South Royalton — The Utah engineer behind the NewVistas Foundation says recent land transfers from his group to a for-profit company did not violate charitable finance law because the foundation never received formal tax-exempt status from the Internal Revenue Service.
David Hall, who has been acquiring land for a sustainable community of thousands in the White River Valley, faces allegations from a Vermont Law School professor that his 2017 transfer of the property to for-profit Windsorange LLC was improper.
In a phone interview on Friday, Hall said he applied for tax-exempt 501(c)(3) status from the IRS, but the federal officials initially denied his request based on his plans to use the land to develop a large settlement.
“You’re not a nonprofit until you get their stamp,” he said of the IRS.
Hall says he has acquired about 1,800 acres toward a planned 5,000 near the birthplace of the Mormon prophet Joseph Smith, in Sharon.
Because of the IRS denial, Hall said, in late 2016 he transferred land from the NewVistas Foundation to the newly formed Windsorange LLC, and then obtained 501(c)(3) approval for the foundation based on a plan that did not include land ownership.
Hall argues that since the foundation did not have federal tax exemption until it gave up the land, it was not yet a true nonprofit and thus the transfer could not have been improper.
The VLS professor, John Echeverria, brought his concerns to a Vermont House committee last month. He disputed Hall’s defense of the transfers this week, saying they conflated state and federal requirements.
Echeverria is also a board member of the Alliance for Vermont Communities, which was formed in opposition to NewVistas, and whose lawyers sent complaints about the transfers to the attorneys general in Vermont and Utah.
Officials with the Utah and Vermont attorneys general last month confirmed that they had received the complaints, but declined to say whether or not they had launched investigations.
The multimillionaire engineer says both offices asked him about the complaints. Utah officials listened to Hall’s explanation about 501(c)(3) status and “cleared me,” Hall said, whereas Vermont officials still are reaching a determination.
Dan Burton, a spokesman for the Utah Attorney General’s Office, said on Friday that he couldn’t confirm Hall’s version of events. He declined to comment further.
The Vermont Attorney General’s Office again declined to comment on Friday.
Lawyers in the office are governed by professional rules of responsibility, Deputy Attorney General Josh Diamond said.
“One of these rules cautions against making public statements that have the ability to prejudice a potential, future adjudicative proceeding,” he said.
Echeverria, however, said Hall’s explanation of the transfer “just couldn’t be more wrong,” having conflated federal tax exemption requirements with the responsibilities placed on nonprofits by state law.
“Charities aren’t created under federal law; charities are created under state law,” Echeverria said, noting that the original incorporation papers for NewVistas in both states called it a nonprofit.
And, Echeverria said, state laws in both Vermont and Utah require that assets devoted to a charitable purpose remain under the control of a nonprofit entity. Whether or not Hall’s charity received federal tax-exempt status, it was bound by the state laws under which it was created, he said.
Nancy McLaughlin, a law professor at the University of Utah, echoed Echeverria’s description of the interplay of federal and state charity law in her state.
McLaughlin, who said she was aware of the NewVistas case but was not speaking to its particulars, said a nonprofit registered in Utah may apply for and not receive federal tax-exempt status, “but that does not make the organization any less charitable in the eyes of the state.”
As a general matter, when a nonprofit misuses funds, it risks the public trust, McLaughlin said.
“The whole integrity of the charitable sector is at risk if charities are transferring assets to private individuals or private entities,” she said. “Our charitable sector is built on public trust, and that trust is violated when a charity transfers assets into private hands.”
Echeverria, a Strafford resident who specializes in land use and property law, among other areas, added that Hall had other options than to transfer the land, even if federal officials told him that NewVistas couldn’t hold property for the purposes outlined in his business plan.
Hall could have sold the land and retained the money for the nonprofit, Echeverria said, or he could have submitted a plan to the IRS that involved holding the land for education or conservation purposes — but not for a NewVistas development.
“This is obviously an egregious example of an abuse of a charitable form of operations,” Echeverria said. “It’s an egregious abuse of a charitable organization involving $10 million worth of assets. And if David Hall and the other directors were allowed to get away with this, the implicit message to the other charities in the state is that no one is overseeing what they’re doing with those charitable assets.”
Hall, for his part, said he would be happy to return the land to the NewVistas Foundation if he could.
“If the citizens in the area can help me get it reversed back to that, that’s great,” he said. “It would save me about $2 million in taxes and make for a longer-term view.”
Hall’s holdings in the White River Valley are near the birthplace of the Mormon prophet Joseph Smith, and the NewVistas design is based on sketched plans he found in Smith’s papers. The land in Provo, where Hall lives, is near Brigham Young University, but he has said NewVistas is not religious and would be open to anyone.
Part of Hall’s reasoning in establishing NewVistas as a nonprofit foundation, he said, was to bind the land and assets to a specific mission that would continue in perpetuity. He has said he does not expect his plans to come to fruition until long after he passes on.
A bipartisan group of lawmakers in the Vermont House have sponsored a resolution “opposing the proposed NewVistas development project in the rural areas of the towns of Royalton, Sharon, Strafford and Tunbridge.”
Echeverria voiced his concerns during a hearing on the resolution, which appears to have remained in committee since late March, according to the Vermont Legislature’s website.
Rob Wolfe can be reached at rwolfe@vnews.com or at 603-727-3242.