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Editor: Paul L. Caron
Pepperdine University School of Law

Sunday, December 4, 2016

WaPo:  Alt-Right Group Has Not Filed Form 990s Due To IRS Error, Allowing Group's Finances To Escape Scrutiny

Alt RightWashington Post, The Financial Secrecy Behind White-Nationalist Group Known For ‘Hail Trump,’ Nazi Salutes:

Richard Spencer, the face of a white-nationalist group that gained notoriety and momentum after Donald Trump’s election, has been allowed by the federal government to operate his nonprofit organization in financial secrecy for the past three years.

Spencer’s think tank, the National Policy Institute, has not filed financial returns with the federal government since 2013, according to a database of nonprofit records. That has allowed the institute to avoid public scrutiny at a time when the alt-right — the term Spencer coined to describe a movement seeking a whites-only state — has garnered international attention.

The institute is a public charity that relies heavily on contributions. The Internal Revenue Service almost always requires organizations such as his, which are exempt from paying taxes, to file returns that detail where the money comes from and how it is spent.

But — for reasons the IRS has declined to explain — the organization has been categorized among those not obligated to file any returns whatsoever, according to an examination by The Washington Post. Tax experts asked to review the case by The Post said they believed the classification is erroneous and should be fixed. ...

It remains unclear how this happened, but nonprofit analysts say the IRS probably made the error. ...

Spencer said he did not know whether his organization had filed returns with the IRS in recent years, and he could not explain why the institute was not required to provide the documents, known as Form 990s. ...

Philip Hackney, who formerly worked in the IRS chief counsel’s office, said that even if the government made the mistake, Spencer’s organization is not free from responsibility. “I don’t think the fact that the IRS improperly coded them should absolve them of a duty to file the Form 990,” Hackney, a Louisiana State University law professor, wrote in an email. “They certainly should have been able to make that determination on their own.”

Spencer would not discuss whether the institute had ever informed the IRS of the apparent error. ...

The IRS’s master list of tax-exempt organizations, GuideStar said, indicates that since 2007 the institute has not been required to file returns, but it did so until three years ago, when it provided a record of its 2012 financial activity. The document noted the organization’s total revenue ($125,325) and where that money came from; a breakdown of its expenses ($123,219); its “program service accomplishments” (a conference in Seattle, the development of a website, the publication of a book and a journal). It also asked for answers to questions such as whether the institute had engaged in any lobbying or political campaigning. ...

Marc Owens, the former head of the IRS nonprofit division, explained that if the agency corrects the classification error, an automated system will see that the institute has not filed a 990 for three consecutive years, triggering the revocation of its tax-exempt status. ...

The incident, he asserted, further indicts his former employer, which he and others have long argued should not be in charge of supervising nonprofits. “It suggests some real weaknesses in IRS oversight,” he said. “I think, frankly, it shows that the system is broken.”

If the IRS had for so long neglected to properly monitor an organization as extreme as Spencer’s, Owens wondered, what else might the agency be missing?

http://taxprof.typepad.com/taxprof_blog/2016/12/wapoalt-right-group-has-not-filed-form-990s-due-to-irs-error-allowing-groups-finances-to-escape-scru.html

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Comments

The Non-profit self-classified itself as a charity receiving less than 10,000 in annual revenues, therefore only was required to file a postcard to notify the IRS of its existence. They were irresponsible when their revenue increased in excess of the deminimis amount, and kept doing what they were doing, even though the postcard filing specifically asks for their annual revenue.

That's my take.

Posted by: ADB | Dec 4, 2016 1:49:26 PM

Yep. Much smarter than the Tea Party geniuses.

Posted by: Publius Novus | Dec 4, 2016 5:12:19 PM

A right wing organization might be getting away with something! Luckily Wapo is on the case. They sent their best 37 men to scrutinize in detail. Strange how little they cared when the IRS was under investigation for corruption and all their hard drives mysteriously went missing at the same time.

Posted by: John Capion | Dec 4, 2016 9:47:31 PM

Mr. Capion: Exaggerate much? At the risk of causing MM’s and wodun’s respective heads to explode, let’s bring the meaning of the language back to within a few thousand feet of earth. “Corruption” means “willing to act dishonestly in return for money or personal gain.” Even in the overheated and excessive language used by the right and alt-right in connection with the IRS “scandal,” I have yet to hear anyone allege, let alone provide evidence, that Lerner or any of the Cincinnati rogues took any actions in return for money or personal gain. Moreover, “all their hard drives mysteriously went missing at the same time?” Really? Please.

Posted by: Publius Novus | Dec 5, 2016 8:32:34 AM

It's a post-truth world Publius. The only things that matter are what makes guys like John mad.

Posted by: ADB | Dec 5, 2016 11:32:33 AM

Pubs is correct. Strictly speaking, there's no public corruption at play with IRS and DOJ. "Malfeasance" at best and "Criminal" at worst describe this pattern of behavior. And "Unconstitutional" describes the net effect on conservative groups.

Posted by: MM | Dec 5, 2016 7:02:23 PM