By Sheryl Rowling and Donald H. Harrison
The news of the tax fraud scheme perpetrated by Chabad of Poway’s Rabbi Yisroel Goldstein has shocked the country.
Among the ancillary questions beyond the income tax fraud: Why hasn’t the County of San Diego gone after back property taxes, interest and penalties for the religious exemption claimed on Goldstein’s residence?
First, some background. Rabbi Goldstein was the spiritual leader of Chabad of Poway. Over a period of years, he engaged in massive tax fraud, essentially laundering charitable contributions back to donors in exchange for a 10% fee.
On Nov. 24, 2019, Goldstein pleaded guilty to numerous counts of tax fraud and agreed to repay approximately $3.5 million to various organizations. He was also terminated from Chabad of Poway and Chabad-Lubavitch (the international parent organization). He is set to be sentenced April 26, 2021, by Judge Cynthia Bashant.
As part of this scheme, Goldstein utilized a shell organization, Congregation B’Nei Yisroel. Since 2002, this organization was granted the status of a nonprofit religious organization based on Goldstein’s representations.
Accordingly, the real estate owned by Congregation B’Nei Yisroel was granted exemptions from property taxes. However, since the organization may not have qualified as a legitimate religious organization, property taxes may be past due.
Congregation B’Nei Yisroel was classified as a nonprofit religious organization in 2002. However, on July 14, 2020 (Case No. 20CR1916-BAS), U.S. Attorney Robert S. Brewer Jr. identified the “congregation” as a shell organization set up solely to defraud taxpayers for Goldstein’s personal benefit. Since the organization was never a religious organization, the properties it owned were not utilized for religious purposes. The properties were Goldstein’s residence (claimed as “parsonage”) and adjacent land (claimed as a “parking lot” for the congregation).
The first filing for Welfare Exemption, Claim For Exemption From Property Taxes, was filed by Goldstein on May 8, 2003. He claimed that the property was utilized as part of a “Religious Institution – Synagogue & Religious School.”
As support for that claim, Goldstein noted tax-exempt status granted by the Franchise Tax Board (California state income taxes) dated Feb. 10, 2003, and the Internal Revenue Service (Federal income taxes) dated Dec. 30, 2002.
Every year since 2003, Goldstein attested that the “congregation” continued its tax-exempt status, stating that the organization’s charitable purpose was “social services” and that the religious purpose was “housing of religious personnel.” The same attestation form was signed again for 2020, but this time, it was signed by Goldstein’s son, Rabbi Mendel Goldstein.
On July 31, 2020, Linda Tartakoff, a private citizen, wrote to the Board of Equalization with concerns about the property tax-exempt status of Congregation B’Nei Yisroel.
On Aug. 8, 2020, the County Assessor’s Welfare or Veterans’ Organization Exemption Organizational Clearance Certificate Finding Sheet showed that Congregation B’Nei Yisroel’s exempt status was suspended. Based on its review of the organization, the organization’s exempt requirements were “incomplete”, “N.F.S” (no balance sheet) and “N.O.S.” (no operating statement).
Thus it appears that the B’nei Yisroel property tax exemption was suspended as of August 2020. However, no mention is made as to prior years.
The case at hand is simply a matter of an individual claiming an exemption for a personal residence since 2003. According to public records, the home’s assessed value is over $2.1 million, and the land’s assessed value is over $430,000. Personal property subject to the exemption was valued at $36,500.
For the real property only, assuming an average 4.17% appreciation rate, 1.2% property tax rate, 10% late penalty and annual interest at 18%, the total delinquent property taxes are well over $2 million!
This is certainly worth pursuing and hopefully the county will do so.
Sheryl Rowling is a certified public accountant, personal financial specialist and former principal of Rowling & Associates. Donald H. Harrison is editor of San Diego Jewish World. A version of this piece originally appeared on San Diego Jewish World, a member of the San Diego Online News Association.