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The National Association of Watch and Clock Collectors
Merges with its Museum after an Audit
by the Internal Revenue Service

By Jeanne Schinto

Originally published in Maine Antique Digest, October 2004.

Being chosen for an audit by the Internal Revenue Service is always a piece of bad luck. Isn't it? Actually, no, said John Hubby, first vice president of the National Association of Watch and Clock Collectors. This 27,500-member organization based in Columbia, Pennsylvania, was audited by the IRS beginning in March 2002. But being forced to undergo the tax man's scrutiny was "good luck" in disguise to Hubby's mind, because it forced change.His opinion is not just positive spin. The final results of the audit, only now being completed, include an IRS-prescribed merger of the 51-year-old association and its museum, the National Clock and Watch Museum -- two entities that probably never should have been incorporated separately in the first place. They also include a needed restructuring of the organization, its leadership and its contractual arrangements. "'This is the strangest organization I have ever seen in my life,'" Hubby recalled one auditor saying during his examination of what's known as the NAWCC.Hubby, who is in line to become the NAWCC's next president (and who was designated as NAWCC spokesperson for this piece by current president Judy Draucker), said he sees the merger as "part of our reinvention." It has come at a time when collector groups of all kinds are seeking new visions of themselves in the face of declining memberships. "Coin collectors are going down faster than we are," he said. "One that's doing reasonably well is train collectors. They are not gaining membership, but they are not losing it, either."Leaders of other collector organizations may well wonder if the NAWCC's audit is the start of a trend. The IRS will neither deny nor confirm any facts having to do with any audits of any groups of any kind or size for any reason, including the NAWCC whose annual budget is currently over $2,300,000. In lieu of making any direct comment, Ken L. Hubenak, an IRS media-relations officer, suggested we read a certain government pamphlet. "Executive Summary Exempt Organizations 2004 Implementing Guidelines" describes some of the IRS's current priorities in that area of enforcement. At the top the list is "support of anti-terrorist efforts... to ensure that exempt organizations' assets are used for charitable purposes."Certainly the government has better things to do than investigate hobbyists. But Hubby's understanding is that tax examiners are paying closer attention to collector organizations with the same exemption status as the NAWCC. "I believe that is the case," said Hubby. "We were told that the audit division was carrying out a random review of 501(c)(3) organizations of our type. We just happened to be picked."Indeed, the U.S. Senate Finance Committee began wide-ranging hearings in late June on non-profit practices and abuses and ways to improve oversight of charities. The hearings included testimony from I.R.S. Commissioner Mark W. Everson, who announced the need for "enhanced governance" of "the exempt organizations community."All associations that receive the 501(c)(3) classification are required primarily to serve the public, not their memberships. Primarily. It's the law. "But many members were not aware [of it]," said Hubby, "and believed we really should operate as a private club." The NAWCC's National Watch and Clock Museum, by contrast, had "absolutely" enough public programming to qualify for the classification. Bringing the two entities together legally solved the NAWCC's problem.The merger idea wasn't a brand-new concept for NAWCC leaders. It was first formally proposed at a meeting in February 2002, exactly one month before the IRS came calling. "We all [on the merger task force] had been in business," said Hubby, a retired Philips Petroleum senior executive who has collected clocks as a hobby since the early 1970s. "We knew that trying to maintain the structure we had was a bad idea. The museum was a shell corporation, to put it succinctly." Hubby and the other task force members (a retired Texas Instruments senior manager; a retired insurance-company executive; and a retired financial consultant) were distressed to note that no formal agreements existed between the two entities. "Everything was on an informal 'handshake' basis." Prior to the merger, for example, although the NAWCC supported the museum financially, and made up all deficits it incurred, no legal obligation required it do so. "We were looking to see how we could do things on a much more business-like basis," Hubby said.In short, the task force initially wanted the merger for practicality's sake, not because of tax law. Did the auditors' conclusion about the NAWCC's need for more public programs come as a complete surprise to Hubby and the others? "I don't think it was on the radar screen," he said. This was despite the fact that three local NAWCC chapters with 501(c)(3) status have been audited in recent years, including the Dallas chapter, according to Hubby, who lives in Woodlands, Texas, a suburb of Houston. (All three chapters "passed," Hubby said, because their public programming is strong.)To be fair, the IRS's 501(c)(3) criteria have changed since the NAWCC first received its tax-exempt status in 1958. But so has the NAWCC. In the 1970s, a philosophical split occurred between the collector-scholars who formed the NAWCC in the 1940s and the "merchant" contingent who began to join them when clocks and watches became collectible commodities. The former group thought the organization's primary purpose was to provide horological education opportunities; the latter thought it was to facilitate trading at marts. Not coincidentally the 1970s was the time when NAWCC split off its museum. The move was designed to prevent its collection, which was growing in size as well as value, from being improperly deaccessioned -- or, in Hubby's words, "from being sold off helter-skelter by some rambunctious board."It's also true that the NAWCC received bad legal advice at the time, said Hubby, because isolating itself from most of its public programming rendered it "member-centric." From that moment on, the NAWCC was in violation of tax law. (It has not been assessed any back taxes, however, said Hubby.)With two good reasons to merge, one of them government-mandated, the other, plain common sense, the plan might have been expected to go forward without opposition. It didn't. "The idea to do the merger came in about thirty minutes of discussion amongst four people," said Hubby. "Getting it accepted by the board of trustees and the membership took two years." (The merger was approved by a 3569-143 vote in February 2004. It goes into effective on the first day of this month.) And although the opposition has mostly been quieted now, either by defeat or by the art of persuasion, at least one of their points of resistance remains a valid topic of discussion. If the NAWCC's primary purpose must be its public benefit, won't that obligation be fulfilled to the detriment of the membership?The solution to the problem may lie with the museum, which encompasses a large library and archives. In Columbia, conceivably, both generalists and specialists can be served. On a visit to the museum in May this reporter saw one stellar exhibition on New York clocks, "Top Shelf: Eight-Day Shelf Clock Makers of Upstate New York, 1816-1842," calculated to please "clock nuts," and another about the Civil War era, "Home Front to Battlefield: Keeping Time in the Civil War," that put clocks into social, cultural, and historical context for civilians. The permanent exhibit, a beautifully designed tour through the entire history of timekeeping illustrated with remarkable examples, would surely appeal to all museum-goers.If the museum were the NAWCC's saving grace, it would be ironic. Another major objection to the merger was that the NAWCC would be legally bound (not merely "honor bound") to support the place.CAPTION #1:
Those who ask why the NAWCC's museum ended up in Columbia, Pennsylvania, are inevitably told: "Because that's where Earl Strickler's basement was." The first NAWCC headquarters was in the former home of Earl T. Strickler (1908-1974), the left side of this duplex, at 333 North Third Street. Strickler, who joined the NAWCC in 1948, was an early officer of the organization; he had some 700 clocks in his personal collection. Strickler also stored the NAWCC's embryonic clock-and-watch collection. For that reason, this building could also be called the NAWCC's first museum.Like many collector organizations, the NAWCC was started with volunteers, not feasibility studies. ("The museum just kind of happened," said John Hubby.) When the headquarters and collection outgrew the Strickler household in 1971, they were both moved to their present location a few blocks away. Thirteen years earlier, the NAWCC had been incorporated in New York State, largely because the lawyers doing the pro bono work lived there. The museum was incorporated as a separate entity in Pennsylvania in 1978. When the merger of the NAWCC and its museum is completed, they will become a single Pennsylvania corporation.Not everyone is pleased that Columbia is the NAWCC's Vatican. Each time plans to expand the facility have been made, the old argument is aired. It's in the wrong part of the country; it's not accessible to enough people -- why throw good money after bad? Shouldn't it be moved? Nonetheless, its latest large and costly building project was completed in October 1999. Schinto photo.CAPTION #2:
The NAWCC's headquarters, along with its National Watch and Clock Museum, at 514 Poplar Street, Columbia, Pennsylvania, is about 25 minutes from York and two hours from Philadelphia. With over 12,000 objects, the museum is recognized as the largest and most comprehensive horological collection in North America and one of the best in the world. The museum's challenge is to attract the public while continuing to excite visiting horologists. For information about joining the NAWCC or visiting its museum, call (717) 684-8261 or see the Web site (www.nawcc.org). Courtesy of NAWCC..

 

 

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