Legal Memorandum Part 2

[Susan Earley]

          The members specifically criticize some of the
Society's events, such as the Pensic, as overly recreational and
social.  We suspect this criticism arises from a
misunderstanding.  Education and recreation are not mutually
exclusive: in fact, they may be completely complementary.  Being
educational does not mean that participants are forbidden to have a
good time; to the contrary, enjoyment enhances the educational value
of participation, so that making educational events enjoyable furthers
educational purposes.  The question is whether the purpose of the
activity is primarily educational.  Although we do not have first-hand
experience with the Society's events, unsolicited comments from the
"Rialto" suggest that the Pensic in particular is highly educational. 
One writer discussing a Pensic said, "I met people making rope beds
who never tried using a chisel before, saw people making bone needles
to sew their leather lamalas together with, gentles making shoes,
finishing garments of fine cloth THAT THEY WOVE [emphasis in the
original]. I witnessed the shooting of a war point, folks fighting in
stout steel and sturdy leather, people gathering dye stuffs and
soaking samples . . . heard tales of Beowulf and Njal.  I enjoyed a
performance of comedia, got to play a portative organ . . ." This
experience was evidently educational not only for the commentator, but
also for the performers.  That both observers and participants in all
likelihood enjoyed themselves and each other's company while learning
does not detract in the least from the educational purposes served by
the activities, and will not be held against the Society by the IRS.  

          It is understandable that some members may be
uncomfortable with having to rely on an assessment of intangible
factors like the "recreational tone" the IRS found troubling in
the St. Louis Science Fiction case, or the "commercial hue"
referred to by the Tax Court in Cleveland Creative Arts Guild. 
But in both instances, the overall context in which specific
problematic activities occurred is key to explaining the result. The
manifestly educational purposes of the Society pervade all the
activities which we have been able to consider, and each activity
clearly advances those purposes, in our opinion.  The "Welcome to the
Current Middle Ages" flyer is a prime example, as it locates the
Society's activities within an educational framework and sets the
"tone", or "hue", by which we can understand the Society's operations.

          The members also question the historical accuracy of
the Society's re-creations.  The very existence of the
controversy is further evidence of the Society's educational
purposes.  Disagreements over details of culture and technology
of 17th century Europe -- the appropriate language, the exact
replication of clothing and weaponry -- are bound to prompt study and
the mustering of evidence on either side, and the atmosphere of
controversy and criticism is hardly indicative of a social club.  To
the contrary, such debate is inherent in any vibrant educational
endeavor, particularly one concerned with reproducing an era which
existed over 400 years ago.

Conclusion

          Reports and record keeping.  In a widespread and active
membership organization such as the Society, with several levels of
hierarchy in governance, keeping accurate and complete corporate and
financial records and making complete, accurate, and timely reports to
regulators is an extremely difficult, as well as critical, task. 
Although we did not review extensive Society records, based on our
experience in performing legal audits of other large organizations run
primarily by volunteers, there are always areas where improvements in
procedures and compliance can be made.  This is especially true of
older organizations like the Society.  The Board bears the
responsibility for overseeing legal compliance efforts and monitoring
the results, and we would be happy to assist.  The Board and the
organization will not, however, be held to a standard of total
accuracy, exhaustiveness, and timeliness in order to retain the
Society's tax-exempt status.

          Unrelated business income taxes.  The Board should
review with the Society's auditors the rules for determining what
portion of its income, if any, is taxable as unrelated business
income.  The Board should also ensure that staff are provided with
such information on unrelated business activity as they may need to
operate the Society within the dictates of the law while minimizing
taxes due.  Should the Board wish to consider reversing its position
on advertising income, a written legal opinion should be sought.

          Private inurement.  We found no evidence of private
inurement or inappropriate private benefit in the materials we
reviewed.  The Board may wish to systematically consider Society
operations not covered by our investigation to ensure that this
can be said of the Society as a whole and without exception.  We
would be happy to review any specific situations that raise Board or
member concerns.

          Substantial non-exempt purpose.  We believe, based on
our review and assuming the limited documents we reviewed are
truly representative of the Society's overall operations, that
the Society is clearly entitled to its tax-exempt status as an
educational organization, and that the social and recreational
value of Society events enhances, rather than decreases, their
educational impact.  Nonetheless, the members' allegations should
serve as a reminder to the Society's Board and membership of the need
to test each activity of the Society against an educational
yard-stick.  But having passed that test, recreational and social
value should not be a bar to the Society's decision to engage (or
continue engaging) in a particular activity.


EXHIBIT A

Documents Reviewed



 1.  Report to the Board by Mark Schuldenfrei (Tibor) dated
     October 5, 1995 attaching a report entitled "Is SCA, Inc.
     Entitled to Tax-Exempt Status Under the Internal Revenue
     Code of the United States" by Lisa J. Steele, Esq.

 2.  Amended Articles of Incorporation dated September 15, 1989 

 3.  Corporate Bylaws 

 4.  1993 Form 990 and Form 990-T

 5.  Organizational Handbook 1995

 6.  Membership Application (1/95)

 7.  Flyer entitled "Welcome to the Current Middle Ages"

 8.  Tournaments Illuminated (Issue 115, September 1995) 

 9.  The Page (Newsletter of the Kingdom of the West) (June 1995
     and November 1995)

10.  SCA Marketplace Price List (9/95)

11.  Random discussions between members over the Internet ("the
Rialto")