A pair of influential senators are looking into the activities of a tax-exempt charity for disabled veterans after questions were raised about whether the group is actually spending the millions of dollars it has collected to help disabled veterans.

Senate Finance Committee Chairman Max Baucus, D-Mont., and Veterans’ Committee Ranking Member Richard Burr, R-N.C., initiated an investigation Wednesday into the potential abuses of tax-exempt nonprofit status by the Disabled Veterans National Foundation, following reports of questionable financial ties between DVNF and Quadriga Art, a marketing firm that handles its direct mail. 

According to tax records, DVNF raised tens of millions of dollars over a two-year period, yet reports on CNN and other media outlets indicate very little of the money went to directly help disabled veterans. Instead, DVNF apparently paid large sums to Quadriga Art in 2009 and 2010. In a letter sent to DVNF President Precilla Wilkewitz, Baucus and Burr requested documents and information relating to DVNF’s fundraising and marketing activities, services provided to disabled veterans, and connections to Quadriga.

“Our veterans should never be used as pawns in a scheme to exploit the taxpayers,” Baucus said. “The tax exemption for charities exists to promote worthwhile causes like assistance to veterans, not to provide tax loopholes to abuse.  DVNF has a responsibility to show it’s genuinely helping veterans and playing by the rules.”

The Senators raised concerns about recent news reports that showed DVNF raised nearly $56 million in donations since it was founded in 2007, yet has paid Quadriga and its subsidiaries nearly $61 million between 2008 and 2010. According to the independent watchdog group CharityWatch, DNVF has received an “F” grade for its questionable balance of fundraising and legitimate donations. 

“Our nation’s veterans and their family members have gone above and beyond in their service to our country, and they and their families deserve to be treated with honor and dignity, not taken advantage of by scam artists,” said Burr. “Veterans service organizations play a vital role in providing the care and support we owe our veterans and military families, but there must be oversight to ensure that no one abuses the relationship of trust that has been established between this community and the organizations helping them.”

In order to qualify for tax exempt status, Section 501(c)(3) organizations like DVNF must be operated primarily for charitable purposes and must not engage in transactions that benefit private interests or organization insiders. They also must not have any substantial purpose deemed nonexempt, so if an organization spends only a small fraction of its funding on its stated charitable purpose, it may be ineligible for 501(c)(3) tax-exempt status.

The Finance Committee has jurisdiction over revenue matters and conducting oversight on the administration of the federal tax system, such as matters involving tax-exempt organizations.  Baucus has previously called on the IRS to investigate the use of tax-exempt organizations for political activity, which is limited under the U.S. Tax Code.  Over the past decade, the Committee has focused extensively on whether tax exempt groups have been used for financial or political gain. In the letter, Baucus asked Wilkewitz about  her group’s fundraising activities, its fundraising contract with Quadriga, an estimate of the number of disabled veterans helped by her organization, the salaries of its officers and employees, and whether they share any employees or officers, along with other questions.

In a statement posted on its Web site, the group defended its record.  “Contrary to recent news reports, DVNF has and does provide financial support to veterans charities and given directly to service men and women who bravely served our country. Some of our specific programs have included providing gift cards during personal visits to hospitalized vets and providing much needed funds to veterans support organizations and their critical missions. DVNF also provides in-kind donations in response to direct requests for the support.  Every grantee is aware of the gifts they will be receiving and the quantities of them in advance. Grantees sign an agreement and are given ample opportunity to decline gifts or request items that better meets their specific needs. We realize that our fundraising and marketing costs seem high; however, these fees are necessary to create the awareness of the causes we support and the programs we offer. We are completely dedicated to serving our disabled veterans and we remain focused on this important goal.”

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