Regulators in 2 states are warning consumers against doing business with an organization that offers to trade what it calls a “tax-deductible installment plan” for a variety of assets.
The Iowa Insurance Division says it plans to issue a cease-and-desist order against the entity, National Foundation of America, Franklin, Tenn., and impose a total of $150,000 in fines and other penalties on National Foundation and an Iowa agent who represented the firm.
National Foundation and the agent have a right to ask for a hearing on the order before it becomes final.
The Florida Department of Insurance has put out a notice stating that National Foundation is not authorized to conduct insurance business in Florida and warning consumers against doing business with it.
Representatives for National Foundation and the Tennessee Department of Commerce and Insurance were not immediately available for comment on the Iowa and Florida actions.
The Tennessee secretary of state Web site shows that National Foundation was incorporated as a nonprofit corporation in Tennessee in January 2006 and filed an annual report April 1.
National Foundation says on its Web site that the installment plan it offers is based on Section 453 of the Internal Revenue Code and can be used to replace annuities, real estate, bonds, securities and cash with an arrangement that can produce “guaranteed income that grows each year” while lowering taxable income by up to 50%.
Iowa regulators allege in their cease-and-desist order that National Foundation has no authority to act as an insurance company in the state of Iowa.
National Foundation says it uses its exchange program to support charities, but it does not appear to have an exemption from incomes taxes of its own from the Internal Revenue Code under IRC Section 501(c), Iowa regulators say.
National Foundation has not notified the Iowa Insurance Division about the execution of any qualified charitable annuity agreements, and it does not seem to have complied with Iowa disclosure laws, regulators say.
The company seems not to have disclosed that the installment plans are not protected by an insurance guaranty fund or an insurance guaranty association, and it has failed to give investors an adequate accounting of how investor funds have been or will be spent, regulators say.
In Florida, regulators say they have received at least 5 consumer complaints about National Foundation.
“There are additional complaints from Florida consumers whose potential economic harm has not been determined,” Florida Insurance Commissioner Kevin McCarty says in a statement.