December 1, 2016; Washington Post
Richard Spencer and his nonprofit public policy think tank have attracted political attention this year. Support for Donald Trump as “God-emperor” and salutes of “Hail Trump!” at a recent conference have placed the man credited with coining the term “alt-right” and his charity into the limelight.
According to its website, the National Policy Institute (NPI) was founded in 2005, but the IRS traces its tax exemption to 1982. According to its 2012 Form 990 return, “National Policy Institute conducts research and nonpartisan analyses and education on public issues, including social, cultural, and governance issues affecting the United States and other nations in the world” as its primary exempt purpose as a 501(c)(3) public charity. Looking at the group’s GuideStar page, revenue received between 2006 and 2012 varied from less than $40,000 annually to about $120,000 annually. Its official address is a post office box in Whitefish, Montana.
The institute has not filed a Form 990, 990-EZ, or 990-N (also known as a postcard return) since it filed its 2012 Form 990 in November 2013. The Washington Post reports that the IRS has placed National Policy Institute on a list of nonprofits that are not required to file a 990, but says the IRS claims it can’t discuss the matter, presumably due to taxpayer confidentiality requirements.
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Spencer, NPI’s president, said, “This whole idea that we don’t need to turn in 990s is definitely news to me. I give this responsibility to others. Ignorance is not an excuse, but I am really ignorant about this stuff.” He indicated that the organization would release updated financial information on Monday (December 5th). If he did, or does soon, that may actually cause the organization more problems. Depending on why and how the IRS has not received Form 990 returns from NPI, it may have triggered the IRS’s automatic revocation of tax exemption process by failing to file returns for three consecutive years. If this happens, it’s possible that NPI could file for reinstatement, and its reliance on IRS representations that it wasn’t required to file seems like a reasonable defense against loss of exemption.
The bigger questions include how the IRS determines exemptions from the Form 990 filing requirement. Is there a bright-line definition, such as exists for religious organizations? Or are filing exemptions issued on a case-by-case basis, using one of the IRS’s famous “facts and circumstances” tests? How is the public made aware that a nonprofit’s claim to be exempted from filing a Form 990 is legitimate?
Another key question is, why should an organization’s chief executive be allowed to say they’re ignorant of IRS filing requirements without comment, much less challenge? Regardless of the details of federal and state regulatory compliance, every nonprofit executive and board member should be aware of the requirement to file a Form 990, especially when their organization has a history of having filed returns.
What the IRS will do, if anything, about the National Policy Institute is anyone’s guess. On the one hand, the IRS is understaffed and underfunded, and the section that oversees nonprofits is still suffering from the pounding it has received from Congress and the courts as a result of the IRS scandal. It is understandably reluctant to take on controversial nonprofit compliance cases at present. On the other hand, new technology has led to the promise in its annual work plan and proposed activities that the agency will be able to do a better job of using digitized Form 990 information to sort and select returns for examination based on exceptional or missing information. These automated examinations may uncover additional 501(c)(3) public charities and other nonprofits that have been exempted from the 990-filing requirement. What we do know is that there needs to be better communication with nonprofits and the public about which organizations are exempted from filing and what criteria are being used to issue exemptions.—Michael Wyland