Gilroy
– Officials at the Gilroy Chamber of Commerce have spent roughly
$3,000 investigating an allegation that their political endorsement
activities conflict with their nonprofit status, one of the charges
leveled by member Chris Coté in his crusade to end the business
association’s involvement in po
litics.
Gilroy – Officials at the Gilroy Chamber of Commerce have spent roughly $3,000 investigating an allegation that their political endorsement activities conflict with their nonprofit status, one of the charges leveled by member Chris Coté in his crusade to end the business association’s involvement in politics.
“That’s a small amount to pay to make sure we’re not violating the law,” said Tim Day, president of the chamber’s board of directors. “(Our attorney) has assured us that what we’ve done is proper, that we’re within the (Internal Revenue Service) tax codes as a 501c6 (nonprofit). “The reason we took it to an attorney is we’re not IRS code attorneys. We sought legal opinion, got it, and feel comfortable with what we’re doing.”
The disclosure came in response to pointed questioning from Coté during a personal sit-down Wednesday with chamber board members. The meeting was scheduled at Coté’s request to allow him to air his concerns about chamber policies and actions. Coté has demanded the group discontinue political endorsements or at least allow all chamber members to vote on endorsement of candidates and issues. Currently, the group only allows a handful of members on its endorsement committee to make recommendations to the chamber’s board of directors, which retains final authority on endorsements.
“This is money invested by the chamber of commerce, ” Coté said, referring to the $3,000 in legal fees. “I think they should have understood what the laws were pertaining to what they’re doing before they did it. Obviously there’s a question about whether it’s legal or not. That’s money that could have been spent on scholarships or promoting businesses.”
Day pointed out, however, that Coté himself forced the chamber to investigate the matter by raising the issue in the first place.
“It is a little bit circular and they are going to be attacked on either end of it,” Coté admitted, “but if you don’t do your due diligence, it’s all of us that are going to have to pay the price. They should have thought of that before they started doing something that is very partisan and not reflective of all the members of the chamber.”
Friction between Coté and the chamber started last summer, when the endorsement committee was vetting candidates for a state assembly seat. A split vote took place to endorse incumbent Simón Salinas (D-Salinas), for whom Coté was campaigning at the time. Coté was among the people who attended the May 21 meeting and voted in favor of the endorsement. But the board of directors later overturned the recommendation after reviewing Salinas’ voting history and deciding he did not have a pro-business record.
Coté and others in the community cried foul over the reversal and accused the chamber of being undemocratic. Officials have countered that the committee made several procedural errors, the biggest of which involved allowing all chamber members to vote on the recommendation. Bylaws state that only the handful of members on the committee can vote.
Since then, Coté has criticized the chamber on multiple fronts. His suggestion that political endorsements conflict with the chamber’s nonprofit status represents the latest tactic in Coté’s campaign to reverse the policy.
According to Coté’s interpretation, the chamber cannot engage in endorsements because of its financial ties with the Economic Development Corporation, a 501c3 nonprofit organization. IRS documents Coté submitted to members state that such groups, since they are publicly financed, are prohibited from engaging in political activity.
Such nonprofits are also banned from supporting other groups that make endorsements, a qualification aimed at preventing political activity under the guise of another organization.
The IRS documents state that a possible conflict occurs when a 501c3 (in this case, the EDC) provides financial or other support for a nonprofit chamber of commerce or other group engaging in political activities.
Coté has said the chamber’s annual contribution of $30,000 to the EDC, along with the fact that both groups share office space on Monterey Street, makes the chamber’s political activities attributable to the EDC, a publicly supported entity.
In this case, however, the EDC does not support the chamber. Instead, the EDC receives support from the chamber.
Day would not reveal if the distinction played a role in the counsel’s determination that the chamber has not violated any IRS rules. But he defended the decision to spend money investigating.
“As chairman of the board, I think I can’t make a unilateral decision like this and put the chamber at danger with tax laws,” he said. “When asked I brought Chris’s allegations to the board and they said I should have the attorney look at it. Is it going to cost money to do that? Yes, but it’s worth it because the allegations are very serious.”
Members have begun to view Coté’s charges as partisan attacks aimed at embarrassing them into giving up endorsements altogether. That sentiment heightened in early March, after Coté forced a vote on whether or not to include a member of the Hispanic Chamber of Commerce on the committee. Members voted against the measure as a violation of normal appointment procedures. They accused Coté of knowingly raising the issue in an effort to paint them as racist.
Those suspicions grew stronger after members learned that Raul Vega, president of the Hispanic Chamber, disclosed that he informed Coté prior to the vote that his organization’s members could not participate on the committee, since the Hispanic chamber’s nonprofit status bars members from engaging in political activity.
Coté has said he simply wanted to extend an invitation to the group.
“I’ve stated previously that I don’t believe anybody at the Gilroy Chamber (of Commerce) is racist,” he said. “They’ve continued to try and paint any attempt to include somebody form the Hispanic Chamber to be an attempt to expose them as racist. I believe they may be insensitive to being inclusive to all segments of our community. They may want to open their hearts and minds to that, and so far they’ve chosen not to. If they’re going to issue political endorsements the endorsements must be reflective of everyone’s viewpoints.”
In a meeting marked by muted anger, members expressed a common feeling toward Coté.
“I happen to appreciate many of the issues you raise and I agree with many of them,” member Rob Oneto told Coté. “The tactics that you use I don’t like. You’ve thrown out the baby with the bath water. You browbeat and you intimidate, whether you know it or not.”
