Did St. Cindy’s peace group commit fraud to attract donations?

Niiiice work here by Sweetness & Light. He’s a teensy bit unfair when he says the process of filing for 501(c)(3) status should only take a few minutes (true with respect to filling out the application, but it can take months to be formally approved by the IRS) but otherwise he’s got himself a solid case of malfeasance.

Do their actions rise to the level of fraud, though? To prove criminal fraud you typically have to show intent to deceive or at least some knowledge on the part of the defendant that his/her actions were deceptive. Seeing as how she’s still studiously agnostic about what went down on 9/11, Mother Sheehan doesn’t strike me as the type who’d have any sense of what “501(c)(3)” might mean beyond the fact that it’s associated somehow with charities. She’s not trying to deceive, in other words; she’s just stupid. Nor would this be the first time she and her inner circle of merry pranksters haven’t been able to pull it together, man, to file paperwork necessary for their activities: A nationally known anti-war group in Mclennan County has lost its corporate status with the state, and a former member is calling for an investigation.

Officials in the Texas State Comptroller’s office said the Crawford Peace House hasn’t handed in required paperwork in nearly a year… Its corporate charter is now revoked. “Why? Because we’re just not responsible about doing it, I guess. I can’t answer that. I would like for someone to come and volunteer for us to do that work for us,” Peace House Board Member Kay Lucas said…

When asked about specific numbers and receipts, Lucas said she didn’t have any available. She also said the delinquent status for filing was in part due to paperwork being sent back. “The IRS was asking us all these questions that I just did not know how to answer,” Lucas said. They collected $700,000, according to one former member. A shade over $11,000 is still left. Without a corporate charter, there’s no limited liability for the officers and directors. Which means Mother Sheehan, potentially, is personally on the hook for any outstanding debts.

Well, look at it this way. They can take the house and their property, but a part of her will always be there.

Per the IRS ( http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html ): “To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

To be organized exclusively for a charitable purpose, the organization must be a corporation, community chest, fund, or foundation. A charitable trust is a fund or foundation and will qualify. However, an individual will not qualify. The organizing documents must limit the organization’s purposes to exempt purposes set forth in section 501(c)(3) and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that are not in furtherance of one or more of those purposes. This requirement may be met if the purposes stated in the organizing documents are limited in some way by reference to section 501(c)(3). In addition, an organization’s assets must be permanently dedicated to an exempt purpose. This means that if an organization dissolves, its assets must be distributed for an exempt purpose, to the federal government, or to a state or local government for a public purpose. To establish that an organization’s assets will be permanently dedicated to an exempt purpose, its organizing documents should contain a provision insuring their distribution for an exempt purpose in the event of dissolution. Although reliance may be placed upon state law to establish permanent dedication of assets for exempt purposes, an organization’s application can be processed by the IRS more rapidly if its organizing documents include a provision insuring permanent dedication of assets for exempt purposes. For examples of provisions that meet these requirements, see Publication 557, Tax-Exempt Status for Your Organization.

An organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities does not further an exempt purpose. For more information concerning types of charitable organizations and their activities, see Publication 557.

The organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.

Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.”

As far as I can tell her organization doesn’t meet the requirements of a 501c3 since its primary purpose is lobbying and other political activities. I’ll bet none of the money went to anyone other than Mother Sheehan and people directly connected to the organization and to activities that are not allowed by the IRS 501c3 regulations. I wouldn’t be surprised to find that legal lines were crossed a long time ago and if it were you or I we’d be in jail already.

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