Carolyn Schenck Weights in on IRS Investigating Nonprofits for Ties to Terrorism in Tax Notes

A new law enforcement initiative between the IRS Criminal Investigation division and the FBI will scrutinize tax-exempt organizations for connections to domestic terrorism.

The IRS division “is collaborating with federal law enforcement agencies, including the FBI, to investigate individuals and entities that may be funding domestic terrorism or political violence,” a CI spokesperson told Tax Notes March 19.
. . .

“The government has sent a very big message that it is going to be looking for domestic terrorism-like activity in nonprofits,” said Carolyn A. Schenck of Caplin & Drysdale.

“I think the takeaway is simple: that nonprofits need to assume a higher level of scrutiny and prepare accordingly,” Schenck said. “This is less about reacting . . . to a single development, but more to adjusting to a new enforcement environment, which is what we’re seeing.”

“EOs really need to have a good grasp of what their organization does, who it’s funded by, and what its expenditures are,” Schenck said.

. . .

The IRS has often assisted in terrorism investigations, usually not taking a leading role but helping to build cases by “providing critical financial analysis that other agencies rely on,” Schenck said.

While CI isn’t the investigative body responsible for revoking the exempt status of an organization, CI could pursue a criminal tax charge against an EO for a false filing, Schenck said.

To read the article in full, please visit Tax Notes’ website.