Political Charity Outside the Lines, Part 8

…And Justice for All.

In the election year of 2010, progressive social-welfare charity WIN Minnesota made a series of donations to state 527 political funds.  On its IRS Form 990 Income Tax Return, WIN Minnesota records the following transactions,

 

• $250,000 to The 2010 Fund[1]
• $835,000 to the WIN Minnesota Political Action Fund[2]
• $25,000 to the Dayton Recount Fund[3]

The 2010 tax return was signed in October 2011 by Jeff Blodgett, its Executive Director at that time.  The Executive Director during calendar year 2010 was Ken Martin, who was elected as Chair of the state Democrat Party, a post he still holds.  More recently, Mr. Blodgett ran President Obama’s re-election efforts in Minnesota.

In contemporaneous filings made at the Minnesota Campaign Finance and Public Disclosure Board, the numbers are not quite as reported to the IRS.  The 2010 Fund actually reported a total of $252,618.87 in cash donations from WIN Minnesota’s 501(c)(4) unit,[4] with the final October 25^th cash donation of $2,618.87 having been omitted from WIN’s Federal tax return.  The treasurer listed for The 2010 Fund was Ken Martin.

Likewise, the filing made to the Board by WIN’s 527 unit does not reconcile with WIN’s Federal tax return.  WIN’s 527 state filing lists $835,000 in cash donations from WIN’s 501(c)(4) unit, but it also includes an additional in-kind contribution of $30,000 in staff time from the 501(c)(4) entity.  The treasurer listed for WIN Minnesota Political Action Fund was Ken Martin.

This $30,000 in-kind contribution WIN’s is not recorded on WIN’s 501(c)(4) IRS Form 990 Schedule C.  In fact, on WIN Minnesota’s 2010 IRS Form 990 tax return, the non-profit lists only $1,085,000 under “Political Expenditures,”[5] appearing to include only $250,000 reported for The 2010 Fund and $835,000 in cash reported for WIN’s 527 Fund.

In an interesting twist, for the intra-mural donations from WIN’s 501(c)(4) to its 527 Political Action Fund, WIN disclosed the source of its donations.  Here’s where that $835,000 came from:

• $100,000 from the Democratic Governors Association[6]
• $150,000 from the Democratic Governors Association[7]
• $250,000 from the Democratic Governors Association[8]
• $250,000 from Alida Messinger.[9]
• $40,000 from National Education Association[10]
• $45,000 from Alida Messinger[11]

Likewise, The 2010 Fund disclosed the sources of most of its donations from WIN’s 501(c)(4)

• $200,000 from Alida Messinger[12]
• $50,000 from National Education Association[13]

The third “527” recipient of WIN Minnesota’s cash is an interesting case.  The Dayton Recount fund was established shortly after the 2010 election for governor ended in a too-close-to-cal recount between Democrat Mark Dayton and Republican Tom Emmer.  The Dayton “adviser” who set up the Recount Fund was Ken Martin.

Program Evaluation

WIN Minnesota accounts for these grants on its Federal tax return under Part III, Line 4c, “Program Evaluation.”  On its 2009 income tax return, WIN Minnesota described its Program Evaluation effort as follows,

Program Evaluation.  Providing direction to organizations receiving support on what key program elements require evaluation of the work funded in state to ensure objective analysis that can improve the effectiveness and efficiency of funded programs in the future.[14]

To my layman’s eyes, that sentence reads as so much non-profit gibberish.  It may or may not have been an accurate description of WIN’s 2009 grant to the Alliance for a Better Minnesota, which consumed most of that effort’s resources.

However, that same language, word-for-word, appears on WIN’s 2010 tax return to describe the $1.11 million donated to political groups to elect Democrat Mark Dayton as governor.[15]  Perhaps the 2010 filing represents merely the danger of cut-and-paste.  In any event, it misrepresents the purpose of WIN’s donations to the three 527 groups.

Adding it All Up

The WIN Minnesota 501(c)(4) spent a total of $2,753,308 in the 2010 calendar year.[16]

Adding together the donations from WIN’s 501(c)(4) reported by (1) The 2010 Fund of $$252,618.87, (2) WIN Minnesota Political Action Fund of $865,000 and (3) the Dayton Recount Fund of $25,000 gives us a total of $1,142,618.87.  Dividing that figure by total 2010 spending gives us a percentage of 41.5 percent.

That percentage, while high, would appear to fall below the IRS requirement that a social-welfare non-profit spend less than 50 percent on political activity.

But hold on a minute.  In Parts (4), (5), and (6) of this series, we document a total of $450,332.37 in donations to other state 527 funds that were certified—under oath—as having originally come from WIN Minnesota’s 501(c)(4).  Adding these certified, indirect donations to 527’s to the direct donations to 527’s listed above increases the percentage of political donations to 57.9 percent.  At that level, the political activity of WIN Minnesota’s would appear to exceed IRS rules on the allowed level of political activity by a social welfare non-profit.

What are we to make of all this?  We have documented numerous transactions between related entities that appear to serve no legitimate business purpose.  We have filings made to state authorities that include transactions not reported to Federal authorities.  We have a description of activities given to Federal authorities that does not appear to correspond to the activities actually undertaken.

On its 2010 IRS income tax return, WIN Minnesota’s 501(c)(4) lists 6 voting members.[17]  The voting members included the following individuals,[18]

• Ken Martin
• Jeff Blodgett
• Alida Messinger
• Dan McGrath
• Luchelle Stevens
• Donald Ross

If I were a real reporter, these are the questions I would have:

• What did Ken Martin know, and when did he know it?
• What did the other board members know, and when did each know it?
• Were the transactions omitted on the WIN 501(c)(4) Federal income tax return omitted by mistake, or in an attempt to mislead?
• Was the description included for these transactions on the Form 990 a mistaken copy from the previous year’s form, or an attempt to mislead?
• What do the minutes of WIN’s board reflect regarding this set of transactions?
• Who or what was WIN’s source for the $25,000 grant to the Dayton Recount Fund?
• Did WIN engage in the transactions with the ABM, Impact, and Somali 527 entities in an effort to work around Federal tax law?
• After accounting for indirect political donations, did WIN violate IRS regulations on the political activities of tax-exempt organizations?

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[1] 2010 IRS Form 990 Income Tax Return of WIN Minnesota, filed October, 26, 2010, Schedule I, Part II, Section 1(a), Line 1.

[2] Ibid., Line 2.

[3] Ibid., Line 3.

[4] See The 2010 Fund’s Year-End Report, Schedule A1-UA.

[5] Schedule C, Line 2.

[6] July 13. 2010 Certification to the Board, signed by Ken Martin.

[7] Ibid.

[8] September 14, 2010 Certification to Board, signed by Ken Martin.

[9] Ibid.

[10] October 18, 2010 Certification to Board, signed by Ken Martin.

[11] Certification included with WIN Minnesota Political Action Fund’s 2010 Year-End Report.

[12] September 24, 2010 Certification to Board, signed by Ken Martin.

[13] September 13, 2010 Certification to Board, signed by Ken Martin.

[14] 2009 IRS Form 990 Income Tax Return of WIN Minnesota, filed May, 28, 2010, Part III, Line 4c.

[15] 2010 IRS Form 990 Income Tax Return of WIN Minnesota, filed October, 26, 2010, Part III, Line 4c.

[16] 2010 IRS Form 990 Income Tax Return of WIN Minnesota, filed October, 26, 2010, Part I, Line 18.

[17] Part IV, Section A, Line 1a.

[18] Part VII, Section A, Part 1a.