Does disgraced rabbi owe $2m in property taxes?

By Sheryl Rowling and Donald H. Harrison

SAN DIEGO — The news of the tax fraud scheme perpetrated by Chabad of Poway’s Rabbi Yisroel Goldstein has shocked the country. Ancillary questions beyond the income tax fraud have arisen related to:

• Why was Goldstein permitted to meet with the U.S. president even though the FBI was aware of his criminal activity?
• Why was Goldstein allowed to appear before the United Nations even though the FBI was aware of his criminal activity?
• 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?

The latter question will be discussed in this article. 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 percent fee. On November 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).

As part of this scheme, Goldstein utilized a shell organization, Congregation B’Nei Yisroel. Since 2002, this organization was granted the status of a non-profit 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 legitimae religious organization, property taxes may be past due.

The Trail

Congregation B’Nei Yisroel was classified as a non-profit religious organization since 2002. However, on July 14, 2020 (Case No. 20CR1916-BAS), US 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 February 10, 2003 and the Internal Revenue Service (Federal income taxes) dated December 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.

Current Status

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 August 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 percent appreciation rate, 1.2 percent property tax rate, 10 percent late penalty and annual interest at 18 percent, the total delinquent property taxes are well over $2 million!

This is certainly worth pursuing and hopefully the County will do so.

 

Year	Av Appr	Est Value	Tax Rate	Est Taxes	Penalty	Interest	Est Amt Owed
2003	4.17%	1263267	1.20%	15,159	10%	18%	278,012
2004	4.17%	1315945	1.20%	15,791	10%	18%	245,428
2005	4.17%	1370820	1.20%	16,450	10%	18%	216,663
2006	4.17%	1427984	1.20%	17,136	10%	18%	191,269
2007	4.17%	1487531	1.20%	17,850	10%	18%	168,852
2008	4.17%	1549561	1.20%	18,595	10%	18%	149,062
2009	4.17%	1614177	1.20%	19,370	10%	18%	131,591
2010	4.17%	1681488	1.20%	20,178	10%	18%	116,168
2011	4.17%	1751606	1.20%	21,019	10%	18%	102,553
2012	4.17%	1824648	1.20%	21,896	10%	18%	90,533
2013	4.17%	1900736	1.20%	22,809	10%	18%	79,923
2014	4.17%	1979997	1.20%	23,760	10%	18%	70,555
2015	4.17%	2062563	1.20%	24,751	10%	18%	62,286
2016	4.17%	2148572	1.20%	25,783	10%	18%	54,986
2017	4.17%	2238167	1.20%	26,858	10%	18%	48,541
2018	4.17%	2331499	1.20%	27,978	10%	18%	42,852
2019	4.17%	2428722	1.20%	29,145	10%	18%	37,830
2020	4.17%	2530000	1.20%	30,360	10%	18%	33,396
							2,120,501

 

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Sheryl Rowling is a certified public accountant (CPA), personal financial specialist (PFS), and former principal of Rowling & Associates, a progressive fee-only wealth management firm helping a diverse clientele with investments, taxes, and financial planning. Active in her field, Sheryl has been named one of the nation’s top 250 financial advisors by Worth magazine for three consecutive years and has been included as one of Accounting Today’s Top 100 Most Influential in Accounting.   Donald H. Harrison is editor of San Diego Jewish World.