Rick Cohen

A Politicized Internal Revenue Service Examining Progressive Nonprofits

In April, In These Times reported on the behind-the-scenes pressure of the Exxon-Mobil corporation to get an Internal Revenue Service investigation of the U.S. affiliates of Greenpeace. The IRS opened a review of what a critic charged was Greenpeace's use of tax exempt resources for purposes not consistent with Greenpeace's nonprofit tax status. Although the IRS doesn't identify who puts the Service up to these audits and doesn't discuss their in-process content, Greenpeace learned that the audit was prompted by a 2003 letter from an organization called Public Interest Watch.

It's a nice name, Public Interest Watch, and the website offers a mission statement that few people would disagree with on face value: "PIW works to fight charitable trust abuse by exposing individual cases of abuse and advocating for stronger governmental oversight, including requirements for greater financial disclosure by charitable organizations". But in 2003, the year PIW sent the letter requesting an IRS audit of Greenpeace's U.S. affiliates, PIW was 96.7% funded by grants from Exxon-Mobil. The nation's record-setting profitable oil company has a long track record of antipathy to Greenpeace's advocacy on global warming issues. Consequently, the identity of the puppeteers behind the trumped up IRS audit probably didn't surprise Greenpeace's managers.

Although PIW seems excited about IRS's findings, any less hyper reading of the IRS letters to Greenpeace (concerning its 501(c)(3) and 501(c)(4) operations) reveals that the findings were minor at best, the typical improve-your-recordkeeping conclusion that nearly every IRS audit comes up with at a minimum. There's really nothing substantive to the PIW-inspired investigation of Greenpeace, but there is something to PIW's ability to trigger an IRS investigation.

The IRS has taken on a number of investigations of nonprofits recently, issuing a report outlining its new concern about nonprofits overly engaged in what might be partisan political or electoral activities prohibited for 501(c)(3) nonprofits. A February 2006 IRS report described the agency's investigations of 132 nonprofit organizations, a little less than half of them churches, for potentially prohibited political campaign activities. Of that total, 22 cases were closed after an initial review without findings, and an additional 82 received fuller review, with 52 receiving similar kinds of improve-your-recordkeeping warnings from the IRS, with 28 cases still open as of February.

The IRS likes to portray its operations as free of political influence, but recent reports suggest evidence that the Service may be responding with a bit more alacrity than warranted to complaints filed by politically conservative entities like the Exxon-Mobil-funded PIW and others(Note: Exxon-Mobil says that it has ceased its funding of PIW, but some half of corporate philanthropy is not disclosed to the public because it is not delivered through corporate foundations that are required to file IRS 990PF forms, so Exxon-Mobil's or other corporate statements about what they do or do not support through their charitable giving are difficult if not impossible to verify). For example, in 2004, the NAACP attracted the IRS's attention for a speech delivered by the organization's board chair condemning the education, economic, and war policies of the Bush Administration. That's called protected free speech, not IRS-worthy nonprofit violations. In 2005, the IRS conducted an equally dubious investigation, this time of an Episcopal church in California because a former rector delivered a sermon imagining a debate between presidential candidates Bush and Kerry and Jesus. Maybe they were concerned that it was an unfair debate? But it wasn't partisan electioneering, even if the results might have been that Jesus as a write-in polled better than the two major party candidates on issues of war and peace.

Is this a trend? The Boston Globe quotes a former IRS tax exempt division administrator to the effect that it appears that the IRS is actively targeting groups that seem to agree with liberal, Democratic policies more than groups with positions more accommodating to the Bush Administration and the Republican Congress. If so, this is a very disturbing development, but not a new one under this administration.

One of the first IRS actions regarding nonprofits under the Bush Administration was to drop investigations of two foundations associated with former House of Representatives Speaker Newt Gingrich, as we described in great detail in the cover article in the Winter 2006 issue of Responsive Philanthropy. Although Newt had escaped major Congressional ethics penalties for the commingling of GOPAC funds and programs with those of the two charitable organizations that happened to have been established and run by GOPAC executives, the two foundations were clearly way over the edge of nonprofit probity serving the Speaker's personal and political interests. They had been under investigation by the IRS, with a likely consequence that they could have been put out of business, until the Bush Administration came into office and abruptly dropped the inquiry.

Whether it's Rick Santorum operating a dubious charitable foundation, Tom DeLay purporting to help foster children through his foundation, Bill Frist handing out grants for AIDS groups through his World of Hope charity, or Alaska Senator Ted Stevens running his eponymous foundation, all of them collecting donations from lobbyists and special interests with perhaps less than fully charitable motives (such as buying face-time with powerful Congressional legislators), the Bush Administration has tended to turn a blind eye. But if it's a liberal group expressing concern about the current administration's policies on education, the economy, the environment, global warming, or the War in Iraq, don't be surprised if the IRS comes snooping for partisan political activity.

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Posted at 3:06 PM, May 08, 2006 in Government Accountability
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