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Deductions for Destruction By: Greg Yardley
FrontPageMagazine.com | Wednesday, August 06, 2003


Communist fronts linked to the government of North Korea.  Maoists specializing in disorderly street rallies.  American allies of Palestinian terrorist groups.  Demonstrators on behalf of cop-killers and thugs. Violent 'direct action' environmental activists.  What do all these groups have in common?  You can donate to each and every one of them, and claim the deduction on your income tax return.  They'll take the money you give them, and they'll use it, tax-free.  Surprised?  You've got a right to be.  All of this activity is against the law - but the law's not being enforced.

The radical left gets away with their tax-free status thanks to inadequate enforcement of the laws governing non-profit organizations. In America, these laws are enforced by the Internal Revenue Service, which formally classifies non-profits as public benefit corporations, and grants them tax-exempt status under section 501(c)3 of the Internal Revenue Code.  The designation is so common "501(c)3" has become shorthand for referring to a registered non-profit.  Establishing one is relatively easy - it only requires a few hundred dollars in filing fees, a high tolerance for paperwork, and a demonstration that you are, indeed, providing a public benefit.  This can be anything from obvious acts of charity to publishing educational materials and holding public meetings.  Many non-profit political organizations justify their own non-profit status through their educational publications.

Being a non-profit has many benefits.  They don't pay taxes.  The personal legal liability of the directors and staff is minimal.  Contributors can deduct their contributions from their taxes, which gives them a strong incentive to donate.  Finally, registered non-profit status is a prerequisite for almost all charitable foundations grants.  However, registered non-profits also have responsibilities.  They must have formal bylaws and hold regular board meetings.  The directors must advance their non-profit's stated purpose, and scrupulously avoid conflicts of interest. The non-profit must conduct its financial affairs impeccably, and follow the government's laws on reporting income and expenditures.  The non-profits activities are somewhat restricted - they can not distribute their assets for private gain, and they cannot directly participate in certain forms of political activity, like election campaigns.

In spite of these limitations, non-profits are often used to advance political aims, by leftists and conservatives alike.  One leftist organization, the Alliance for Justice, specializes in training left-wing groups to take full advantage of non-profit tax laws, gaining every possible advantage the law permits.  However, certain leftist groups are abusing and stepping beyond the boundaries of non-profit law in order to fund their activities, activities that most certainly do not provide a 'public benefit.'  They know that the list of non-profit organizations in America is two thousand pages of tiny type, and the IRS, understaffed and underfunded, lacks the resources to investigate every organization in depth.  Therefore they choose to break the law; a calculated risk.  Their primary method is the abuse of a variety of fiscal sponsorship, a procedure which allows an unregistered project to obtain tax-deductible contributions through a non-profit intermediary.

In most forms of fiscal sponsorship, the sponsoring non-profit agrees to accept contributions earmarked for a non-registered organization, and then give them to the non-registered organization as a grant.  The contributions have been made to the non-profit, and are therefore tax-deductible, while the cash goes to the sponsored group.  For example, the Interreligious Foundation for Community Organizing (IFCO), a registered tax-exempt non-profit, has agreed to fiscally sponsor the Revolutionary Communist Party 's front organization, Refuse and Resist.   Refuse and Resist, which has a long history of participation in unruly demonstrations, is most definitely not a registered non-profit, but donors can still make a tax-deductible contribution to it.  Under the fiscal sponsorship agreement, the donor simply writes his check to the IFCO and notes on the memo line that it's meant for Refuse and Resist.  The IFCO will happily passes the money on to its intended recipient.

It seems extraordinary, but in some cases fiscal sponsorship is legal.  The IRS recognizes fiscal sponsorship if the sponsored project fulfills the goals of the sponsoring organization, and if the sponsoring 501(c)3 remains in charges of the funds - that is, they decide to distribute the funds, are not required to pass them on to the sponsored program at all, and make it clear that the donation is not directly to the sponsored program in their fundraising appeals.  Art projects, especially those of temporary duration, are often funded in this manner, as are grants to individual academics undertaking research projects.  This legal fiscal sponsorship is typically governed by a detailed grant agreement between sponsor and the sponsored, an agreement which clearly describes the limited goals of the sponsored project, how those goals will advance the purpose of the sponsoring organization, and how the sponsoring organization will monitor the project to ensure its goals are being met.  When fiscal sponsorship is conducted in this manner, it's unobjectionable.  However, many left-wing groups flout fiscal sponsorship regulations by a) establishing indefinite, unmonitored, 'conduit' transactions which simply pass contributions on without effective supervision or control; b) supporting a variety of causes which either fail to further their organization's purpose or openly further illegal purposes; or c) establishing registered 501(c)3 fronts that are completely controlled by and exist only to pass grants on to their founders. They get away with these violations because they can - in general, they're small organizations with small budgets, able to pass beneath the notice of overworked government inspectors.

Who is involved in these dubious transactions, and what do they do with the money?  One primary offender is the already-mentioned Interreligious Foundation for Community Organization, directed by the Rev. Lucius Walker. The IFCO has a long history of participating in protest movements - most recently, as a member of the steering committee of International ANSWER, the communist Workers World Party's anti-war and anti-national security front group.  Reverend Walker has an embarrassing moral blindness when it comes to Cuban dictator Fidel Castro; the activities of his non-profit reflect this. Through his organization, he sponsors forty different "projects," none of them registered non-profits, including the "Free Mumia Abu-Jamal Coalition," the "October 22 Coalition," and "Refuse and Resist" - the latter two are both oft-arrested protest groups at least partially controlled by the Revolutionary Communist Party, a Maoist organization with an often violent history.  Although the IFCO claims it funds only specific programs of these groups - for instance, Refuse and Resist's money is to go to "a project which is exploring ways to defend against violence at abortion clinics and family planning centers" - the groups themselves prove this false by freely soliciting funds for general purposes, all funneled through IFCO.  The IFCO also fiscally sponsors "Not In Our Name," the Revolutionary Communist Party-dominated anti-security coalition responsible for nation-wide protests against the recent war on Iraq.  Activities led by all these groups have resulted in many arrests - none could qualify for 501(c)3 funding on their own.  I wish I could tell you how much the IFCO transfers to each project, but I can't, because the IFCO fails to meet even the most rudimentary requirements of public disclosure.  Their latest-available tax return, the IRS Form 990 for 2001, states that the IFCO spent over $860,000 on program services, but they neglect to tell the IRS how much went to which organization, or even what organizations the IFCO supports, saying only that "there are 40 active projects" and "there are two caravans to Cuba and Mexico."  Due all of the above, the IFCO is flouting tax laws, and is probably due for a careful audit.

At least the IFCO is an independent organization, which is more than anyone can say for the Peoples Rights Fund and Progress Unity Fund, two 501(c)3 organizations very closely affiliated with the Workers World Party.  Close examination of these organizations' public tax returns reveals that the vast majority - in the Progress Unity Fund's case, all - of their grants go to Workers World Party front organizations, and their directors are either closely tied to the Workers World Party or are full Workers World Party members.  It certainly seems like the directors of these funds aren't exercising full control over the grants they make; rather, the recipients of the funds control the directors!  But no IRS agent would ever know this, unless they were familiar with the Workers World Party's range of front organizations or had the time and resources to launch a proper investigation.  If the IRS agent picked up, say, the 2001 IRS Form 990 of the Peoples Rights Fund, they'd read that "in order to receive grants from the Fund, organizations and/or individuals must submit a written statement stating the purpose that they seek a grant and how they would use the grant. The Board of Directors could, if it chooses, schedule an oral interview with the applicant to further discuss the proposal.  The proposed project is then reviewed by the advisory board.  Finally the Board of Directors vote whether to fund the project based on the Fund's exempt purposes."  Sounds above board, no?  They'd also read that the Peoples Rights Fund gave $5,382 to the Peoples Video Network for equipment and training, $10,300 to the Center for United Labor Action for "research studies and seminars," $20,000 went to the World View Forum for "seminars, lectures, and forums on current events," $25,050 went to the National Peoples Campaign for "lectures, forums, and meetings," another $20,495 went to the Job is a Right Campaign for "production of literature and educational programs," and $7,050 went to the Korean Truth Commission.  That IRS agent would also read that the International Action Center was the largest recipient - $49,140 went to its New York office, $25,562 to its San Francisco office, $7,250 to its Washington D.C. office, and lesser amounts to Los Angeles and Philadelphia.

Now, the IRS agent would likely figure out the Peoples Rights Fund slanted left, just based on the names of the organizations it gave grants to, but that's no crime.  Based on the information in that 2001 tax return, there's no real reason to investigate the Peoples Rights Fund further - unless, of course, the IRS agent somehow knew that the Peoples Video Network was established and led by members of the Workers World Party in the 1990s, that the Center for United Labor Action is a now-largely defunct organization established by WWP Secretariat member Larry Holmes in the 1970s, that the World View Forum is the Workers World Party's publishing operation, dedicated to printing the works of deceased party founder Sam Marcy and prominent party ally Ramsey Clark; that the National Peoples Campaign was the 1980s protest group founded by the Workers World Party to oppose Ronald Reagan, that the "Job is a Right Campaign" was a local Minneapolis coalition founded by a Workers World Party ally, that the Korea Truth Commission is a sub-unit of the International Action Center, and that the International Action Center was founded by the Workers World Party in cooperation with former U.S. attorney Ramsey Clark.  If the IRS agent happened to know all that, and knew that the Peoples Rights Fund shared an address on West  14th St. in Manhattan with the Peoples Video Network, International Action Center, and National Peoples Campaign, three recipients of their "grants," and knew that the administrative contact for the Peoples Rights Fund' s web site is also the administrative contact for the Workers World Party's web site, he might start thinking something was a little suspicious. Especially when the organizations the Peoples Rights Fund provide 'grants' to are not the recipients of fixed amounts but are in fact fiscally sponsored - they solicit money directly from the public for their own organizations, and tell them to make the checks payable to the Peoples Rights Fund.  Groups like the International Action Center have the same relationship with the Peoples Rights Fund that Refuse & Resist does with the IFCO.  If the IRS agent knew all that we've mentioned about the Peoples Rights Fund, he'd probably decide it was time for an investigation.

The Progress Unity Fund is even more transparently a creature of the Workers World Party - all three of its directors in 2001, Brenda Sandburg, Rosa Penate, and Keith Pavlik, have written multiple articles for the Workers World Party's own weekly newspaper, Workers World, a honor normally reserved for Party members.  Rosa Penate, the Progress Unity Fund's secretary, has spoken on behalf of the International Action Center, a cause the Progress Unity Fund gave $13,985 to in 2001.  The Mission St. address given on the San Francisco-based Progress Unity Fund's on its website is the same as the San Francisco address of the International Action Center - once again, a non-profit shares office space with its biggest benefactor.  An out-of-date web page for the International Action Center clearly spells out the relation between the two groups, asking visitors to "Support the Progress Unity Fund: This new tax exempt foundation (in formation) will sponsor IAC activities and events and fund IAC activities."  Since the International Action Center knew the Progress Unity Fund would support it before the fund was even established, it's pretty obvious the IAC controls the non-profit and not the other way around.

One wonders why the International Action Center and other Workers World Party organizations need charities - odds are, many Workers World Party fronts could obtain 501(c)3 funding independently, including the IAC. It's probably because the International Action Center and other front organizations don't want to be looked at so closely - if they were 501(c)3 organizations, they'd have to report how their money is spent, how much they pay their organizers, who really directs their activities, and, most importantly, all their sources of funding.  Since the vast majority of the grants went to 'educational' events, it'd be nice to know how much was spent on hall rental and how much was given over as speaker's fees - since many of the speakers at these events are Workers World Party officials, the Workers World Party could be using their 501(c)3 fronts to indirectly launder their full-time party staff's salaries.  The money also tends to go to political conferences and street demonstrations that double as quasi-official Workers World Party functions and recruiting opportunities - in 2001, the Peoples Rights Fund spent over seventy thousand dollars on four 'educational' events; each, they claimed, attended by more than a thousand people.  One was a "series of conferences, rallies, and meetings" - i.e., protests - opposing U.S. foreign policy in the Middle East after 9/11.  Another attempted to find evidence of U.S. war crimes in North Korea.  A third opposed the death penalty as racist, and the fourth criticized the results of American intervention in Kosovo.

It's also possible that the Workers World Party is hiding something more sinister behind their in-house charities.  Representatives of the International Action Center frequently travel to North Korea and Cuba and frequently traveled to Saddam Hussein's Iraq, where they participated in public meetings and rallies and had private meetings with government officials.  Perhaps they were merely exchanging well-wishes with the representatives of totalitarian regimes - then again, perhaps not.  If we had the International Action Center's balance sheets, we'd be in much better position to find out.

Some leftist organizations simply ignore the tax laws when it suits them and hope nobody notices - for instance, the Urbana-Champaign Independent Media Center.  The network of Independent Media Centers commonly known as Indymedia serve as organizing centers for radical protest; given the outcome of many events promoted by various Indymedia centers (for instance, the mass lawbreaking that occurred in San Francisco at the start of Iraq's liberation), it's unlikely that many of them could get classified as "public benefit" corporations by the IRS.  However, Urbana-Champaign's Independent Media Center did obtain 501(c)3 status, and promptly declared itself the "fiscal sponsor" for the entire Indymedia network, taking the place of their former fiscal sponsor, a small concert promoter called Jam With Justice. This is probably illegal, since so many of the Indymedia centers glorify protest-related crime.  However, that's only one of Urbana-Champaign Indymedia's problems - a quick perusal of Indymedia's on-line organizational set-up reveals that the board of directors for Urbana-Champaign Indymedia is not solely responsible for approving and allocating grants.  Instead, the decision to disburse funds is made by the participants of the IMC-Finance mailing list, a group drawn from all over the world.  While the Indymedia Network is obviously trying to remain true to its collectivist ideology, that doesn't change the illegality of the set-up.  Fiscal sponsorship arrangements require that the sponsor exercise complete control over the grant.  To make their fundraising set-up legal, the board of directors of Urbana-Champaign Indymedia must insist that they are at the top of the hierarchy, that they are the sole decision makers, and that none of the funds are to be given to IMCs that promote illegal activity.  If they're not willing to take these steps, their contributors shouldn't be getting tax breaks.

Not all of this money laundering is done through traditionally-established 501(c)3s.  In Boston, a group called Boston to Palestine has arranged for the Middle East-based International Solidarity Movement, a group of anti-Israel activists with a history of cooperation with Palestinian Islamic Jihad and Hamas, to receive their tax-deductible donations through a religious go-between.  As their web site makes clear, as long as you write 'for ISM' in the memo line, checks sent to "Christ Church Cambridge" will make their way to the Middle East.  With a receipt from Christ Church Cambridge, donors can help a group impeding the Israelis' fight against domestic terrorism and look like pious Christians in the process.  Since a church, in the eyes of the IRS, is just a 501(c)3 organized for religious purposes, their financial support for the crimes of the International Solidarity Movement is illegal.

For openly flouting tax regulations, all of these organizations should face a loss of their privileged tax-exempt status - conservatives should add them to the list of already-targeted groups like the Rainforest Action Network, a 501(c)3 that takes in millions each year for an often illegal campaign of vandalism and trespassing, and demand that the IRS be given the resources and the authority to enforce its own rules, rules established when the IRS was better funded.  It's not just a matter of legality, it's a matter of national security.  The kind of abuses taking place under the nose of the IRS show that charitable institutions aren't being monitored closely enough; it's a clear invitation to more serious abuses.  Remember the "broken windows theory" - when small transgressions of the law are tolerated, it send a signal that no one is in charge, and greater crimes soon follow. Remember that 501(c)3s have already been used to funnel hundreds of thousands of dollars to the Palestinian Islamic Jihad, a terrorist organization, by professor-turned-terrorist-funder Sami al-Arian.  Al-Arian clearly knew how to manipulate the "fiscal sponsorship" rules quite well - one of the non-profits he founded, the National Coalition to Protect Political Freedom, was fiscally sponsored by the Interreligious Foundation for Community Organization, the same group that sponsors Refuse and Resist and Not in Our Name.

How many more Al-Arians are lurking in America's network of public charities?  The time has come to reform the regulations guiding the IRS, to ensure future Al-Arians can't take advantage of 'fiscal sponsorship' and other tricks to funnel more money to terrorists.  The IRS can do this by conducting a thorough audit of tax-exempt organizations and enforcing their own regulations; those organizations offering 'fiscal sponsorships' should be required to send in their detailed grant agreements with their tax returns, showing the IRS how the sponsorship furthers their stated charitable purpose and how the sponsored organization is spending their grants.  Those using fiscal sponsorship agreements legally will find this no burden - they'll simply have to make an additional copy of paperwork they already do.  But those breaking the law will be exposed.  This reform should be done, and done quickly - until it's put into place, the government is not taking homeland security as seriously as it should be.




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