Dear Ms. Wilkewitz:
The Senate Finance Committee has jurisdiction over revenue matters, and is responsible for conducting oversight of the administration of the federal tax system, including matters involving tax-exempt organizations. The Committee has focused extensively over the past decade on whether tax-exempt groups have been used for financial or political gain. The central question examined by the Committee has been whether certain charitable and social welfare organizations have violated the requirements to qualify for the tax-exempt status provided under the Internal Revenue Code.
Recent media reports have identified issues related to the operation of the Disabled Veterans National Foundation (DVNF), which is organized as a 501(c)(3) tax-exempt organization under the U.S. tax code. For example, a CNN report raised questions about DVNF’s marketing expenditures, relationship to its marketing partners, and assistance to disabled veterans.
We owe our veterans a debt of gratitude that can never fully be repaid. We work hard in the Senate every day to improve veterans' health care, advance veteran educational opportunities through the New GI bill, and make it easier for businesses to employ veterans when they leave the military. We will continue to stand up for our veterans in every way we can. Based on this commitment, we believe an organization which purports to help disabled veterans and operates as a tax-exempt organization deserves special scrutiny.
Section 501(c)(3) organizations must be operated exclusively for one of the charitable or other purposes described in the tax code. This has been interpreted to mean that the organization must be operated primarily for such purposes, and the organization may not have a single substantial nonexempt purpose. If an organization is spending a very small fraction of its resources and time on activities related to its tax exempt purpose, that organization arguably may not be in compliance with the exemption requirements of section 501(c)(3).
Section 501(c)(3) organizations are also prohibited from engaging in private inurement transactions (generally, transactions for the benefit of private interests of organization insiders). As an enforcement mechanism, section 4958 of the tax code imposes intermediate sanctions on excess benefit transactions between a section 501(c)(3) or (4) organization and its officers, directors, key employees, and others in a position to exercise substantial influence with respect to the organization.
In order for the Committee to analyze whether DVNF meets the standards for a 501(c)(3) organization, please provide the following information:
1. For calendar years 2009, 2010 and 2011, please provide the dollar amounts raised by your organization.
2. Please provide the amounts spent to raise funds for each of these years.
3. Please provide a list of the persons or contractors employed to raise these funds and the amount paid to them.
4. Please provide the total cost of salaries for staff and management, and any compensation provided to DVNF board members for each of these years.
5. Please provide an estimate of the number of disabled veterans and/or other veterans assisted by your organization, a detailed description of the assistance that was provided to those veterans, how your organization determined that such assistance could be helpful to those veterans, and the cost of providing the assistance.
6. What percentage of your organization’s financial resources, staff time, and volunteer time are devoted to exempt activities?
7. What are the organization’s exempt activities?
8. Do DVNF and Quadriga Art, LLC share common board members, and or officers, and or employees?
9. What are the terms of Quadriga Art’s fundraising contract with DVNF?
10. Does DVNF have any financial interests or relationships with contractors other than Quadriga Art LLC?
11. Please provide a copy of the DVNF’s original application for tax exemption.
12. Please provide samples of the organization’s solicitations for charitable contributions.
13. DVNF apparently attributes a portion of the direct mail expenditures to program service expenses and to management and general expenses, as opposed to fundraising expenses. What is the basis for DVNF allocating the direct mail expenses to categories other than fundraising?
14. Please provide any written agreements or contracts with fundraisers Brick Mill and Convergence Direct.
We look forward to hearing from you no later than June 6, 2012. If you have any questions please do not hesitate to call [staff redacted] on the Finance Committee staff, at 202 224-4515.
Sincerely,
Richard Burr Max Baucus Senator Chairman
Source: Ranking Member’s News
