U.S. Attorney Investigates 527s
I am not sure Lloyd understands the concept behind the phrase “snitches get stitches.” Because only days after he obliquely suggested that a couple of former college Republicans were treading dangerously close to criminal violations, the U.S. Attorney issued subpoenas for the records of certain 527s that raised nearly $90 million using AI generated robocall appeals to patriotism and gratitude for first responders. The problem is, most of the $90 million went to the fiduciary’s web of private entities, ala United Cancer Council. Here is a summary from the New York Times:
Federal prosecutors are scrutinizing at least 10 political nonprofit groups — including five recently profiled in The New York Times — seeking to determine if the groups defrauded donors, according to two recent subpoenas.
. . .
One of the two recent subpoenas was signed May 15, according to a copy obtained by The Times. It sought recordings of fund-raising calls from five nonprofits that The Times had profiled a day earlier: the American Police Officers Alliance, the National Police Support Fund, the American Veterans Honor Fund, the Firefighters and EMS Fund and the Veterans Action Network.
The subpoena said that prosecutors in the Southern District of New York were investigating allegations of wire fraud and conspiracy to commit fraud. These groups are “527s,” named for a section of the tax code and overseen by the Internal Revenue Service. They are supposed to focus primarily on helping candidates for office.
Together, these five groups have raised $89 million since 2014, mostly from small-dollar donors who answered fund-raising robocalls. The largest of the five groups, the American Police Officers Alliance, promised in its calls to “support legislators whose goals are to keep our communities safer,” and to help the families of first responders killed in the line of duty.
But about 90 percent of the money raised was used to pay for more robocalls. Another 3 percent was paid to three political operatives from Wisconsin, who appeared to be the driving force behind all five groups.
Of course, it could have been the Times article I posted about. But my post only mentioned that there are no rules revoking exemption for private inurement or even private benefit, though those prohibitions should be implicit in the word “nonprofit.” That word is not often used, if at all, in IRC 501 and certainly not in 527. Just as the general concept of “charity” underlies all exempt organizations — meaning they all must be “charitable” in the common law sense going all the way back to the Statute of Charitable Uses and even further — all exempt organizations should also have to meet a common law conception of “nonprofit” even if the statute never mentions that phrase. It ought to be implicit and enforceable. I’m just talking tax, though, I ain’t dropping no dimes on nobody.
darryll jones