IRS strips tax-exempt status from Richard Spencer’s white nationalist nonprofit

The nonprofit run by one of America’s most prominent white nationalists, Richard Spencer, has lost its tax-exempt status for failing to file tax returns with the federal government, according to Internal Revenue Service records.

An inquiry by The Times also raised questions about whether Spencer had properly filed paperwork allowing the National Policy Institute to raise funds in Virginia, its primary place of business, and whether Spencer, a Donald Trump supporter, had flouted federal rules that forbid nonprofits from supporting or opposing political candidates.

On Monday, Spencer said an IRS error led him to believe his group was not required to file federal tax returns, and said he would appeal the loss of his tax-exempt status.

“I don’t know what to say. I don’t want to make a comment because I don’t understand this stuff,” Spencer said in a telephone interview. “It’s a bit embarrassing, but it’s not good. We’ll figure it out.”

Spencer also said his group had filed the necessary paperwork to operate as a nonprofit in Virginia. But a spokeswoman for the Virginia Department of Agriculture and Consumer Services, which regulates charities in the state, said Monday that the status of Spencer’s group was under review.

The paperwork trouble at the National Policy Institute, which was registered under section 501(c)(3) of the Internal Revenue Code, seems to have started shortly after Spencer took over the organization in 2011 and used it as a vehicle for promoting his “alternative right” beliefs, which include the need for a separate nation for white people.

The National Policy Institute’s website says it is “dedicated to the heritage, identity, and future of people of European descent in the United States, and around the world.”

As Spencer’s profile rose on the national stage in recent years, the National Policy Institute’s nonprofit status allowed his supporters to make tax-deductible donations to support his publications and conferences for white nationalists. One of the National Policy Institute’s events included a November conference in Washington, where Spencer told a crowd, “Hail Trump! Hail our people! Hail victory!” and received Nazi salutes in return.

But as Spencer’s visibility rose on the national stage, there was little corresponding transparency into the National Policy Institute’s finances because the group had stopped filing its required tax returns with the IRS after 2012.

Such tax records for nonprofits, which are available to the public, generally must be filed each year. The forms show how much money an organization makes, how much it spends, how much it pays its officers and who sits on its board, plus other information intended to provide transparency and accountability. Failing to file for three years in a row results in an automatic loss in tax-exempt status.

But for years, the IRS had apparently misclassified the National Policy Institute and publicly listed the group as not being required to file such forms. (An IRS spokeswoman declined to comment for this story, saying “federal law prohibits the IRS from commenting on a particular taxpayer or case.”)

The IRS fixed the error in February, and on Monday it updated its records to say that the National Policy Institute’s tax-exempt status had been stripped retroactively as of May 15, 2016, when the group’s 2015 tax return would have been due.

Spencer cited the IRS error as the reason his group did not file its tax returns. Tax experts said that was no excuse.

“They should have known that they should have been filing,” said Philip T. Hackney, a law professor at Louisiana State University who formerly worked for the IRS, specializing in nonprofits. “It’s very clear under the law that if you don’t file for three years, you lose your status.”

Chuck McLean, a senior research fellow at Guidestar, a site that monitors and publishes records of nonprofits, agreed. “Ignorance is no excuse,” McLean said.

Spencer recently opened an office above a chocolatier’s shop in the suburb of Alexandria in Virginia, where the National Policy Institute is incorporated. He raised more than $50,000 in donations from an online fundraising drive held over several weeks at the end of 2016 and the beginning of 2017. The National Policy Institute’s website solicits donations by mail to be sent to a post office box in Arlington, Va.

But as of February, a database maintained by the Virginia Office of Charitable and Regulatory Programs had listed the National Policy Institute as “not authorized to solicit in Virginia.”

“They had sent in a registration form to us years ago, but it was incomplete and we requested additional information,” Elaine Lidholm, a spokeswoman for the agency, wrote in an email to The Times last week. “We never heard back from them.”

When The Times requested information about Spencer’s group, Virginia charity regulators removed the entry for the National Policy Institute from their public database of nonprofits and began a review, which remained active as of Monday.

Spencer has repeatedly said that paperwork is not his strong suit. On Monday, Spencer said that he had spoken with his bookkeeper about the paperwork required at the state level, and that person “has assured me that it is completed.” He did not identify the bookkeeper.

Previous statements by Spencer also raised questions about whether the National Policy Institute had flouted IRS rules on election-year activities by nonprofits, which state that, during election years, leaders of 501(c)(3) organizations “cannot make partisan comments in official organization publications or at official functions of the organization.”

In a September 2016 fundraising pitch on the National Policy Institute’s website, Spencer wrote, “I invite you to join us in the fight against Hillary Clinton, and the liberal agenda that’s haunted our country for generations,” adding, “I ask you to make a investment of $25, $75, $100, or however much you can spare.”

Shortly after the election, Spencer told a crowd at a conference put on by the National Policy Institute, “We willed Donald Trump into office, made this dream into reality.”

Tax experts consulted by The Times said Spencer had probably crossed the line laid down by the IRS.

“I would say that the fundraising pitch on the website and the conference that they held where he made those comments, I think that those both definitely are infractions,” said McLean of Guidestar.

However, Hackney, the former IRS attorney, said Spencer’s political statements may not matter, given the retroactive stripping of his organization’s tax-exempt status.

“As a technical matter,” Hackney said, “they can’t have violated the provision, because they weren’t a charity anyway.”

To read the article in Spanish, click here

matt.pearce@latimes.com

@mattdpearce

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