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July 29, 2013

Cause of Action Files IRS Complaint Against Enroll America For Violating the Internal Revenue Code

WASHINGTON – Today, Cause of Action (CoA), a government accountability organization, filed a complaint before the Internal Revenue Service (IRS) asking for the IRS to revoke the charitable status of Enroll America, the nonprofit whose mission is to enroll individuals in the Patient Protection and Affordable Care Act’s insurance exchanges. Enroll America is, the complaint alleges, improperly classified as a 501(c)(3) organization and therefore in violation of the Internal Revenue Code.

“If Enroll America is designed to benefit insurance companies instead of the American public, then its charitable status no longer applies,” said Dan Epstein, executive director of Cause of Action. “An organization that has been granted tax deductible status but is actually depriving the American people of taxable revenue warrants an investigation.”

Cause of Action has conducted previous investigations into how non-profit groups are handling federal grant money as well as how the IRS monitors tax-exempt groups. Their report on potential violations of the law concerning stimulus funds that went to a program called Communities Putting Prevention to Work can be found here. A report released last month delves into a little known provision of the tax code called fiscal sponsorship, which is ripe for abuse and not being monitored well by the IRS.  The report can be found here. This Enroll America complaint is the latest in CoA’s work to ensure that organizations benefiting from taxpayer dollars and tax exemption are adhering to the law.

Cause of Action is requesting an immediate investigation to address the following:

  1. Enroll America does not operate as a 501(c)(3) charity; it is organized more like a trade association for the healthcare industry, employing marketing and political tactics to sell health insurance.  Accordingly, Enroll America is not organized and operating exclusively for a charitable purpose.
  2. The for-profit healthcare providers represented on EA’s board of directors and advisory board stand to reap a substantial private benefit from EA that is not shared by its intended beneficiaries, meaning Enroll America fails the private inurement and private benefit doctrines.

Cause of Action will also be sending a letter to Covered California, California’s state health exchange, to alert them of liabilities under federal and state laws and guidelines. Enroll America will be a liaison to state health exchanges across the country, such as Covered California, who manage the sale of health insurance policies.

“The risk of spending federal money in wasteful, fraudulent or abusive ways as they fund outreach activities to enroll the uninsured should put state exchanges on high alert,” said Dan Epstein. “Covered California creates a one-stop insurance marketplace, while conducting outreach similar to that of Enroll America, and we want these exchanges to be aware of the numerous laws and regulations that could present multiple liabilities for them as enrollment begins.”

The complaint can be found here.

The liability alert letter to the General Counsel of Covered California is here.