IRS lays siege to VFW posts Tax claims excessive, Md. veterans say

December 18, 1995|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

The menu is sour beef or pork, dumplings on the side. The televisions are turned to the evening news and, once in a while, someone drops a little money in one of the four video poker machines that line one wall.

Just another night at the Veterans of Foreign Wars Post 6506 -- for 50 years a Rosedale institution and, as one member puts it, "a place for old guys to get together and tell old war stories."

But lately the Internal Revenue Service is trying to give the Rosedale post and many other veterans groups in Maryland a new identity: tax scofflaw.

Where its members see a benign place for aging veterans to drink some beer and do a little charity work, IRS agents see a quasi-commercial enterprise that has abused its tax-exempt status and now owes the government a lot of back taxes.

The officers at the Rosedale post don't offer much of a defense against the specifics of the IRS claims. But as they squeeze off verbal shots at the government's sudden and intense interest in them -- why pick on the veterans, they ask, and why now? -- it is clear they do want to defend their organization's place in the American culture.

"If it was wrong, it wasn't done on purpose," says Frank Dziennik, a veteran of the Korean War and the post's assistant adjutant. "Why didn't they come in and tell us 20 years ago?"

"All of a sudden, they say it's all wrong," adds Bob Rogers, 70, a retired Baltimore police officer and the post's senior vice commander. "OK, if we made an honest mistake, give us a fine, slap us on the wrist and tell us what we have to do."

Robert Esler, a lanky retired plumber from East Baltimore and the Rosedale post's commander, says IRS agents seemed to ignore the community service the post provides -- the many goodwill trips up to a Cecil County veterans hospital; the thousands of dollars donated to children's cancer research; the flags the group hands out to anyone who wants them.

Giving to the community

This weekend, there's a Christmas party for a couple of hundred neighborhood children, with each to receive a stocking stuffed with little trinkets and candies.

"The IRS doesn't want to see that. They're not interested in that," Mr. Esler says. "I think they ought to take that into consideration."

Investigators based in the Baltimore IRS office have combed through the records of the Rosedale post and at least 28 other veterans posts around the state.

At Rosedale, they found problems with the post's payment of Social Security taxes for its employees and large amounts of "unrelated business income" that should have been taxed -- presumably from its poker machines and restaurant operation.

With interest and penalties, some of the tax bills have mushroomed into huge sums. The Dundalk VFW post could owe much as $700,000, officials there say. In Bethesda, the American Legion post may owe $400,000.

It's not clear how much the Rosedale post could end up owing. The matter has been turned over to an attorney who is reluctant to talk about it. The findings of the Baltimore IRS office are now being reviewed by the national office in Washington, which is expected to begin issuing final rulings in the cases soon.

For some 50 years, the young men of East Baltimore, Dundalk, Rosedale and surrounding areas have gravitated to the Rosedale VFW post after leaving the service.

The post -- named after Charles Evering, a young Marine from the area who died in World War II -- used to be located in a one-room schoolhouse.

Today, the post has more than 3,200 members -- making it the second largest in the country -- and a sprawling clubhouse just down from Golden Ring Mall.

It has two banquet halls -- one for men, a smaller one for women -- a large bar, restaurant, gameroom and comfortable second-floor offices.

A social whirlwind

There is a busy schedule of social activities: bingo on Wednesdays, big-band dances on Fridays and Sundays that are open to the public, and, of course, the bar and restaurant, a place where members can buy a beer for $1.10 about 12 hours a day, seven days a week.

"What's the difference in building a senior citizens center and having this here?" asks Mr. Esler.

Anna Stielper, a leader of the Ladies Auxiliary of the Dundalk VFW post, says the VFW life is a safe way for veterans to find amusement.

"If you have a husband who's wondering around the house getting underfoot, if he goes to the VFW post, you know some bimbo isn't going to pick him up," Mrs. Stielper says. "Or you know if he gets drunk, someone will take his car keys away."

The post has had to do some things differently after the IRS launched its audit. Perhaps most importantly, it had to kick out a couple of hundred "social members" who don't qualify for full-fledged membership as veterans. Many Maryland veterans posts -- faced with declining interest from aging members -- had taken to using that method to supplement their rolls.

"We never knew there was anything wrong with it," Mr. Esler says.

Now, veterans leaders worry about the fallout from the IRS probe. Mrs. Stielper says she saw it first-hand the other day at Eastpoint Mall when she set up a table to recruit new members.

"This one particular couple went by and said, 'The VFW? That's nothing but a bunch of crooks and drunks,' " Mrs. Stielper says. "I couldn't believe it."

Mr. Esler says a huge tax judgment in the hundreds of thousands of dollars could put the post out of business.

"Who would want to pay it off?" he says. "Why bother?"

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