NY Times: Lavish Spending At Leading LGBTQ Nonprofit May Have Violated IRS Tax Rules

New York Times, A Pattern Of Lavish Spending At A Leading L.G.B.T.Q. Nonprofit:

A light rain fell at the Zurich airport one Sunday morning in January 2023 as Sarah Kate Ellis made her way from a seat in Delta’s most exclusive cabin to a waiting Mercedes. It was there to chauffeur her to the Swiss Alps, where she and her colleagues would stay at the Tivoli Lodge, a seven-bedroom chalet that cost nearly half a million dollars to rent for the week.

Ms. Ellis, who was en route to the World Economic Forum in Davos, doesn’t run a Wall Street bank or a high-flying tech start-up. She is the chief executive of the nonprofit organization GLAAD, one of the country’s leading L.G.B.T.Q. advocacy groups.

The group, which has an annual budget of roughly $30 million, paid for Ms. Ellis’s trip, as well as a day of skiing, according to internal documents reviewed by The New York Times and interviews with current and former employees and others with knowledge of GLAAD’s operations.

The trip was part of a pattern of lavish spending at GLAAD, much of it by Ms. Ellis, that may have violated the organization’s own policies as well as Internal Revenue Service rules.

The Times reviewed dozens of GLAAD expense reports and accompanying receipts from January 2022 through June 2023, as well as employment agreements, tax filings, audit reports, other financial documents and internal communications.

When Ms. Ellis traveled for work, there were first-class flights, stays at the Waldorf Astoria and other luxury hotels and expensive car services. Not to mention a Cape Cod summer rental and nearly $20,000 to remodel her home office, which was outfitted with a chandelier, among other accouterments.

All of that is on top of Ms. Ellis’s annual pay package, which has the potential to stretch into the high six or low seven figures — a sum that would far exceed what her peers at many similarly sized organizations have earned.

Such perks, luxurious business travel and large pay packages might be commonplace at a for-profit company. But legal experts said they were inappropriate for a nonprofit organization with about 60 employees that, in exchange for being exempt from federal and state taxes, must ensure that executive pay is reasonable and aligned with the charity’s mission and the intent of donors.

The overall pattern of spending represents “a potentially abusive use of charitable funds that would be surprising and insulting to a lot of their donors,” said Michael West, a lawyer who advises charities at the New York Council of Nonprofits. “It appears she may have fallen into the trap of excess.”

Based on advice from lawyers, GLAAD did not declare the money spent on the home office renovation as income on Ms. Ellis’s tax forms, a GLAAD spokesman said, meaning that she most likely did not pay taxes on the spending. Nonprofit experts said this may have violated I.R.S. rules. ...

Legal experts said nonprofits can justify paying large sums to attract top talent but that, under federal and state rules, their boards of directors must ensure that compensation is fair and comparable to the pay of executives at similar organizations. Such determinations are subjective, but if the I.R.S. or state regulators deem executive pay to be excessive, the nonprofit and its leaders can face financial or other penalties, including the revocation of its tax-exempt status. ...

Several experts, including Phil Hackney, a law professor at the University of Pittsburgh who specializes in nonprofits, said that because the home-office renovation improved Ms. Ellis’s property, at least some of the spending typically would have been classified as taxable income for Ms. Ellis.

GLAAD’s accountants, lawyers and auditors disagreed, Mr. Ferraro said. He said they advised GLAAD that because the spending was work-related, it should not be classified as taxable income.

Ms. Plauché, who joined GLAAD as its chief financial officer in the fall of 2022, was worried that the group was not disclosing Ms. Ellis’s first-class flights and summer housing on publicly available I.R.S. forms, according to people familiar with the situation. She also thought that some of Ms. Ellis’s spending violated GLAAD’s expense policies.

New York Times, 4 Key Takeaways From The Times’s Reporting on Spending at GLAAD

• Hollywood, GLAAD’s Sarah Kate Ellis Under Fire After New York Times Investigation Into Spending, Expenses
• Variety, GLAAD CEO Sarah Kate Ellis Accused of Lavish Spending in New York Times Investigation, Including $22,000 Flight and Home Office Renovation; Nonprofit Denies Claims
• The Wrap, GLAAD’s Sarah Kate Ellis Says Mainstream Media Is ‘Pushing Dangerous Narratives’ Following NYT Salary Exposé

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