Trump Foundation Says It Engaged in 'Self-Dealing' in IRS Filing
(Bloomberg) Donald Trump’s charitable foundation said on an Internal Revenue Service filing that it violated rules preventing leaders of nonprofit organizations from using a charity’s money to benefit themselves or other “disqualified” people.
The president-elect’s charity acknowledged it engaged in so-called “self-dealing” on an IRS form for 2015 that was posted to Guidestar, a charity tracking organization. “Such admissions are relatively unusual, although they do happen on occasion,” said Lloyd Mayer, a law professor at the University of Notre Dame who specializes in nonprofit law.
The charity’s admission comes after a series of reports in the Washington Post found Trump had used foundation money to pay for legal settlements, including a dispute over an oversized flagpole at his Mar-a-Lago Club in Palm Beach, Florida.
The president-elect also used his foundation’s money to purchase portraits of himself at charity auctions, as well as memorabilia such as a football helmet signed by former NFL quarterback Tim Tebow.
The foundation said in the tax documents it had transferred “income or assets to a disqualified person” and again checked “yes” when asked if the charity had done so in previous years. That’s a discrepancy from previous filings signed by the president-elect that said the group had not transferred money to an ineligible person or entity.
Trump’s transition team didn’t immediately respond to an e-mailed request for comment. WeiserMazars LLP, which handles tax matters for the foundation, declined to comment.
The IRS could levy a 10 percent “self-dealing tax” on any money that was improperly transferred to an ineligible recipient, including Trump or his businesses, and require restitution of those sums to the charity, Mayer said. The agency could also require the charity’s leaders, possibly including Trump, to pay a 5 percent manager’s tax on the funds that went to ineligible recipients, he said. And the Donald J. Trump Foundation would also have to develop and adopt procedures to prevent future violations.
While it’s possible that the IRS could revoke the foundation’s tax-exempt status, Mayer said that’s unlikely. “Many more grants were made to legitimate charities,” he said.
The documents don’t say who benefited from the self-dealing practices or explain what instances ran afoul of the charity’s legal obligations.
In the final presidential debate, Trump said that money from the foundation “goes 100 percent” to different charitable causes.
“I don’t get anything,” he said. “I don’t buy boats. I don’t buy planes.”
New York Attorney General Eric Schneiderman ordered the Trump Foundation to cease soliciting charitable donations in October, after the state’s charity bureau determined the group had been fundraising even though it wasn’t registered to do so.
Representative Elijah Cummings, the top Democrat on the House Committee on Oversight and Government Reform, released a letter that he sent to tax lawyers who have worked with Trump, seeking additional information on the filing. He asked for documents related to the payments in question and identifying their recipients, documents showing whether the foundation had paid any penalties or additional taxes in connection with those payments, among other things.
A spokeswoman for Morgan, Lewis & Bockius LLP, the firm contacted by Cummings, said its lawyers don’t comment on client affairs.
The foundation’s IRS filing also shows that two of Trump’s companies were the largest donors to the charity in 2015, combining to give $616,000. The London branch of Ukrainian oligarch Victor Pinchuk’s foundation contributed $150,000. Pinchuk’s foundation was also a major donor to the Clinton Foundation, giving between $10 million and $25 million. Critics contended the donations were made for access to Hillary Clinton when she was secretary of state, a charge that both Clinton and Pinchuk denied.
Trump’s foundation divided $896,000 among more than 50 charities in 2015, with the biggest chunks of money going to groups dedicated to curing cancer or supporting veterans and law enforcement officers and their families.
It also gave grants to a handful of conservative organizations, including $50,000 to the American Conservative Union Foundation and a $10,000 grant to Project Veritas, which in 2016 made undercover recordings of Democratic Party operatives taking credit for sponsoring protests at Trump’s campaign rallies.