Groups Urge IRS to Penalize Nonprofit for Failure to File

April 4, 2018

The Honorable David J. Kautter
Acting Commissioner
Internal Revenue Service
1111 Constitution Ave. NW
Washington, DC 20224

Re: Complaint Against Americans for Job Security

Dear Acting Commissioner Kautter:

Issue One and the Campaign Legal Center respectfully request that the Internal Revenue Service (“IRS”) enforce appropriate penalties against Americans for Job Security, a nonprofit business league exempt from taxation pursuant to Section 501(c)(6) of the Internal Revenue Code (“Code”), for failing to file annual returns for the past three years.

Exempt organizations that file late returns are subject to fines, and organizations that do not file returns for three consecutive years will lose their tax-exempt status. Hundreds of thousands of nonprofits have lost their tax-exempt status for failing to file returns for three consecutive years; Americans for Job Security appears to be such a group.

As set forth below, Americans for Job Security last filed an annual return on September 15, 2015,¹ when it submitted a completed IRS Form 990 that detailed its financial activities during its 2013 fiscal year. The annual returns for its 2014 fiscal year, its 2015 fiscal year and its 2016 fiscal year have yet to be filed with the IRS. Issue One recently contacted Americans for Job Security's accountant who confirmed that none of these returns have been filed.

Americans for Job Security's return for its 2014 fiscal year is currently 750 days late. Its return for its 2015 fiscal year is currently 385 days late. And its return for its 2016 fiscal year is currently 20 days late.

For years, Americans for Job Security has used its tax-exempt status to spend tens of millions of dollars on elections while keeping its donors secret. Americans for Job Security has been afforded substantial benefits by virtue of its tax-exempt status; if it cannot comply with the minimal reporting responsibilities that accompany that status, it should lose its tax-exemption and be fined.

Issue One and the Campaign Legal Center are bringing these violations to the IRS's attention because it is essential that the IRS enforce these laws and hold organizations that violate these rules accountable.

Background

According to published reports, Americans for Job Security was founded in 1997 by David Carney, a former adviser to President George H. W. Bush, and Michael Dubke, who began his political career as a staffer on President Bush's 1992 re-election campaign.² Americans for Job Security subsequently applied for, and was granted, tax-exempt status under Section 501(c)(6) by the IRS, which issued Americans for Job Security the employer identification number of 52-2062978 in 1998.³ Since 2008, Stephen DeMaura, a former executive director of the New Hampshire Republican Party, has served as the president of Americans for Job Security.⁴

Since its inception, Americans for Job Security has spent tens of millions of dollars on political advertisements while keeping its donors secret.⁵ Since 2010 alone, when the U.S. Supreme Court's Citizens United v. Federal Election Commission decision allowed organizations like Americans for Job Security to spend money on advertisements that expressly advocate for the election or defeat of federal candidates, Americans for Job Security has spent more than $20 million on such advertisements, records show.⁶

Section 6033(a)(1) of the Code requires that all exempt organizations — including those exempt under Section 501(c)(6) — file an annual return disclosing their gross income, disbursements and other information.⁷ These disclosures are filed on Form 990, Return of Organization Exempt from Income Tax. This document must be submitted to the IRS by the 15th day of the fifth month after the end of the organization's accounting period.⁸

The last Form 990 that Americans for Job Security filed with the IRS was submitted on September 15, 2015, for its 2013 fiscal year, which ended on October 31, 2014.

The Form 990 for Americans for Job Security's 2014 fiscal year, which ended on October 31, 2015, was due on March 15, 2016. As of the filing of this complaint, this return is 750 days late.

Additionally, the Form 990 for Americans for Job Security's 2015 fiscal year, which ended on October 31, 2016, was due on March 15, 2017. As of the filing of this complaint, this return is 385 days late.

Moreover, the Form 990 for Americans for Job Security's 2016 fiscal year, which ended on October 31, 2017, was due on March 15, 2018. As of the filing of this complaint, this return is 20 days late.

An organization may request an extension of up to six months after the prescribed filing date by submitting a completed Form 8868 to the IRS.⁹

However, even assuming that Americans for Job Security was granted the maximum number of extensions by the IRS, its Form 990 for its 2014 fiscal year should have been submitted to the agency no later than September 15, 2016. That would make this return 566 days late as of the filing of this complaint.

Moreover, assuming the maximum time extension, Americans for Job Security's Form 990 for its 2015 fiscal year should have been submitted to the IRS no later than September 15, 2017, making it 201 days late as of the filing of this complaint.

If Americans for Job Security sought an extension for its 2016 fiscal year, this Form 990 would be due to the IRS no later than September 15, 2018. However, any such extension request must have been required to be submitted to the IRS prior to March 15, 2018; it is unclear whether any such request was filed.

In January 2018, Issue One contacted Michael Dolan, the certified public accountant who is listed as preparing Americans for Job Security's five most recently filed Form 990s, to request copies of the group's returns for its 2014 and 2015 fiscal years. Dolan confirmed that he and his firm were still “engaged to prepare” Americans for Job Security's returns and that neither document had yet been completed or filed with the IRS, saying “[t]he Form 990s that you have requested are not yet prepared but we are working with Americans for Job Security to gather the necessary information to do so. Requests for such information are with their management.”¹⁰

When Issue One, in a January 18, 2018, follow-up email, outlined its understanding of when Americans for Job Security should have filed these mandatory documents, Dolan stated: “We are engaged to prepare the 990 forms. We cannot prepare them without the information to do so and we have not received the information yet. I believe the information is being gathered to allow us to complete the forms.”¹¹

Last month, Issue One again inquired about the status of these two Form 990s — and also requested a copy of Americans for Job Security's Form 990 for its 2016 fiscal year.

On March 21, 2018, Dolan again confirmed that no additional Form 990s for Americans for Job Security had yet been filed, writing: “I have checked with my staff and we do not have any update on these filings. Our requests for information to prepare them have not been responded to.”¹²

On March 23, 2018, Dolan told Issue One in an email that his firm “did not file that extension form” — referring to Form 8868 — for Americans for Job Security for its 2016 fiscal year because “we were not engaged for that period.”¹³ Calls and emails from Issue One to other people associated with Americans for Job Security went unanswered.

Potential Fines and Penalties

Under Section 6033(j) of the Code, organizations that do not file annual returns for three consecutive years will automatically lose their tax-exempt status. Since 2011, more than 500,000 nonprofits across the country have automatically lost their tax-exempt status by failing to file returns for three consecutive years.¹⁴ If Americans for Job Security failed to file a return for its 2016 fiscal year, the organization should lose its tax-exempt status.¹⁵

Section 6652(c)(1)(A) of the Code further states that an organization whose gross receipts are less than $1,000,000 incurs a penalty of $20 per day for each day its return is submitted after its due date.¹⁶ The maximum penalty is $10,000, or 5 percent of the organization's gross receipts, whichever is less.¹⁷ The penalty is increased to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.¹⁸

As set forth above, Americans for Job Security's return for its 2014 fiscal year is between 566 and 750 days late. Consequently, Americans for Job Security could be fined up to $50,000 for failing to file its Form 990 for its 2014 fiscal year (or up to $10,000 if its gross receipts that year do not exceed $1 million).

Americans for Job Security's return for its 2015 fiscal year is between 201 and 385 days late. Consequently, Americans for Job Security could additionally be fined between $4,020 and $38,500 for failing to file its Form 990 for its 2015 fiscal year, depending on its gross receipts that year.

Americans for Job Security's return for its 2016 fiscal year is 20 days late. Consequently, if Americans for Job Security was not granted an extension for filing this return, it could additionally be fined between $400 and $2,000 for failing to file its Form 990 for its 2016 fiscal year, depending on its gross receipts that year.

Conclusion

Based on the above, Issue One and the Campaign Legal Center respectfully request that the IRS hold Americans for Job Security accountable for not complying with the legal requirements of being a tax-exempt 501(c)(6) business league. The evidence indicates that Americans for Job Security has violated its legal disclosure requirements and that there are clear penalties that can and should be administered, including monetary fines and the loss of its tax-exempt status.

In recent years, Americans for Job Security has spent tens of millions of dollars influencing U.S. elections while keeping its donors secret. One of the only ways the public obtains any information about Americans for Job Security is through the annual returns that it has failed to file. Disclosure helps the public, the media and enforcement agencies detect irregular behavior and deter illegal activities. There must be meaningful consequences for tax-exempt organizations that attempt to evade mandatory disclosure requirements and leave the public in the dark about their activities.

Thank you for your consideration of this important matter.

Sincerely,

Meredith McGehee
Executive Director
Issue One
1401 K Street NW, Suite 350
Washington, DC 20005

Brendan Fischer
Director, Federal Reform Program
Campaign Legal Center
1411 K Street NW, Suite 1400
Washington, DC 20005

Enclosures

cc:
Margaret Von Lienen
Acting Director, Tax Exempt Organizations
Internal Revenue Service

Exhibits:

• Americans for Job Security IRS Form 990 for its 2013 fiscal year, which ran from November 1, 2013, through October 31, 2014, accessed via CitizenAudit.org (Exhibit A)

• Email correspondence between Michael Beckel, Issue One's manager of research, investigations and policy analysis, and Michael Dolan, a certified public accountant hired by Americans for Job Security (Exhibit B)