September 26, 2016; Washington Post
In its continuing investigation of presidential candidate Donald Trump’s charitable activities, the Washington Post reports that two companies owing Trump about $2.3 million sent payments to Trump’s foundation rather than to Trump or his companies. It is unclear whether Trump directed the payments to his foundation or the two businesses made their decisions independently.
This is a key consideration because, under the “assignment of income” doctrine, Trump would owe federal (and presumably state) income taxes on the payments if he directed the payments. Further, the payments, made by the Comedy Central cable TV network and a company owned by a New York ticket broker, would not be considered charitable gifts if the payments were understood to be made in exchange for services rendered by Trump or his companies. The two companies have provided about half the Trump Foundation’s revenues since 2008.
The foundation’s lack of structure, including no identified legal or accounting personnel, has led to confusing and contradictory statements from Trump business and campaign sources regarding the foundation’s activities. Media requests for information often culminate with a refusal to produce supporting documentation for Trump’s claims and denials of wrongdoing, occasionally laced with counterpunches such as the “pure speculation and worthless conjecture on your part” e-mail comment given to reporter David Fahrenthold by a senior adviser to the Trump campaign last weekend.
Previous media reporting and reviews of the foundation’s IRS Form 990 returns show few, if any, boundaries between the foundation, Trump and his family, and the Trump Organization. The foundation, established in 1987, claims no paid staff and almost no administrative expenses. All foundation directors and officers are members of Trump’s immediate family (Donald Trump is foundation chair), with the exception of the CFO of The Trump Organization, who serves as treasurer.
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Activities and issues surrounding Trump’s foundation have stumped the experts.
“This is so bizarre, this laundry list of issues,” said Marc Owens, the longtime head of the Internal Revenue Service office that oversees nonprofit organizations who is now in private practice. “It’s the first time I’ve ever seen this, and I’ve been doing this for 25 years in the IRS, and 40 years total.”
Nonprofit purists should be concerned by the repeated references to “Trump’s foundation,” since, by law, nonprofit organizations cannot be “owned” like for-profit businesses. Charities especially, among nonprofits, are private organizations operated for public benefit and are “owned” by the community, with trustees or directors to govern them on behalf of the community in such a way as to pursue what the IRS refers to as a “public benefit purpose.” Yet the structure and publicly reported operations of the Trump Foundation make the first-person pronoun seem more appropriate.
Trump has said recently that he’s a big believer in using “OPM”—other people’s money—and that structuring one’s business dealings so as to legally avoid paying income taxes is “smart.” The reported structure and activities of the Trump Foundation, including the facts that Trump himself has not donated to it since 2008 and the foundation claims credit for gifts made by other donors, are building an image unlike any textbook description of what a charitable foundation is or how it should be operated. If there is a clarifying narrative about its accountability and transparency, it’s past time for the Trump Foundation to tell it—and show it.
One unsettling quote is reported at the end of the Post article. When the reporter asks if the foundation had self-reported any violations or paid any other penalties to the IRS, the campaign spokesperson said, “That’s something we’re not prepared to comment on.”—Michael Wyland