Political Charity Outside the Lines, Part 4

The Fish Rots from the Head Down

In previous posts, I detail how three local progressive non-profits (Alliance for a Better Minnesota (ABM), Impact Minnesota, and the Somali Action Alliance) appear to have exceeded IRS limits on allowed political contributions by tax-exempt entities back in 2010.

As it turns out, all three groups shared a single source for their political contributions, the IRS-approved 501(c)(4) social welfare non-profit WIN Minnesota.

And to get to the point of this post (and the big reveal), I’m afraid that you, Dear Reader, will have to wade through a lot of accounting and campaign finance minutia.

In a profile last year, Minnesota Public Radio (MPR) describes WIN Minnesota as ABM’s primary fundraiser.”[1] MPR reported,

Aside from advertising on behalf of specific candidates, both Win Minnesota and ABM share resources and work closely on developing campaign themes and messages with other groups.

ABM and WIN Minnesota each have 501(c)(4) tax exempt, non-profit entities linked to 527 political action groups.

As I documented in Part 1, in 2010 ABM’s 501(c)(4) non-profit donated $266,705.62 in cash and in-kind resources (staff time, overhead, research, polling and production costs) to the related ABM 527 “Action Fund.” In a Certification filed on January 31, 2011, with Minnesota’s Campaign Finance and Public Disclosure Board, ABM identified the source of the money as WIN Minnesota.

Specifically, ABM certified the source as the “WIN Minnesota Political Action Fund.” In its filing with the Board, WIN’s 527 PAC lists 12 separate donations to ABM’s 527 Action Fund, totaling $5,658,427.24. These 12 donations map penny-for-penny to the other donations that the ABM 527 discloses as being receiving from WIN’s 527. Nowhere in the 13-page filing that WIN’s 527 made for 2010 was there a donation or payment cited to ABM’s 501(c)(4) entity.

Actually, the source of the $266,705.62 was not WIN’s 527 arm, but WIN’s 501(c)(4) entity. And it turns out that this small distinction makes a huge difference.

On October 26, 2011, WIN Minnesota’s 501(c)(4) non-profit filed its 2010 Form 990 income tax return with the IRS. On Schedule I, Part II, Line 1, WIN Minnesota disclosed a donation of $372,903 to ABM’s 501(c)(4).

As you will recall from Part 1 of this series, total spending in 2010 for ABM’s 501(c)(4) entity equaled $472,598. In other words, 78.9 percent of ABM’s “social welfare” spending was financed by a grant from WIN Minnesota. In turn, ABM’s 501(c)(4) donated $266,705.62 to its 527 political arm, representing 56.4 percent of its total spending—exceeding IRS requirements that tax-exempt entities spend no more than half on political activity.

“So what?”, you may ask. Here’s where the story gets interesting. In 2010, the Executive Director of WIN Minnesota[2]was Ken Martin, who now serves as Chair of the Minnesota Democrat Party (DFL, Democrat-Farmer-Labor as we style it in the North Star State).

At the same time, Mr. Martin also served as a named “Member at Large” of ABM’s 501(c)(4) non-profit.[3]

As the head of WIN Minnesota, Ken Martin had to have (or should have) known of the group’s grant to ABM’s non-profit.

As a member of ABM’s Board of Directors, Ken Martin had to have (or should have) known that WIN’s 2010 grant constituted the bulk of the ABM 501(c)(4)’s 2010 revenue. And as a member of ABM’s Board of Directors, Ken Martin had to have (or should have) known that the bulk of the proceeds of WIN’s 2010 social welfare grant would be spent supporting ABM’s political efforts in electing Democrat Mark Dayton as Minnesota’s governor.

In engaging in this byzantine series of transactions, Ken Martin had to have known (or should have known) that he was jeopardizing the tax-exempt status of ABM’s non-profit.If I were a real reporter, these are the questions I would have:

  • What did Ken Martin know, and when did he know it?
  • Was ABM’s certification to the Campaign Finance Board as to the source of its 501(c)(4) money merely mistaken or deliberately meant to mislead?
  • What do the minutes of ABM’s board reflect regarding this set of transactions?
  • What do the minutes of WIN’s board reflect regarding this set of transactions?
  • Who or what was WIN’s source for the $472,598 grant to ABM?
  • Why did WIN’s 527 not just make a 13th donation to ABM’s 527, rather than engage in these additional transactions?
  • Why is ABM’s donation to its 527 arm not disclosed on the 501(c)(4)’s 2010 tax return? Either the $60,000 cash grant or the in-kind donations?
  • Did ABM violate IRS regulations on the political activities of tax-exempt organizations?
  • If so, did WIN Minnesota assist ABM in violating IRS regulations?

Don’t worry, Dear Reader, there is much more to come.

Cross-posted at BillGlahn’s blog