A government watchdog is taking legal action in an effort to compel the Internal Revenue Service to investigate whether Donald Trump’s charitable foundation violated its tax-exempt status by engaging in political activity on behalf of the Republican nominee’s presidential campaign.
Citizens for Responsibility and Ethics in Washington (CREW), a left-leaning government watchdog group, is filing a formal complaint to IRS Commissioner John Koskinen on Monday morning, citing the Donald J. Trump Foundation’s highly publicized contributions to veterans charities that were doled out earlier this year—which could be a violation of its nonprofit status.
If the IRS audits the Trump Foundation and it is determined to have violated regulations governing nonprofits, the charitable organization could lose its tax-exempt status and the Republican nominee himself could be subject to excise taxes.
Tax-exempt organizations like the Trump Foundation—of which Trump is the president—are strictly prohibited from engaging in political activity.
“The Trump Foundation appears to have violated this prohibition by participating in Mr. Trump’s campaign and advocating for Mr. Trump’s nomination and election,” Noah Bookbinder, CREW’s executive director, writes in the complaint.
The Daily Beast reported in June that the foundation has been operating essentially as a political slush fund, and that it has been coordinating with the campaign in a way that likely violates both IRS and Federal Election Commission regulations.
Monday’s legal action was prompted in part by the presentation of checks to veterans charities that were paid by the foundation, which had Trump’s campaign logo and its signature slogan—“Make America Great Again”—imprinted on them.
Although the IRS prohibits charities like the Trump Foundation from engaging in political activity, the agency does not specifically define what that is. According to FEC guidelines, though, the use of a campaign slogan is a violation because it constitutes express political advocacy that “can have no other reasonable meaning than to urge the election or defeat of a candidate.”
CREW cites the reporting of The Daily Beast and others to conclude that the foundation is acting as a public relations tool to prop up Trump’s historic and unprecedented presidential campaign.
“The Trump Foundation has a history of engaging in inappropriate political activity,” Bookbinder told The Daily Beast. “The law strictly bans charitable foundations from engaging in political activity. The IRS should immediately investigate these apparent repeated violations of the law.”
Phil Hackney, a law professor who worked for the IRS chief counsel for five years and specialized in tax-exempt organizations, said legal action taken by groups like CREW often serve as ways the IRS can generate leads on organizations that are thought to have violated the agency’s regulations.
“It [CREW’s complaint] is one of the ways the IRS generates information in order to decide whether to open an audit,” Hackney, who helped oversee the IRS’ tax-exempt sector, told The Daily Beast. “There are several different ways to do this. A referral is one of them. CREW is playing a part in that system of how the IRS selects groups for audit.”
The Daily Beast previously reported that campaign staffers were in direct contact with the veterans charities on behalf of both the Trump Foundation and the Trump Organization ahead of formal presentations of the checks, suggesting improper coordination among the three entities. Two of them—the foundation and the campaign—are subject to IRS and FEC rules, respectively.
Representatives from two of the charities that received $100,000 checks from the Trump Foundation told The Daily Beast they were in direct communication with Trump campaign staffers, including its spokeswoman, Hope Hicks.
“Under these facts and circumstances, and especially as Mr. Trump was both a political candidate and controlled the Trump Foundation, the Trump Foundation appears to have participated in Mr. Trump’s campaign,” according to the complaint.
In January, Trump pledged $6 million—which was never completely accounted for—to charities that work to help military veterans after the candidate skipped a Fox News primary debate over an ongoing feud with Megyn Kelly. The money raised at an event the same night as the debate went to the Trump Foundation instead of directly to the charitable organizations, and the checks were doled out in the succeeding months.
“Those checks unquestionably communicated the Trump for President’s campaign slogan, and in the context of a campaign rally designed to advocate for Mr. Trump’s nomination and at which Mr. Trump spoke, the use of the slogan can have no reasonable meaning other than to urge his election,” CREW’s complaint says.
In 2013, the foundation failed to report an illegal $25,000 donation to a political group supporting Florida Attorney General Pam Bondi, chalking it up to a simple clerical error. At the time, Bondi was reviewing legal complaints regarding the defunct Trump University.
The Bondi donation alone should be enough for the IRS to audit the foundation, experts told The Daily Beast. CREW filed a complaint over the contribution in March.
The Daily Beast’s calls to the phone number listed on the foundation’s annual disclosures routinely led to staffers within the Trump Organization. Multiple attempts to speak with a foundation staffer were unsuccessful, suggesting that the foundation exists largely on paper.
If the IRS finds evidence of illegal behavior, the organization’s tax-exempt status could be taken away and its purveyor—who has not made his tax returns public—could be forced to pay up.