08.12.08

IRS Complaint Filed Against Round Rock Charity

Posted in Commentary, Election 2008, HD-52, Williamson County at 10:08 am by wcnews

A local man has filed an IRS complaint against the Greater Round Rock Charitable Foundation for a possible violation of its non-profit status. According to the complaint, the GRRCF is choosing sides in the state house race for HD-52 by sharing an office with the Republican in the race. Diana Maldonado‘s Republican opponent, insurance salesman Bryan Daniel, is sharing an office with the GRRCF. Last week they had a joint ribbon cutting ceremony with the campaign and the Round Rock Chamber of Commerce:

The Greater Round Rock Community Foundation (GRRCF) has allowed Bryan Daniel to locate his campaign headquarters in the same office as the Foundation … in Round Rock.

… The GRRCF is not only sharing space with a political campaign, both entities (Daniel’s and GRRCF) participated in one grand opening and ribbon cutting ceremony on August 6th. Those citizens that chose to go the GRRCF grand opening could only conclude that Mr. Daniel is an endorsed candidate of the Foundation.

Non-profit organizations are prohibited from directly or indirectly participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. This includes becoming involved in any activities that may be beneficial to any candidate. (IRS rules) I filed a Tax-Exempt Organization Complaint with the Department of the Treasury – Internal Revenue Service on Friday, August 8th against GRRCF because I believe that the GRRCF is involved in Mr. Bryan’s political campaign.

There is intrinsic value to Mr. Daniels being associated with GRRCF, after all, GRRCF does good work in the community. As a 501 (c) 3 organization GRRCF appears to be playing a blatant and active role in Mr. Daniels political campaign.

Internal Revenue Service code allows for organizations to form non-profit, non-political work under a tax rule known as “Section 501(c)(3)”. According to the IRS web site:

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.

Further correspondence with the complainant revealed that a spokesman for the charity subsequently contacted the complainant to urge him to withdraw the complaint:

T. Nyle Maxwell Jr. called me today. He is on the board of the GRRCF. He told me that the GRRCF was charging Bryan Daniel’s fair market value for the rental of the space. He asked that I rescind my complaint to the IRS. That I was hurting GRRCF and that the foundation was doing good work. I refused. I again reiterated that I thought the foundation was wrong in leasing space to Mr. Daniel and that I thought it wasn’t in the foundation’s interest to be so closely associated with Mr. Daniel’s campaign. I told him that the Executive Director, Kamali (Kami) Barron should have known the rules about a non-profit being involved in a political campaign.

He stated that the GRRCF would be issuing a press release in the next couple of days explaining the rental agreement with Mr. Daniels campaign.

Being a non-profit doesn’t prevent GRRCF from having a lot of money. Even though the charity has only been around since 2004, according to this Impact News article from June, the GRRCF already has in excess of $1 million in assets.

The complaint appears to have merit, given that the GRRCF has a history of entangling political, charitable and real estate development work. Maxwell served as mayor and now serves as the organization’s chair. Recall that Maxwell had been rumored as a possible Republican candidate for HD-52 last year, after Rep. Mike Krusee announced his retirement. There was also this recent article about the GRRCF paving over the historical Sam Bass youth baseball fields in downtown Round Rock for their new office. (Be sure and read the comments).

While we need to wait and see how the IRS rules on the complaint, we are left to speculate why the GRRCF would risk its status and take sides in the HD52 contest. The ban on 501(c)(3) political activity serves two purposes: it maintains a strict policy that political giving is not tax deductible, and it helps ensure that all political contributions are reported and public information. Moreover, the wall between politics and charity serves both sides well.

It would seem that a charity would want to stay non-partisan to give potential donors no reason to withhold their support. They would be wise to keep themselves out of politics in order to cast as wide a net as possible for its fundraising and charitable endeavors. Offending Democrats may not have been cause for concern for charities in Williamson County in the past; however, the times they are a changin’.

[UPDATE]: See comments to view IRS ruling clearing the GRRCF of any legal wrong doing.

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