LUCERNE – The Lucerne Senior Center's financial struggles may finally be nearing a resolution, with the center and the Internal Revenue Service reaching a settlement on back taxes that became official Thursday.

Center Board President Jim Swatts told Lake County News that he and the IRS settled on a figure of just over $33,000, and that he signed the agreement papers Thursday morning.

That settlement, which has taken months to reach, will allow the center to move forward with selling its thrift shop building to the county for $150,000, as Lake County News previously reported.

The county agreed earlier this year to purchase the building to pull the center out of its financial troubles, which have been serious enough to warrant a recent grand jury investigation into the center's affairs predating Swatts' taking over the center's leadership.

The purchase agreement includes a rental agreement in which the county will rent the building back to the center for $1 per year, with an opportunity for the center to repurchase the building for $150,000 in 10 years.

County Administrative Officer Kelly Cox said the title company had contacted him to let him know that the tax liens on the property had been cleared. Cox said he'll be signing the papers this morning at 11 a.m. to close the deal.

“It looks like it's working out – thank goodness,” said Cox Thursday evening.

The Board of Supervisors had already approved one extension to the purchase agreement earlier this summer, and another extension was scheduled for their consideration on this Tuesday's agenda, Cox said.

Swatts said he has worked to resolve the IRS liens since he took over as the center's board president in July 2005.

During the last few months, Swatts had been waiting for the settlement on a day-to-day basis. Swatts said the holdup in reaching a resolution resulted in another food company attaching the center's bank account.

As Lake County News reported in June, the senior's center's total tax liability is about $39,000, of which $16,000 is penalties.

In May Congressman Mike Thompson wrote to the Sacramento IRS office to ask them to dismiss the penalties, which would have reduced the debt to about $23,000. Thompson's letter cited the failure of the center's former executive director – Rowland Mosser – to pay the IRS the taxes the center owed.

But when the IRS heard that the center was selling the building, IRS officials began suggesting that the tax liability could go as high as $72,000, counting additional penalties, Swatts previously told Lake County News.

Lake County News called the IRS about the tax penalty issue.

Spokesman Bill Steiner said tax liability amounts go up or down for a variety of issues, including unwillingness to pay.

That, however, hasn't been the case with the center, which has been sending the IRS $500 each month since March 2006 as part of a repayment plan, according to Swatts and the center's Executive Director, J.J. Jackson.

“Typically, penalties can be dismissed, but interest is what we call statutory,” said Steiner, which means it cannot be removed from the tax bill.

As for specifics of the center's situation, and why the numbers were jumping around, Steiner said, “The IRS can't talk about it,” because of confidentiality. Even he wasn't privy to the case information, he added.

“The IRS is always willing to work with the entity to make sure they can stay in business and pay the taxes off,” Steiner said. “It's not our resolve to put people out of business.”

Every situation is different, said Steiner, and a decision to remove penalties is based on a case's unique circumstances. The decision is ultimately up to a revenue officer with the IRS collection division.

Swatts said he was told the center could have its money as soon as next week, once the attachment to its bank account is resolved.

The $150,000 will allow the center to pay off its bills, including other outstanding liens against the property, and put a new roof on the building.

“We will be able to go forward,” Swatts said.

With this major obstacle now nearly a thing of the past, Swatts is preparing for his next move.

“I'm resigning the end of this month,” he said, although he recently had been reelected the center's board president for another year.

Swatts told Lake County News in a previous interview that he has worked long hours each week during the past few years to get the center back on its feet, which he said he promised to do before stepping down as board president.

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