Report: Nonprofits 'Gaming the System' for Farm Subsidies that Never Reach Farms

[Rapunzel]

http://www.breitbart.com/Big-Government/2014/03/09/Nonprofits-Including-Farrakhan-tied-Group-Game-System-for-Farm-Subsidies

Report: Nonprofits 'Gaming the System' for Farm Subsidies that Never Reach Farms

by William Bigelow 9 Mar 2014, 4:35 PM PDT

Some nonprofit organizations whose stated purposes have nothing to do with farming have enjoyed hundreds of thousands of dollars in farm subsidies over the past ten years, according to a FoxNews.com report.

They include:

1. The Three Year Economic Saving Program, which supervises Muhammad farms, is owned by Nation of Islam leader Louis Farrakhan. The farm is located in Georgia, but the government subsidies, nearly $160,000, have gone to Farrakhan’s home in Chicago since 2002. The program, which was incorporated on Sept. 12, 2001, has been listed as “Not in Good Standing” by Illinois’s secretary of state since last September. The Office of the Illinois Secretary of State said the program was “involuntarily" dissolved by the State of Illinois on Feb. 1.

The Illinois Attorney General Office said it has no record of the program's ever being a charity. Adam Andrzejewski, founder of OpenTheBooks.com, asked, “'Not in good standing' doesn’t seem to trouble the Cincinnati office of the IRS. Why is Farrakhan’s charity allowed to receive federal money? This is no longer about farm policy, it’s merely a transfer mechanism from one set of Americans who pay taxes to another set who know how to game the system.”

The Muhammad Farms website states that donors to the program can make “tax deductible contributions” to the Three Year Economic Saving Program. However, neither Muhammad Farms, the Nation of Islam, nor the Three Year Program have a listing on the IRS’s public database of 990 forms, the forms that can testify that the program or company has true nonprofit tax-exempt status. The Three Year program may be evading filing such forms by claiming it is a religious program, which would make it exempt. The Freedom of Information Act states that nonprofits are required to show their 990 forms for the past three years if requested, but the Nation of Islam would not return phone calls when the forms were requested.

2. Seven waterfowl habitat foundations based in Chicago that aim to protect waterfowl at the Putnam County, Illinois, Dixon Waterfowl Refuge have received roughly $3.4 million in taxpayer funds. Each foundation has amassed more than $50,000 in subsidies. The foundations are part of the Wetlands Initiative, which states that it is “dedicated to restoring the wetland resources of the Midwest.” All of the foundations are based in the same downtown Chicago high-rise office; they share the same agent and IRS 990 filer and gather their subsidies from the same USDA county office.

Despite the fact that the foundations claim to be based on protecting waterfowl, none of the ducks each foundation is named for is endangered. They include the Pintail, Ringbill, Blue-Wing Teal, Green-Wing Teal, Wood, Mallard, and Gadwall ducks. Not only are those ducks not endangered, the International Union for Conservation of Nature lists them as being “of the least concern.” When queried, the Wetlands Initiative's finance manager would not answer why there were seven separate foundations.

3. The National Audubon Society, located in downtown Manhattan, has collected almost $763,000 in the last ten years, with its payment recipients located in eight separate states.

Since 1995, only $114,000 of the foundation’s $932,801 in farm subsidies have been allocated for crop and livestock payments; the rest has been used for conservation. FoxNews.com could confirm that of the $114,000, only one farm affiliated with the Society, Aullwood Farm in Dayton, Ohio, received payments, which amounted to no more than $3,224. The National Audubon site lists no centers or sanctuaries in Minnesota, but that state’s chapter has still obtained over $6,000 in subsidies over the past ten years. The foundation’s 990 form states that 26 “key employees” together accumulate a total of more than $8 million each year, with the National Audubon Society’s president earning at least $460,000.

[Oceander]

Without knocking the seriousness of the story, I would point out that a corporation not being in good standing, or even having been "involuntarily dissolved" by the state - also known as dissolution by proclamation - really doesn't mean anything at all; about the only real effect it has is to prevent such a corporation from suing in the state's courts (the corporation can respond in court if it's sued by someone else).  In particular, as far as the IRS is concerned dissolution by proclamation is a nothing, a "so what".  Why?  First because the definition of "corporation" in the tax code doesn't depend on whether the entity in question is in good standing with the jurisdiction in which it was formed.  Second, because the general classification into which separate legal entities fall is "association" which is much broader than merely "corporation".

For those who care, or who have finished organizing their sock drawer for the umpteenth time, there's an IRS article addressed to their Exempt Organizations officers (the folks who handle nonprofits and charities) that discusses this very topic:  http://www.irs.gov/pub/irs-tege/eotopici92.pdf

The more pertinent take-away from that article is this:

The Exempt Organizations specialist will sometimes be faced with an exempt corporation whose corporate charter has lapsed or been revoked by the state because the corporation has failed to pay the state corporate franchise tax. The question arises, is such entity an exempt organization for that year? We believe the answer is that a lapsed corporate charter will rarely have any adverse effect on the exempt status of an entity. If an entity is neither a statutory corporation, nor a de facto or de jure corporation, then consideration should be given to whether it is an association, which is treated as a corporation for federal tax purposes. Reg. 301.7701-2(a)(1). In almost all cases the lapsed charitable corporation will have directors or others associated to conduct its charitable activities and will otherwise meet the major characteristics of associations discussed below.