Private Nonprofit

Appeal Brief

Summary Paragraph

Hurricane Sandy caused damage throughout the state of New Jersey from October 26, 2012 to November 8, 2012, resulting in a disaster declaration on October 30, 2012 for Monmouth County, New Jersey. The Romer Shoal Lighthouse facility (Lighthouse) located in Monmouth County, experienced damage during the storm. Romer Shoal Lighthouse (RSL) submitted a Request for Public Assistance (RPA) to FEMA on December 16, 2012, stating that the primary purpose of the Lighthouse was “Aid to Navigation.” FEMA approved the RPA and multiple subsequent time extensions for projects associated with the Lighthouse, including one submitted on April 20, 2021, and resubmitted on December 23, 2021, which FEMA denied, finding that RSL was not an eligible Private Nonprofit (PNP). RSL appealed FEMA’s decision, claiming it had established it was an eligible PNP. The FEMA Region 2 Regional Administrator found that RSL was not an eligible PNP and denied the appeal. RSL filed a second appeal in a letter dated September 22, 2023, reiterating first appeal arguments, and the State of New Jersey, Division of State Police, Recovery Bureau (Recipient) forwarded the appeal to FEMA, with its support, on November 27, 2023.  

Authorities

• 44 C.F.R. § 206.221(f); (44 C.F.R.) § 206.223
• PA Guide at 10-11.
• FEMA Public Assistance: Private Nonprofit Organizations Fact Sheet (Oct. 2022).
• FEMA Second Appeal Analysis, Redus Kiddie Kampus, FEMA-1603-DR-LA (Mar. 26, 2013).

Headnotes

• To be eligible for Public Assistance, a PNP organization must currently have: (1) a ruling letter from the IRS that was in effect at the time of the disaster, granting tax exemption under sections 501(c), (d), or (e) of the Internal Revenue Code of 1954, or (2) satisfactory evidence from the State that the organization is a non-revenue producing, nonprofit entity organized or doing business under State law.
  • RSL has not demonstrated it has met either of these two criteria.

Conclusion

RSL has not demonstrated it is an eligible PNP applicant. Therefore, it is ineligible for PA funding.

Appeal Letter

Appeal Analysis

Background

Hurricane Sandy caused damage throughout the state of New Jersey from October 26, 2012 to November 8, 2012, resulting in a major disaster declaration being issued on October 30, 2012. Romer Shoal Lighthouse (RSL) submitted a Request for Public Assistance (RPA), and claimed that the Romer Shoal Lighthouse facility (Lighthouse) experienced extensive damage as a result of the disaster. The Lighthouse was constructed in 1898 and was used to mark dangerous water for vessels using the Port of New York. The Lighthouse was conveyed by the General Services Administration to the National Lighthouse Museum Services, LLC, (NLMS) in 2011, and then again from NLMS to RSL in a quitclaim deed the Applicant signed on February 15, 2012 and recorded on March 16, 2015. Prior to the disaster, the Lighthouse housed an active aid to navigation (ATON) station operated and maintained by the United States Coast Guard (USCG), even after the changes in ownership for the Lighthouse.[1] 

RSL submitted its RPA to FEMA on December 16, 2012. RSL subsequently applied for tax exempt status with the Internal Revenue Service (IRS) under section 501(c)(3) of the Internal Revenue Code and filed as a nonprofit corporation with the state of New Jersey on 

December 17, 2012. It received a letter from the IRS confirming its tax-exempt status on March 24, 2013. FEMA approved RSL’s RPA on March 28, 2013, and classified its facility as a “functioning lighthouse.” FEMA initiated two Project Worksheets (PWs), obligating $484,369.00 for Project Worksheet (PW) 4897 on March 27, 2015, and $4,302,128.00 for PW 4967 on October 20, 2017. 

After receiving several time extensions (TE) for work completion between 2014 and 2021, RSL submitted an additional request on April 20, 2021, for a TE through November 30, 2022, citing among other reasons, COVID-19-related issues as the justification for the TE. FEMA denied this TE in a letter dated November 2, 2021, finding that RSL had not demonstrated extenuating circumstances beyond its control to justify the delay. The Recipient then notified RSL that it received verbal confirmation from FEMA that it could resubmit its request with additional information, rather than file a formal appeal of the denial. RSL then did so in a letter dated December 23, 2021. 

FEMA responded in a letter dated October 21, 2022. FEMA again denied the TE, this time finding that RSL was not an eligible private nonprofit (PNP) organization, because it was not incorporated as a nonprofit and did not become a section 501(c)(3) tax exempt entity until after the disaster. Additionally, FEMA found that even if RSL had been an eligible PNP at the time of the disaster, it did not meet the ownership and legal responsibility requirements set forth in Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223 because the sale of the Lighthouse to RSL was not official until 2015, three years after the disaster. 

First Appeal 

RSL appealed FEMA’s determination in a letter dated December 19, 2022. RSL argued PNPs are not required to have documentation from the state or IRS of their nonprofit status by the date of the disaster. Instead, the RSL asserted the applicable regulation at 44 C.F.R. § 206.221 only required that a PNP “currently” have such documentation, and RSL stated it met that requirement. RSL next pointed to FEMA’s current policy which provides that if an organization is not required to obtain section 501(c)(3) status or tax-exempt status under applicable state law, that organization can alternatively establish its status as an eligible PNP with FEMA by providing articles of association, bylaws, or other documents indicating that it is an organized entity, and evidence of compliance with Internal Revenue Code section 501(c)(3) and state law requirements.[2]RSL claimed that it was exempt from the registration requirements imposed on charitable institutions under New Jersey law because it did not meet the contribution receipt threshold, and that it established its status as an eligible PNP through its Articles of Incorporation and Bylaws and through compliance with the IRS and state law requirements. In support, RSL attached Bylaws dated September 15, 2011 for an entity named Romer Shoal Lighthouse NLMS. Regarding the issue of legal responsibility, RSL stated it assumed both ownership and legal responsibility for the Lighthouse when it executed the quitclaim deed with NLMS in 2012, rather than when it was recorded in 2015. RSL also argued that the requested TE was justified. 

The State of New Jersey, Division of State Policy, Recovery Bureau (Recipient) submitted RSL’s first appeal to FEMA on January 16, 2023, with a letter expressing its support.

On July 24, 2023, the FEMA Region 2 Regional Administrator denied the appeal. FEMA found that RSL was not an eligible PNP, as it did not provide evidence that it was a PNP entity organized or doing business under state law at the time of the disaster, and it did not seek a letter from the IRS until post disaster demonstrating that it was an eligible tax-exempt entity. Further, FEMA found that the name on the predisaster Bylaws in the record (Romer Shoal Lighthouse NLMS) was different from the name on all other relevant PNP documentation presented, that the entity named in those Bylaws was not the same entity as RSL, and that there was no evidence of a change of name in the record to indicate otherwise. Therefore, FEMA found the Bylaws presented did not demonstrate that RSL was operating as a PNP at the time of the disaster. FEMA also found that RSL did not provide either critical or non-critical services that would allow it to qualify as an eligible PNP, because the USCG provided the critical ATON services and RSL had not begun to provide its planned non-critical museum services at the time of the disaster. FEMA concluded that RSL was not an eligible PNP, and the TE request was therefore moot. FEMA deobligated the funding for PW 4897 and PW 4967.

Second Appeal

RSL filed a second appeal in a letter dated September 22, 2023, reiterating prior arguments. RSL also reiterates its position that it existed for a charitable purpose at the time of the disaster, and that it was the same entity named in the predisaster Bylaws, having simply dropped the “NLMS” from its name in subsequent documents. RSL presents a set of Bylaws from September 22, 2023, which it claims is a revision of the September 15, 2011 Bylaws, intended to reflect the entity’s earlier name change, and that the revisions should be treated as effective from the date of the earlier Bylaws. RSL next argues that FEMA erred in its interpretation of the applicable FEMA regulations and policy by finding RSL ineligible because it did not operate the ATON system or provide the critical service itself. According to RSL’s interpretation of FEMA’s authorities, it asserted an eligible PNP must either own “or” operate a facility that provides an eligible service, but need not do both, and a PNP applicant need not provide an eligible PNP service itself, as long as the PNP facility it owns provides that service. RSL argues that the Lighthouse provides an eligible critical service (navigation service), and even if FEMA finds the service provided was a non-critical service (such as a museum), RSL still complied with FEMA policy because it did not restrict the public from accessing the Lighthouse and it applied for and was denied an SBA loan. 

The Recipient transmitted RSL’s appeal on November 17, 2023, along with a letter of support. In its letter, the Recipient asserts that RSL was organized and operating as a PNP under New Jersey law at the time of the disaster, even though it was not registered with the State at the time. In support, the Recipient attaches a letter from the New Jersey Department of Community Affairs, Office of Consumer Protection, regarding filing requirements for charitable organizations. 

Discussion

FEMA may provide funding for the repair, restoration, reconstruction, or replacement of eligible PNP facilities damaged or destroyed by a disaster.[3] To be eligible for Public Assistance, a PNP organization must currently have: (1) a ruling letter from the IRS that was in effect at the time of the disaster, granting tax exemption under sections 501(c), (d), or (e) of the Internal Revenue Code of 1954; or (2) satisfactory evidence from the State that the organization is a non-revenue producing, nonprofit entity organized or doing business under State law.[4] The effective IRS ruling letter or evidence from the State, must demonstrate that the applicant was a PNP organization under applicable law at the time of the disaster.[5]

RSL does not have an IRS ruling letter that was in effect at the time of the disaster, as it acknowledges that it applied for and received tax exemption under section 501(c)(3) of the Internal Revenue Code in December 2012, after the disaster.[6] Similarly, it did not incorporate or file as a nonprofit corporation with the state of New Jersey until after the disaster.[7] Although the Recipient’s second appeal transmittal letter claims that RSL was organized and operating as a PNP under New Jersey law at the time of the disaster, even if it had not registered with the State at that time, neither RSL nor the Recipient has provided satisfactory evidence to support this assertion, as required under FEMA regulation and policy. Instead, the Recipient cites for support to a November 6, 2023 letter from the New Jersey Department of Community Affairs, Office of Consumer Protection which provides the general conditions under which certain entities may be exempt from the requirement to register as a charitable organization and file annual financial reports. However, this letter does not suggest that RSL was a non-revenue producing, nonprofit entity organized or doing business under State law at the time of the disaster, nor does it even discuss RSL at all.[8] 

Finally, RSL also points to two sets of Bylaws from 2011 and 2023 to establish that it was an eligible PNP at the time of the disaster, based on current policy that allows FEMA to consider such documentation in making its determination.[9] It claims that the 2023 Bylaws were simply a revised version of the 2011 Bylaws effective prior to the disaster, reflecting a name change. However, the documentation does not establish that the named entity in the 2011 Bylaws, Romer Shoal Lighthouse NLMS, is the same as the entity in the 2023 Bylaws, RSL, with each having a different specific purpose listed.[10] Therefore, assuming that the 2023 Bylaws belong to RSL, it has not demonstrated that the 2011 Bylaws in effect at the time of the disaster belonged to the same entity. As such, RSL has not demonstrated that it was an eligible PNP at the time of the disaster. 

Conclusion

RSL has not demonstrated it is an eligible PNP applicant.[11] Therefore, it is ineligible for PA funding.