The American Democracy Legal Fund has filed a complaint with the Internal Revenue Service against The Donald J. Trump Foundation and Mr. Donald J. Trump, President, for violating the Federal Election Campaign Act of 1971.
The Donald J. Trump Foundation is a tax-exempt private foundation organized under section 501(c)(3) of the Internal Revenue Code, which disallows organizations from participating or intervening in any political campaign on behalf of any candidate for public office.
In clear violation of the law prohibiting section 501(c)(3) organizations from participating in or intervening in political campaigns in any way, the Foundation has recently positioned itself at the center of the presidential campaign of Mr. Donald J. Trump, its president. The Foundation has featured prominently in both Mr. Trump’s remarks and in news coverage focused specifically on Mr. Trump’s campaign. Mr. Trump, the Foundation president, deliberately thrust the Foundation into his campaign by making it a pivotal topic of discussion at numerous campaign-sponsored events and using his political limelight to focus attention on Foundation activities. Through these actions of its president, Mr. Trump, the Foundation has inserted itself into an inherently political presidential campaign in direct violation of section 501(c)(3) of the Code.
The complaint is available below and in full with exhibits here. The American Democracy Legal Fund holds candidates for office accountable for possible ethics and/or legal violations. The organization is run by Brad Woodhouse.
June 16, 2016
Ms. Tamera Ripperda
Director, Exempt Organizations Division
Internal Revenue Service
1111 Constitution Avenue NW
Washington, DC 20224
Re: Complaint against The Donald J. Trump Foundation and Mr. Donald J. Trump, President – PARC Referral
Dear Ms. Ripperda:
On behalf of the American Democracy Legal Fund, I request that the Internal Revenue Service (“IRS”) investigate The Donald J. Trump Foundation (“the Foundation”), 60 Crossways Park Drive West, Woodbury, NY 11797, and its president Mr. Donald J. Trump as organization manager, for violating the prohibition against political intervention by organizations described under section 501(c)(3) of the Internal Revenue Code (“the Code”). I request that this complaint be sent to a Political Activities Referral Committee (“PARC”) and that an investigation be opened immediately to determine whether both the Foundation and Mr. Trump, its president, should be assessed a penalty for political expenditures under Code section 4955(a)(1) and (2).
Description of The Donald J. Trump Foundation
Formed in 1987, the Foundation is a tax-exempt private foundation organized under section 501(c)(3) of the Internal Revenue Code. As a private foundation without a detailed website, its exempt purpose is not readily available in public records. However, its Foundation Center profile indicates that the Foundation’s grant-making primarily goes towards “health organizations, youth development, and social services.” The Foundation’s 2014 Form 990-PF lists grants to organizations ranging from schools and cancer research organizations to other foundations and theatre groups. In addition, the Foundation has recently been featured in numerous news reports regarding its soliciting of contributions and its grant-making for veterans organizations.
Legal Background
A section 501(c)(c)(3) organization must not “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” The legislative history behind the Code provisions barring political campaign activity by section 501(c)(3) organizations makes it clear that the purpose of the prohibition is to deter candidates from “using IRC 501(c)(3) organizations to promote their candidacy.”
A violation of this prohibition will result in a penalty against the organization and against the organization’s managers who agree to a political expenditure. “Manager” includes an officer of an organization, such as its president, who “manifests approval of the expenditure which is sufficient to constitute an exercise of the organization manager’s authority to approve . . . the making of the expenditure by the organization.” The IRS also has the authority to revoke an organization’s tax-exempt status for engaging in political campaign activity.
The prohibition on political campaign intervention is absolute; it makes no difference whether an organization only engages in this activity as an insubstantial part of its overall activities. As the Seventh Circuit has explained, “It should be noted that exemption is lost . . . by participation in any political campaign on behalf of any candidate for public office. It need not form a substantial part of the organization’s activities.”
Finally, if a 501(c)(3) organization is “effectively controlled by” a candidate, it can also be charged with penalties for an expense “which has the primary effect of promoting public recognition, or otherwise primarily accruing to the benefit, of such individual.”
Foundation Participation in Political Campaign
In clear violation of the law prohibiting section 501(c)(3) organizations from participating in or intervening in political campaigns in any way, the Foundation has recently positioned itself at the center of the presidential campaign of Mr. Donald J. Trump, its president. The Foundation has featured prominently in both Mr. Trump’s remarks and in news coverage focused specifically on Mr. Trump’s campaign. Mr. Trump, the Foundation president, deliberately thrust the Foundation into his campaign by making it a pivotal topic of discussion at numerous campaign-sponsored events and using his political limelight to focus attention on Foundation activities. Through these actions of its president, Mr. Trump, the Foundation has inserted itself into an inherently political presidential campaign in direct violation of section 501(c)(3) of the Code.
For example, at an official presidential campaign event on May 31st at Trump Tower in New York City, Mr. Trump, the Foundation president, spoke at length about the Foundation’s grant-making and the organizations it had served amidst remarks about his presidential campaign and political viewpoints. For example, Mr. Trump stated at the event, “I raised close to $6 million” for the Foundation’s grant-making to veterans, and “I don’t think it’s anybody’s business if I want to send money to the vets.” Mr. Trump may spend his personal money how he pleases, but as Foundation president, he may not use the Foundation as an instrument of his presidential campaign. While delivering these remarks about the Foundation and throughout the event, Mr. Trump was standing at a podium adorned with a large campaign placard featuring his campaign logo.
This press conference was far from an isolated incident. In January, Mr. Trump, the Foundation president, hosted a televised fundraiser to raise money for the Foundation to grant out to veterans organizations. This fundraiser featuring the Foundation was undoubtedly a campaign event. It was touted as an alternative to the final televised Republican debate prior to the Iowa caucuses since Mr. Trump had declined to participate in that debate. It was attended by supporters of Mr. Trump’s candidacy, and it aimed to generate a final bump in his supporter numbers before the critical Iowa caucus. It prominently featured campaign paraphernalia and logos throughout the set. Yet, both at the event and on numerous subsequent occasions, Mr. Trump, the Foundation president, and his campaign manager Corey Lewandowski have “trumpeted” the Foundation’s fundraising for veterans during official campaign events and press conferences.
In short, through the actions of its president Mr. Trump, the Foundation has deliberately transformed itself into a political tool calculated to boost Mr. Trump’s campaign, in flagrant violation of the absolute prohibition on political campaign intervention in section 501(c)(3) of the Code.
Conclusion
In light of this blatant violation of the well-established absolute prohibition on political campaign activity by section 501(c)(3) organizations, we request that the IRS open an immediate investigation of The Donald J. Trump Foundation and Mr. Donald J. Trump, its president, through the Political Activities Referral Committee to determine whether excise taxes for political expenditures should be levied against these parties and whether additional action by the IRS is appropriate.
Respectfully submitted,
Brad Woodhouse
American Democracy Legal Fund
cc: Internal Revenue Service
Fresno, CA 93888