The Bill, Hillary, and Chelsea Clinton Foundation improperly exploited its tax status to expand in size and stature, Daily Caller News Foundation investigations indicate.
TheDCNF’s Mark Tapscott and Richard Pollock reported in recent weeks that the Clinton Foundation deceived the IRS with respect to its tax status, and that the Foundation often does not abide by good governance practices common to charities. Taken together, these revelations could present a significant legal problem for the Foundation.
As Tapscott reports, when the Foundation registered as a charity with the IRS in 1997, it was designated strictly as a presidential archive. The agency defines an archive as a repository for the records, papers, and communiques generated during the course of a presidency. In addition, the Clintons also declared their intent to house a research facility relating to Bill’s presidency on the same site. Those express purposes were authorized by the IRS at the exclusion of all other activities.
The Foundation appears to have been in compliance with its IRS designation from inception in 1997 through 2001. That changed in 2002, when the Foundation launched the Clinton Health Access Initiative (CHAI), a global effort to furnish prescription drugs for victims of HIV in impoverished nations. The work, however reputable, did not qualify as legitimate, tax-exempt charitable activity because it was beyond the scope of the narrowly tailored 1997 designation. (RELATED: Clinton Foundation Deceived IRS On Tax Status From The Start)
An IRS designation is no mere legal minutia.
“When you get the authority to operate a charity, it’s for a specific purpose,” says Charles Ortel, an expert in best practices for nonprofits, told TheDCNF.
He explained the IRS carefully polices charitable organizations because they are often used as fronts for money laundering, fraud, or other criminal activity. “The idea that it’s just a minor little trivial, technical problem is not the case in the slightest,” Ortel says.
This problem is compounded by the fact the Foundation operates internationally. Charities with global operations are subject to another set of tighter rules. Compliance with these regulations must be regularly demonstrated to the IRS.
It is unclear if the Foundation or the IRS were regularly auditing for compliance with these rules, though the law clearly requires it. For example, federal regulations dictate that a global charity may only solicit money in connection with its IRS-approved purpose.
“If you go raise money over the internet from some schmuck in Russia, and that schmuck thinks you’re operating a library in Little Rock but in reality you’re convening sessions in New York, that’s charity fraud,” Ortel said. “You’re not allowed to do that.”
The law does not set forth an intent requirement for charity fraud. Prosecution may arise if a charity’s records are false and materially misleading. In addition, the burden of proof does not lie with the prosecutor, but with the charity.
Should the government determine an organization was not validly operating as a charity, they will determine how much profit the organization generated, and assess a corporate tax against it. Individuals who declared a tax deduction for donations to said organization are also made to pay a penalty.
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