FOR IMMEDIATE RELEASE CONTACT:
June 17, 2013 Jamie Morris, 202-499-2425
Lack of IRS Oversight Lead to
Fraud, Money Laundering, and Abuse by Tax-Exempt Groups
Cause of Action releases investigative report on fiscal sponsorship: “Conprofit: How the IRS’s Failed Oversight Allows Nonprofit Money Laundering”
WASHINGTON – Cause of Action (CoA), a government accountability organization, today released “Conprofit: How the IRS’s Failed Oversight Allows Nonprofit Money Laundering,” a comprehensive report revealing significant loopholes in the tax code which allow nonprofits to engage in corruption, fraud, and money laundering—in some cases with federal funds. In light of these findings, Cause of Action filed a petition for rulemaking with the IRS, asking them to define and set clear parameters for the practice of fiscal sponsorship.
CoA’s fifteen-month long investigation demonstrates how the Internal Revenue Service (IRS) has consistently lacked oversight and enforcement of its Tax Exempt and Government Entities Division, the same division that has recently come under public, Congressional, and legal scrutiny for allegedly targeting applicants for 501(c)(4) status that hold specific political beliefs. The report reveals how the International Humanities Center (IHC), Christian Community, Inc. (CCI), and Help Is Here, Inc. (HIH), as well as other nonprofits, routinely used the practice of fiscal sponsorship to abuse their tax-exempt status, and in some cases even commit fraud.
“Conprofit: How the IRS’s Failed Enforcement Allows Nonprofit Money Laundering” exposes how these groups subverted the original intent of fiscal sponsorship, which is to create opportunities for charitable projects to start their endeavors under existing nonprofit groups. Instead, “Conprofit: How the IRS’s Failed Oversight Allows Nonprofit Money Laundering” documents fraud, corruption, and money laundering happening under the guise of fiscal sponsorship.
Some of the most egregious examples of fiscal sponsorship abuse:
- IHC sponsored over 200 projects as a fiscal sponsor then collapsed after funneling almost $1 million in project funding toward its own mismanaged debts.
- HIH preyed upon projects, improperly seizing funds, refusing to disburse funding to projects, and attempting to wrest control over projects which attempted to leave.
- CCI posed as a fiscal sponsor for twenty years. Tax documents, audits, and bank statements were fabricated and over $400,000 in project funding was lost.
Cause of Action’s Executive Director Dan Epstein explained the consequences of these findings:
“Cause of Action has exposed yet another layer of mismanagement and lack of oversight at the IRS. This report exposes how the IRS engaged in selective enforcement, targeting certain 501(c)(3) applicants with additional scrutiny while it has approved the tax-exempt status of charities that have engaged in money laundering and fraud.
Significant loopholes in the tax code have opened the door to abuse for organizations to funnel money, fabricate tax documents, and destroy charities by abusing fiscal sponsorship. We now turn to Congress and the IRS to define fiscal sponsorship and remove the ambiguities which have allowed groups such as IHC, CCI, and HIH to exploit and defraud American taxpayers.”
Click here to read a full copy of the report.
About Cause of Action:
Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit www.causeofaction.org.
To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Jamie Morris, jamie.morris@causeofaction.org.
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