Fairhope Single Tax Corporation

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FSTC readies for tax exempt status

Legal advice available to FSTC is extremely positive on two possible plans to seek tax exempt status. In one initiative, FSTC would initiate a completely new "Fairhope Foundation", which would be tax exempt and able to receive donations from interested individuals or corporations of land, stock, money or any kind of gift (usually for a tax benefit to the donor) to be used for the public benefit of the City of Fairhope and the public at large.

In a different initiative, FSTC could try to have the IRS recognize whether the "rent fund" of FSTC can properly be considered tax exempt as a 501 [c] (4) public charity.. We pay substantial federal taxes to the IRS on the income in this fund, as though FSTC membership were eventually to become dividend recipients. For 106 years FSTC’s lease has noted that we will "convert into the treasury of the Corporation for the common benefit of its lessees, all values attaching to such lands, exclusive of improvements thereon", "that no part of the rents paid by him (the lessee) upon the land herewith leased, shall be appropriated as dividends to its members or any other persons, but that all shall be administered as a trust fund for the equal benefit of those leasing its lands".

FSTC’s standard lease was considered by the Alabama Supreme Court in 1987 and 1988 to take precedence over our constitution in dealing with our lessees. The quotations given above are pretty clear indications of the long-term intent of the Corporation to fit into what the IRS considers a "non-profit" corporation.

In any event, our concern with tax exempt status is directed only toward obligations between FSTC and the Internal Revenue Service of the federal government. No possible action by FSTC will have any effect on property taxes and their support of Baldwin County and the City of Fairhope. Additionally, this potential change to non-profit status will not affect FSTC’s 1904 constitution or its current by-laws.