Recently, the Alliance to Protect Nantucket Sound quietly filed its 2011 federal tax return. This relatively routine event might not raise an eyebrow in normal situations. But the Alliance has a track record of, shall we say, carefully managing the information in its tax returns, presumably to avoid scrutiny of its deep financial ties to billionaire Bill Koch. The 2011 return was no exception. It was interesting to see that 60 percent of its revenue came from one donor – hmmmm. We wondered if that donor was concerned about the fact that despite his and a handful of other donors’ handsome contributions in excess of $1.3 million, the Alliance ended the year over a million dollars in debt.
But our real interest was in how the Alliance accounted for its “gift” to the Town of Barnstable, or shall we say, how it didn’t account for it.
You may recall that, back in August, Barnstable town attorney Charlie McLaughlin revealed to the Cape Cod Times that the Alliance had funded the Town of Barnstable’s anti-Cape Wind litigation to the tune of $355,000 “so far” through a special gift fund. Our blog post of October 5 peeled back the layers on how that fund was established and generated some serious concern about whether the Town’s actions, ostensibly on behalf of its residents, should be bought and paid for by a special interest.
We were curious about how the Alliance accounted for that “special gift,” at least $175,000 of which was paid to the Town of Barnstable in 2011, according to an invoice produced by the Town, the Cape Cod Times reported in an article on November 17. The gift was not singled out as a specific line item in the Form 990, but instead included with the Alliance’s own legal expenses, according to Alliance executive director Audra Parker. That didn’t seem right to us, so we asked Donna Turley, a prominent Boston-based attorney who advises non-profits, how it should have been handled.
According to Turley, the Alliance erred either way. In an email, Turley explained that the IRS forms require a direct gift or a grant to be listed separately on the Form 990 and, if in excess of $5,000, explained further on a separate Schedule. This Schedule requires the charity to list the name of the grantee, the amount of the grant and its purpose. If the money was a legal expense, as Parker explained when asked by the Cape Cod Times, then a 1099 should have been issued to the law firm from the charity and the firm should have been listed as an independent contractor.
Turley continued, “The purpose of these disclosures is for both public transparency and so that the IRS can ensure that the organization is not engaged in prohibited conduct.” She noted that the Alliance could be subject to significant fines if it is found to have violated the law.
The Alliance has come under scrutiny for potential violations of tax law before. In 2010, Greenpeace filed a formal complaint with the IRS asking the agency to investigate wither the Alliance had violated federal tax law by airing a political ad criticizing then-candidate Deval Patrick for his support of Cape Wind during the final days of the governor’s race. The complaint sought to prompt an inquiry into whether the Alliance had violated its 501c3 status by exceeding spending limits on lobbying, and by engaging in activities that benefit the private interests of donors and board members.
The Alliance’s tendency to spin the facts is nothing new. But we doubt that the federal government would agree that a Form 990 is the right place to do it.