After a year in which financial improprieties gobbled up headlines like never before, it would stand to reason that a brewing scandal involving a major international organization, millions of dollars, and alleged tax evasion would receive similar treatment. But if that major international organization is famed environmental group Greenpeace, the media goes mute.
Two months ago, nonprofit watchdog Public Interest Watch (PIW) filed a complaint with the Internal Revenue Service alleging that Greenpeace has engaged in massive transfers of money between its many subgroups in order to skirt U.S. tax laws. PIW simultaneously issued a companion report, called “Green Peace, Dirty Money: Tax Violations in the World of Non-Profits,” which details how the environmental group transferred $24 million in tax-exempt contributions over a three-period to fund non-tax-exempt activities.
Much like Enron’s dizzying array of shell organizations and dummy corporations, Greenpeace has a multitude of entities established throughout the world—all unified by Greenpeace International, which in 2000 had an operating budget of $134 million.
In the U.S., there are two primary groups: Greenpeace Inc. and Greenpeace Fund Inc. Neither has to pay U.S. taxes, but there is one key difference between them: donations to the latter entity are tax-deductible, whereas contributions to the former are not. In IRS-speak, this means that money given to Greenpeace Fund Inc., known as a 501(c)(3) organization (named for the corresponding provision in tax law), can reduce the amount one pays in taxes, whereas funds given to Greenpeace Inc, known as a 501(c)(4) entity, cannot.
Just as common sense would dictate, it is much harder to raise money for a 501(c)(4) group, because donors cannot deduct the contributions from their taxable income.
That’s why the IRS has very strict rules about how tax-exempt donations to a 501(c)(3) entity can be used. 501(c)(3) groups are essentially limited to religious, charitable, or educational activities. Such groups can transfer funds to 501(c)(4) entities, but money from those grants are bound by the same restrictions 501(c)(3) organizations face on all their activities.
Joel Mowbray, who got his start with Townhall.com, is an award-winning investigative journalist, nationally-syndicated columnist and author of Dangerous Diplomacy: How the State Department Threatens America's Security.
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