Baltimore-based Second Chance asked a federal judge last week to refund civil penalties the Internal Revenue Service issued after the tax agency determined the nonprofit and its CEO had helped certain donors inappropriately claim higher tax write-offs.

The nonprofit, which sells building materials and home furnishings pulled from deconstructed homes, and its CEO, Mark Foster, were both fined $22,000 last year after the IRS found they “aided and abetted” people who donated houses in understating their tax liability.

Foster and the nonprofit paid their fines in part last year. The penalties weren’t public knowledge until they sued the U.S. government last week in federal court, denying the IRS allegations and seeking a refund. In doing so, they attached a series of letters between the IRS and the nonprofit’s owners, revealing that investigators had been probing the nonprofit.

Lawyers representing Foster and the nonprofit did not return a request for comment.

The federal probe followed IRS audits of Second Chance donors and multiple investigations that the nonprofit described as a “crusade” to “put a stake through the heart” of the organization.

The IRS asserted that only the value of salvaged items from deconstructed homes can be deducted from a donor’s taxes. But the agency alleged that Foster had signed off on appraisals that were “not revised to reflect salvaged items and their ‘as-deconstructed’ condition.” They said that the list “cannot be an accurate list of the items salvaged” from the homes, as the appraisals were performed before the actual deconstruction.

“As a result, Second Chance, Inc. is providing the client with a false contemporaneous written acknowledgement of the donation of building materials and personal property because the list Mark Foster is signing does not represent the items salvaged,” the IRS wrote. Donors are thus “led to believe” items in that list “are the items salvaged from the deconstruction,” resulting in inflated amounts for donations.

That’s not true, according to the nonprofit. The audited donors only wrote off “discrete items of personal property that were physically removed from the premises by Second Chance,” lawyers wrote in their complaint against the IRS.

They said that it’s “clear” that the nonprofit couldn’t have helped any donor overstate their contributions, and that their IRS penalties were due to the tax agency’s “insistence on various far-fetched theories.”

“The underlying contributions were all fully documented, accurately valued, and entirely permissible under the regulations,” the nonprofit’s lawyers wrote.

The IRS penalties followed a lawsuit from donors who alleged they were misled about the tax benefits of having their properties deconstructed, leading to a drop in donations altogether. Donors also sued the federal government over their tax benefits.

The penalties also came around the same time the nonprofit was accused of wage theft in federal court for classifying its “deconstruction” workers as independent contractors, preventing them from claiming overtime and other wages.

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