IRS: Complaint to Deny Tax-Exempt Status

Reform Groups Ask IRS To Deny Tax-Exempt Status to DeLay-Sponsored Organizations & Take Enforcement Action Against House Majority Leader

The Campaign Legal Center and Democracy 21 have filed a complaint with the Internal Revenue Service (IRS) against House Majority Leader Tom DeLay and his new tax-exempt "charity," Celebrations for Children, Inc. (CFC). The complaint charges that the DeLay organization is in fact "a scheme that has been organized by Representative DeLay to allow him to raise and spend unlimited 'soft money' funds for political activities to be conducted in conjunction with the Republican National Convention in New York City" in August 2004.

The complaint, filed by Democracy 21 President Fred Wertheimer and Associate Legal Counsel Glen Shor of the Campaign Legal Center, asks the IRS to deny CFC an exemption from taxation under Section 501(c)(3) of the Internal Revenue Code, or revoke such exemption if it has already been granted. It also urges the IRS to "undertake other enforcement actions and impose penalties, as appropriate," against CFC, U.S. House Majority Leader Tom DeLay and any other responsible parties.

"Representative DeLay is using the nation's charity tax laws and the pretext of helping children as a cynical cover to raise and spend huge amounts of prohibited soft money to finance political activities and provide political benefits for himself and his Republican colleagues," said Democracy 21 President Fred Wertheimer. "It's a scandalous attempt to misuse IRS tax exemptions and a brazen scheme for circumventing the new ban on soft money," he said. "Representative DeLay needs to be treated by the IRS the same way it would treat any other citizen, in making a determination about whether the tax laws are being violated."

"The IRS must not allow the tax exemption for charities to serve as a shelter for a political operation," said Campaign Legal Center Associate Counsel Glen Shor. "If pseudo-charities like CFC are permitted to flourish, there will inevitably be a backlash against legitimate charities. The integrity of the tax laws needs to be preserved here, to prevent future efforts by lawmakers to set up soft money operations for their political benefit."

Wertheimer and Shor note in their complaint that "if the IRS allows this sham arrangement to go unchallenged, it will seriously undermine public confidence in the many legitimate Section 501(c)(3) organizations in operation and will serve as a dangerous precedent for future misuse of 501 (c)(3) organizations by officeholders for private political benefits."

The 15-page complaint to the IRS:

• describes the fundraising and political activities that CFC proposes to undertake during the Republican National Convention in 2004;

• places these in the context of similar political activities DeLay conducted during the 2000 Republican National Convention, using the vehicle of his political committees and financed by then-legal soft money; and

• details how these proposed activities constitute violations of law.

Click here to view a copy of the complaint.

Click here to view a copy of the Celebrations for Children, Inc. fundraising brochure.