement of the ordinance. Ark officials have tried to negotiate what they believed was a fair approach, rather than an open-ended one to the safety tax, and still meet the city's needs.
"The filing for an exemption as a religious non-profit (as permitted in the ordinance), was done in an attempt to get the county to change the wording as it currently stands, which would exempt the Ark Encounter. It was not to avoid paying its fair share, as some articles have suggested.
"The Ark was offering to pay up to $500,000 a year into the safety fund. The city rejected the offer.
"To date, more than one million guests have visited the Ark, yet thankfully, calls for emergency services—to both Williamstown and Dry Ridge—have been few in number, averaging about 2 per week.It should also be noted that a user fee is often charged to an individual's personal insurance for the cost of local medical emergency services' response to the Ark.
"There has been much false speculation about the matter over a deed. The Ark Encounter, LLC, operates as a non-profit because it is wholly owned by a non-profit (the LLC is a pass-through entity for tax purposes), which is in turn owned by non-profit Answers in Genesis. To resolve any issues over the recent change in title for the Ark Encounter property, the property has been conveyed back to the Ark Encounter, LLC, and that deed has been recorded.
"Grant County has benefitted enormously from Ark tourism. In Dry Ridge, many hotels, restaurants, and other tourist-related businesses are flourishing. In a spirit of cooperation, we encourage the city of Williamstown to work with more hotel developers and restaurant brands to build in the area. For its part, when Ark staff attend various civic functions, they frequently encourage entrepreneurs to build in Williamstown.
"Summary: The safety-tax matter has been highly misrepresented. The Ark has always been willing to pay into the safety fund, suggesting a yearly cap of a half million dollars per year."
About The State Tax Incentive
I was surprised to see the amount of the state tax incentive cited as $18 million as the amount in question in the federal litigation was $43,125,000. The incentive was tied to the cost of the project, so it may be that the attraction ended up being a little less grand than anticipated. There is an argument that the State of Kentucky is not going out of pocket on the incentive as the mechanism for payment is to kick back sales taxes collected at the attraction. If the attraction is actually drawing people to the area who might otherwise have gone to Disney World, Kentucky comes out ahead. Too bad Orlando.
Is There Anything Here?
Ark Encounter's complaint of unfair treatment by the media might have some merit. Linda Blackford's coverage appears to me to be pretty solid and balanced, but some of what has been in the blogosphere has not been. For example, consider Dan Arel's headline - Ken Ham Sells Ark Encounter Land To Himself For $10 To Avoid Paying Taxes. I don't see that as a fair characterization as to what happened. Hemant Mehta's treatment on Patheos, though quite critical, is fairer and gives full credit to the new sources. Derek Welch of World Religion News got it backward saying that Ark Encounter sold the property to its subsidiary. The transfer was actually upstream.
On the other hand, I'm not displeased to see how they were hoist on their own petard when they transferred the property to beat the city tax. Overall the whole thing strikes me more as clumsy than smacking of deep conspiracy. All in, I think it was a mistake for the Ark to try to be frugal when it comes to supporting local services. Apparently, they think $500,000 is enough, but anything the city got over and above that would be from higher attendance.
On the other hand, I would not rate their attempt to be a little hardball with the city as scandalous. The structure they are using is actually pretty straight forward. One of the members of my brain trust indicated that he was poking at it wondering whether there might be inurement, as the Huff Post headline implies, but there really is not. Everything stayed in the same not for profit (for federal purposes) chain. That the LLC at the bottom is considered for profit for local tax purposes is really not that unusual.
