Wednesday, April 24, 2019

The Criminalization of Excess Benefit and Campaign Intervention


This just must be the season for craziness amongst fiduciaries of tax exempt organizations.  We previously blogged about recent high profile scandals involving exempt organizations and how those scandals might be characterizing the whole sector.  But I don't think I have ever seen a more egregious case of excess benefit and campaign intervention than that alleged in an indictment by DOJ in Western Missouri two weeks ago.  The indictment, which carries a penalty of up to 33 years imprisonment and a $1 million dollar fine, is almost exclusively concerned with punishing tax exempt law violations, and exemplifies the civil enforcement vacuum filled by criminal process instead.  As I mentioned, this is indeed an egregious case but I am not so much in favor of the criminalization of tax exemption law.  The rules are vague and undefined enough that I have to wonder whether its appropriate to bring criminal sanctions for violations. 

Anyway, its hard to have that discussion in this particular context given the absolute greed and arrogance described in the indictment.  Here are summaries from the LA Times and the DOJ press release. The 85 page, 110 paragraph indictment, starting at paragraph 44 provides a mini-dissertation concerning the private inurement, excess benefit and campaign intervention prohibitions in 501(c)(3) and 4958.  Then, starting at paragraph 65 and continuing to the end, the indictment describes astonishing examples of all three violations.  If nothing else, its a good real-life example for use in class if you are teaching exempt organizations in an upcoming semester.

Darryll K. Jones

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