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Carson Wants IRS To Revoke Tax Exempt Status For Muslim Advocacy Group

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We ask Mr. Ben Carson to withdraw from the presidential race because he is unfit to lead, because his views are in contradiction with the United States Constitution.

Those were the words of Nihad Awad, Founder of Council on Islamic-American Relations (CAIR) in response to comments made by GOP presidential hopeful Dr. Ben Carson stating that the president of the United States should not be a Muslim. Carson followed up his comments by telling CNN's Jake Tapper that, for a Muslim to become president, "you have to reject the tenets of Islam."

Those controversial remarks drew criticism from Muslims in America, including those affiliated with CAIR. CAIR describes itself as "a grassroots civil rights and advocacy group." It is America's largest Muslim civil liberties organization, with regional offices nationwide, including locations in Philadelphia, PA; Dallas, TX; and Washington D.C. Awad responded to Carson's comments, saying, "The protection of freedom of religion in America is a fundamental principle of our country so whether you are Christian, you are Jewish, you are Muslim, you are Catholic, you are black, you are brown, you are white -- if you are born in this country, if you uphold Constitution, if you have the vision, if you are fit to lead, you can lead irrespective of your faith tradition."

The Anti-Defamation League, which was founded "to stop the defamation of the Jewish people and to secure justice and fair treatment to all," also shot back at Carson's comments, calling them "deeply offensive, un-American and contrary to the Constitution."

But it was Awad's specific directive for Carson to step down that raised Carson's ire and some eyebrows. Carson went on the offensive, demanding that the Internal Revenue Service (IRS) withdraw the organization's tax exempt status based on the statement. On Carson's website, he called for action, saying:

The Council on Islamic-American Relations (CAIR), a U.S. Muslim group, recently demanded that I withdraw as candidate for the 2016 presidential race. By doing so, the organization has brazenly violated IRS rules prohibiting tax-exempt nonprofits like CAIR to intervene in a political campaign on behalf of—or in opposition to—a candidate.

Carson went on to say:

This is not the first time that CAIR has disrespected U.S. laws or America. It has previously lost its tax-exempt status by failing to file federal taxes three years in a row. It had also been named by federal prosecutors as an unindicted co-conspirator in a criminal conspiracy to funnel money to Hamas, a terrorist organization.

While calling for the immediate revocation of status, Carson also got a zinger in at President Obama, saying, "Under the Obama administration, the IRS has systematically targeted conservative nonprofit groups for politically motivated audits and harassment. The agency should now properly do its job and punish the real violators of America’s laws and regulations."

As part of his argument, Carson notes that CAIR previously lost its tax-exempt status by failing to file federal taxes three years in a row. That information is true, as confirmed with the IRS web site. CAIR initially lost its tax-exempt status on May 15, 2010, and publication of revocation was posted as of June 9, 2011:

The page notes: "The federal tax exemption of this organization was automatically revoked for its failure to file a Form 990-series return or notice for three consecutive years."

If that feels like deja vu all over again, it is. That's the same message that the IRS posted with respect to Veterans for a Strong America (VSA), the veterans group that hosted a recent Trump speech.

Like VSA, it appears that CAIR got caught up in a rule change. The rule used to be that tax exempt groups which fell under certain income thresholds did not have to file an information return with IRS. However, all of that changed under the Pension Protection Act of 2006 which made it mandatory for most tax exempt organizations to file an annual information return or notice with the IRS regardless of how much (or little) income the organization received. Failure to do so for three consecutive years resulted in an automatic loss of tax-exempt status unless exempted (for example, churches and certain church-related organizations are not required to file annual reports). The first year that would have impacted existing organizations would have been 2010 since returns which were not filed for the years 2007, 2008 and 2009 would have resulted in a loss of status.

Unlike VSA, however, CAIR did apply for and receive tax exempt status after its revocation. CAIR is currently recognized by the IRS as a section 501(c)(3) organization. The organization's website directs donations to the CAIR Foundation (at least five chapter foundations are also recognized by the IRS as tax exempt organizations).

(Remember that you can always check an organization's tax exempt status using the IRS Select Check tool online.)

Losing tax exempt status due to a failure to file might be many things (sloppy and indicative of a lack of accountability, perhaps) but it's not criminal. In fact, as of 2011, the IRS estimated that approximately 275,000 organizations automatically lost their tax-exempt status because they did not file annual reports on time. The fact that CAIR applied for and received status after the revocation makes the prior loss of status moot for tax purposes.

Carson also charges that CAIR had been named by federal prosecutors as an unindicted co-conspirator in a criminal conspiracy to funnel money to HAMAS, a terrorist organization. That is also true but, as with the loss of tax exempt status, requires some additional information.

The trial that Carson is referring to is the 2007 trial of Holy Land Foundation for Relief and Development (HLF) officials. At one time, HLF was the largest Islamic charity in the United States. In 2001, HLF was designated a terrorist organization under Executive Order 13224 and on December 4, 2001, Secretary of Treasury Paul O'Neill announced that "[g]overnment agents today shut down 4 offices of the Holy Land Foundation in the United States. Innocent donors who thought they were helping someone in need deserve protection from these scam artists who prey on their benevolence." According to the Treasury, HLF supported HAMAS, a Palestinian group that has been designated as a terrorist group by the United States since 1993.

In 2004, a federal grand jury in Dallas, Texas, indicted HLF and a number of its officers on felony charges including conspiracy, providing material support to a foreign terrorist organization, tax evasion, and money laundering (indictment downloads as a pdf). Along with the indictments was a lengthy list of alleged co-conspirators; those co-conspirators were not charged and the government did not present evidence at trial linking those co-conspirators to criminal behavior. The first trial ended in a mistrial in 2007; a second trial in 2008 resulted in guilty verdicts on all counts.

At around the same time that the first trial was happening, two organizations, including CAIR, filed court documents to have names removed from the list, predicting that their appearance on the list would "forever taint them." At the time, the prosecution acknowledged that the list, which named about 300 individuals and organizations, was "unusually long." The prosecution further characterized their own decision to publish the list as an "unfortunate oversight" which was not meant to imply criminal behavior but rather was a "legal tool to identify people and entities involved with Holy Land" for trial purposes. In 2009, Judge Jorge Solis denied CAIR's request but did order the list sealed; he also criticized prosecutors for publicly filing the co-conspirators list. While there are certainly sources, including those at FBI, who believe that CAIR was aware of HLF's illegitimate purpose, CAIR was never formally accused of a crime.

While Carson alleges that the initial loss of tax-exemption status and the inclusion of CAIR's name on the list of unindicted co-conspirators rise to a level of disrespect for U.S. laws, those actions are not legitimate legal grounds for the IRS to challenge CAIR's tax exempt status. That said, Carson's concerns over CAIR's call that he step down fall into a different category: they fly in the face of the IRS' own rules about political campaign intervention.

The IRS notes that "Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office." This includes not only contributions to political campaign funds but "public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office." The latter, according to IRS would "clearly violate the prohibition against political campaign activity."

The IRS notes that factors which are taken into consideration when determining whether a communication results in political campaign intervention include:

  • Whether the statement identifies one or more candidates for a given public office
  • Whether the statement expresses approval or disapproval of one or more candidates’ positions and/or actions
  • Whether the statement is delivered close in time to the election
  • Whether the statement makes reference to voting or an election
  • Whether the issue addressed distinguishes candidates for a given office

It is true that tax exempt organizations under section 501(c)(3) may engage in public advocacy not related to legislation or election of candidates. That generally means advocacy which is issue oriented. For example, if CAIR, like the ADL, had expressed disappointment at the characterization of Muslims in a political context, that likely would have been okay. However, calling Carson out by name is clearly concerning.

That doesn't mean, as some allege, that the rules prohibit freedom of speech. You can say what you'd like as an individual but not as an organization (or in a capacity that could be interpreted as representative of an organization). Rev. Rul. 2007–41 clearly states (downloads as a pdf):

The political campaign intervention prohibition is not intended to restrict free expression on political matters by leaders of organizations speaking for themselves, as individuals. Nor are leaders prohibited from speaking about important issues of public policy. However, for their organizations to remain tax exempt under section 501(c)(3), leaders cannot make partisan comments in official organization publications or at official functions of the organization.

It is clear that Awad was representing CAIR with his speech. That would appear to be a violation under the rules against political invention for organizations which are exempt under section 501(c)(3) of the Tax Code (it's worth noting that the rules for 501(c)(3) organizations may be different than other tax exempt organizations).

CAIR, however, differs with that interpretation, declaring in a statement:

We find it interesting that Dr. Carson seeks to use a federal government agency to silence his critics and wonder if that tactic would be used to suppress First Amendment freedoms should he become president.

CAIR is not in violation of any IRS regulation in that we did not ‘participate in’ or ‘intervene in’ any political campaign. We, as mandated by our mission as a civil rights organization, merely expressed the opinion of our community that a candidate whose views violate Article VI of the Constitution is unfit for public office.

So what happens if the IRS determines that an intervention did, in fact, occur? A violation could, according to the IRS "result in denial or revocation of tax-exempt status and the imposition of certain excise taxes." Depending on whether the IRS finds the statements to be concerning, CAIR could likely find itself under the tax exempt microscope at IRS.

As the presidential elections heat up, it's likely that we'll see more of these kinds of issues. While the IRS does issue reminders to tax exempt organizations about applicable rules and restrictions, it's not unusual for some organizations to press forward anyway into some areas they might believe border on gray. This is especially true when it comes to religious organizations and churches, which are notoriously personal and controversial.

(For more on churches and politicking, see this piece from my colleague, Peter Reilly.)

The question of whether a candidate's religion should matter has become a lightning rod during the current election cycle - though it's certainly not the first time that a candidate's religion has been the source of controversy (think Kennedy in 1960 and Romney in 2012). Questions about Obama's religion have continued to dog his presidency: according to an early September CNN/ORC Poll conducted this year, one in three Americans believe that President Obama is Muslim. President Obama has said that he personally identifies as Christian.

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