March 9, 2020
The nonprofit organization founded by allies of President Donald Trump that hosted a $25,000 cash giveaway aimed at black voters last December told the IRS that it would not be providing “funds to individuals” in its application for tax exempt status, according to documents obtained by CREW. The Urban Revitalization Coalition (URC) similarly told the IRS it would not operate raffles, which it did. URC also claimed that it would not “support or oppose candidates in political campaigns in any way,” but some of its activities and affiliations raise questions about this assertion as well.
Since the Cleveland event, public scrutiny and ethical questions have increased for URC, which was founded by Trump surrogate Rev. Darrell Scott. The event honored and reportedly featured executive branch employees including WH staffer Ja’Ron Smith. While URC has defended its cash giveaway raffles, the Trump campaign disavowed any knowledge of or involvement in planning the events and the White House has avoided comment.
The Cleveland cash giveaway was part of URC’s nationwide strategy of holding events “in black communities where they lavish praise on the president while handing out thousands of dollars in giveaways.” To date, those efforts have fallen well short of expectations. In January, Virginia Union University canceled URC’s planned event featuring a $30,000 cash giveaway and honoring President Trump on Martin Luther King, Jr. Day. Following intense public scrutiny, last month, URC postponed indefinitely its planned $50,000 cash giveaway in Cleveland featuring entertainer Ray J.
In February, URC was the subject of a complaint to the Cuyahoga County Prosecutor requesting that the office investigate URC for possibly violating local election laws. Other legal experts including CREW raised concerns that URC’s events could violate IRS regulations due to questions of whether the giveaways qualify as having a charitable purpose.
URC’s conduct also raises questions about whether the group is engaging in political advocacy prohibited for an organization created under section 501(c)(3) of the Internal Revenue Code. For example, though URC officials deny that their activity is electorally-focused, a report published on the group’s website last year, first identified by CREW, invoked the Trump campaign slogan, “Make America Great Again,” when discussing URC’s “purpose.” And, in 2018, the coalition received a $238,000 donation from America First Policies, a politically active group backing Trump’s reelection.
In order to understand more about URC’s mission and the purpose of its cash giveaways, CREW requested documents and information regarding the organization from the Internal Revenue Service (IRS). Under federal law, both the IRS and organizations like URC, created under section 501(c)(3) of the Internal Revenue Code, must provide the nonprofit’s annual tax returns (Form 990) and its application for tax-exempt status (Form 1023) to members of the public upon request.
Despite being founded in June of 2017, URC does not appear to have a publicly available tax return, raising questions about whether the group ever filed the required forms. Last week, the IRS provided CREW with a copy of URC’s Form 1023, but explained in a letter that the organization’s 990s for 2017 and 2018 were “unavailable.”
Here is what we learned:
Discrepancies Between URC’s Form 1023 Responses and Its Current Activities
Applicants for tax exemption as a public charity under section 501(c)(3) have to answer a detailed set of questions regarding their “past, present and planned activities.” Documents included in URC’s application for tax-exempt status show that while the group was incorporated in July 2017, it began operations in June 2017. The group filed its Form 1023 with the IRS in August 2018.
The actions it described to the IRS while seeking tax-exempt status seem quite different from the cash giveaways that they have sought to host in 2019 and 2020. While there is nothing illegal about a section 501(c)(3) applicant changing some of its activities after applying for and receiving a determination letter from the IRS, these discrepancies raise questions regarding when and why URC decided to change course to hosting cash giveaways at events promoting Trump.
Funds to Individuals
The Form 1023 asks: “In carrying out your exempt purposes, do you provide goods, services, or funds to individuals?” If the answer is yes, URC would have to describe each program that it runs that provides goods, services or funds to individuals. As an example, the relevant instructions for the form URC filled out said programs that “provide food to the homeless, employment counseling to senior citizens, or grants to victims of a disaster” would count. URC checked the “No” box.
In 2019, URC launched a program to hold cash giveaway events in black communities across the country. The first event featured the organizations’ co-founder handing out envelopes filled with cash in hundred dollar increments. Even after URC’s second giveaway was put on hold, the organization indicated that more events were in the works. As URC co-founder Kareem Lanier said in an interview, “If they’re upset and outraged with the cash giveaways, wait until we launch our next event.”
Political Activity and Propaganda
The Form 1023 asks: “Do you support or oppose candidates in political campaigns in any way?” The relevant instructions note that organizations described in section 501(c)(3) “are prohibited from supporting or opposing candidates for public office in any political campaign. If you answer ‘Yes,’ you aren’t qualified for tax exemption under section 501(c)(3) and should reconsider whether the filing of application Form 1023 is appropriate for your organization.” URC checked the “No” box.
In an addendum to Form 1023 that URC filed with the IRS, it stated that “No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.”
While URC claims to be nonpartisan, it has taken numerous steps suggesting its support of Trump’s reelection bid.The organization’s website highlights its founders’ roles on the National Diversity Coalition for Trump, an organization that “strongly supports Donald J. Trump for President of the USA.” Last year, URC published a report indicating that it was working to “increase the 8% African-American vote from 2016 by 25% in the 2020 Presidential Election.” But the “8%” figure does not reflect overall black participation in 2016, but is instead the estimated percentage of black voters who supported Trump. And, as already noted, URC published a report invoking the “Make America Great Again” slogan when discussing the group’s purpose and received a $238,000 contribution from a political active group backing Trump’s reelection.
While increasing African American voter registration is a laudable goal, voter registration drives that favor a partisan candidate can constitute prohibited political activity for section 501(c)(3) organizations like URC. In a video tweet posted minutes before URC’s cash giveaway event started, co-founder Rev. Darrell Scott said: “This is how Black folks Pro-Trump events begin.” During the event, a raffle winner declared “Four more years of President Trump. Yay!” suggesting that attendees understood the purpose of the event.
The Form 1023 asks: “Do you or will you operate bingo or gaming activities?” The relevant instructions note that: “Other gaming activities include pull-tabs, raffles, keno, split-the-pot, and other games of chance.” If yes, URC would have to describe who conducts the gaming activities, and list all the revenue received or expected to be received, as well as the expenses paid or expected to be paid in operating the activities. URC checked the “No” box.
Flyers advertising URC’s December 14, 2019 pro-Trump event said it was “open to the public” and that recipients “must be present to redeem giveaways.” The event prominently featured a raffle where prizes were awarded in a live drawing. Video from the raffle shows co-founder Kareem Lanier announcing one winner, Teresita Jones-Thomas, then stating, “I ain’t giving her the money. Her son plays for the Golden State Warriors in the NBA. She [sic] don’t need the money,” before presenting her with an envelope.
Why Did a Politically-Active Non-Profit Backing Trump’s Re-Election Fund URC?
Watching a nonprofit prohibited from engaging in partisan advocacy give away cash to voters where organizers lavish praise on President Trump inevitably leads one to ask where that money came from. URC is not required to disclose its donors and declined to share information about them when asked, but public records revealed that at some point in 2018, the nonprofit received a $238,000 donation in 2018 from America First Policies (AFP).
That donation seems especially curious in light of the fact that as of late August 2018 when it filed for tax-exempt status, URC had no money and told the IRS it did not expect to get much more. URC reported that it had an estimated budget of $7,500 for 2018 and stated that at that point in time “no revenue” had “been generated” to fund its activities. Somehow, between that time and the end of 2018, the group was financially rescued by a politically active non-profit backing the President’s re-election bid.
In its statement of revenues and expenses on its Form 1023, URC reported $5,000 in revenue and $5,000 in expenses between June 22, 2017 and December 31, 2017, its first tax year in operation. The organization predicted $7,500 in revenue and expenses for 2018 and $8,750 in total revenue and expenses in 2019, totaling projected revenue and expenses of $21,250 for its approximately 2.5 years of existence.
Those figures include no expenditures for rent, salaries and wages, or professional fees, despite the fact that URC appears to have brought on an Executive Director in December 2017. That $21,250 estimate is also less than the total amount of money raffled off at URC’s cash giveaway in Cleveland last year.
URC’s balance sheet as of August 2018 also showed zero dollars in assets and liabilities.
Not surprisingly, URC appeared to be worried about its cash flow, or lack thereof, in August 2018. As co-founder Darrell Scott wrote to the IRS on August 27, 2018 in a letter seeking an expedited review of URC’s application for tax exempt status, “Failure to expeditiously obtain tax-exempt status may impede contributions and upcoming federal grant opportunities.”
It is unclear exactly why AFP donated nearly a quarter million dollars to an organization that, according to its tax-exempt application, had no money, no assets, and no accomplishments in furtherance of its programmatic mission. In a recent statement to CNN, AFP’s communications director, Kelly Sadler, praised URC for “providing grassroots support for the passage of the First Step Act and other Trump administration policy initiatives aimed at improving the lives of those living in urban areas.” That may also have come as a surprise to the IRS – URC’s Form 1023 stated that the organization did not and had no plans to “attempt to influence legislation.” Sadler also appeared to acknowledge URC’s barren coffers prior to the infusion of funds from AFP, saying, “Our 2018 grant helped get the organization off the ground.”
The relationship between AFP and URC appears to have begun before URC applied for tax-exempt status in August 2018 and AFP transferred money to the group. In April 2018, Carl Higbie, then-the director of advocacy at AFP who joined AFP after leaving the Trump administration in the wake of reports of racist, sexist, anti-Muslim and anti-LGBT comments he had previously made, told a radio host that he was “on the board of the Urban Revitalization Coalition,” which he said was “run by the National Diversity Coalition,” an apparent reference to the explicitly pro-Trump advocacy group that URC’s Rev. Darrell Scott and Kareem Lanier help lead. Higbie, who resigned from AFP in June 2018 after several companies distanced themselves from AFP over his past comments, is not listed as a board member in URC’s application for tax-exempt status filed in August 2018.
AFP reports that they maintain records to substantiate the amount of its grants or assistance, the grantees’ eligibility for the funds, as well as the selection criteria used to make the award. In addition, AFP requires its grantees to provide it with a report detailing how the funds are spent and stays in regular communication with grantees with respect to their use of awarded funds. These facts raise questions about whether URC and its donor(s) are exploiting tax laws to serve as a front for political advocacy.
Where are URC’s 990s?
Information about a charity’s funding and activities is normally available to the public through the annual Form 990 tax returns tax-exempt organizations are required to file. URC appears to have failed to file those tax returns for its 2017 and 2018 tax years.
URC was incorporated in Delaware on July 10, 2017. On its application for tax-exemption, URC declared that it was not claiming to be excused from filing Form 990 or Form 990-EZ. In addition, URC indicated that its tax year would end annually on December 31, specifically suggesting that its first tax year covered June 22, 2017 through December 31, 2017. That means that URC should have filed its return covering its 2017 tax year no later than November 15, 2018 and its return covering its 2018 tax year no later than November 15, 2019.
But the organization’s results page on the IRS’ tax exempt organization search does not contain any copies of returns or Form 990-N e-postcards. In addition, while there is an entry for URC in the Exempt Organization Business Master File Extract (EO BMF), which includes cumulative information on exempt organizations that is extracted monthly, the most recent update of the EO BMF posted on March 9, 2020 shows a blank entry in the tax period field that is supposed to record the tax period of the latest return filed. URC’s fields for asset amount, income amount, and revenue amount are also blank.
CREW filed a request with the IRS for URC’s 2017 and 2018 990s on January 29, 2020. The IRS replied with a letter on February 26, 2020 stating that they could not provide copies of the requested forms because they are “either unavailable, aren’t open to public inspection under Internal Revenue Code Section 6104, or destroyed (if it’s been six years since the end of the processing year).” CREW also asked URC to provide its tax returns, but it has not responded.
Urban Revitalization Coalition’s cash giveaways and other activities raise serious concerns that the organization is engaged in political activity aimed at promoting the President’s reelection effort in violation of IRS regulations governing section 501(c)(3) organizations. While URC’s IRS Form 1023 sheds light on the organization’s original intentions and empty coffers during its first year of operation, it exposes far more questions than it answers. After two and a half years in existence, URC still does not have a publicly available tax return that would reveal whether it has more donors than a single politicallly-active pro-Trump nonprofit and how it has spent those funds. CREW will continue to investigate and to shed light on URC’s questionable conduct and who is funding it.