IRS Investigation Requested Over Soros-Funded Nonprofits
A conservative watchdog group is urging the Internal Revenue Service (IRS) to look into the tax-exempt status of two nonprofits linked to George Soros, alleging these organizations have misused their privileges to support left-wing initiatives.
Recovering American Freedom (RAF), an advocacy group dedicated to civil and constitutional rights, lodged a formal complaint with the IRS. They contend that the Private Equity Stakeholder Project (PESP) and its affiliate, Private Equity Stakeholder Action (PESA), have committed serious violations of federal tax laws. The RAF claims that both groups primarily engage in political activities while providing inappropriate benefits to Democratic candidates.
A spokesperson for the RAF mentioned that the Private Equity Stakeholder Project has egregiously misused its tax-exempt status and obscured its spending from public view. They believe the IRS should thoroughly investigate PESP and consider revoking its tax-exempt status, suggesting that if the IRS agrees with their assessment, the case should be forwarded to the Department of Justice.
Established in 2017, PESP is based in Chicago and focuses on research regarding the impact of financial services on various stakeholders, including human rights and environmental issues. Its 501(c)(4) affiliate, PESA, claims to work on developing policy solutions related to environmental, social, and governance issues linked to financial service investments.
Both PESP and PESA rely on significant funding from prominent left-leaning foundations, including Soros’ Open Society Foundation. Reports indicate that they have become deeply intertwined with the private equity sector.
According to federal law, 501(c)(3) organizations are prohibited from major political activities while 501(c)(4) organizations can engage in some political advocacy, though this should comprise less than half of their total expenditures. The RAF’s complaint argues that PESA’s primary aim has been political support for Democratic candidates rather than simply social welfare.
In concrete terms, PESA contributed $10,000 to the Democratic Treasurer Association and $5,000 to a candidate for the Oregon Treasury in 2020. In 2022, contributions exceeded $54,000, all directed towards Democratic groups.
While PESA’s political spending appears to be under the 50% threshold for 501(c)(4) organizations, the RAF argues that much of its non-political activity over the last two years has been merely a reimbursement structure for PESP’s costs. They believe this could violate the tax-exemption rules regarding political involvement.
Furthermore, the complaint contends that both organizations engaged in unrelated business activities without paying necessary taxes, raising the question of whether they are genuinely operating as nonprofits. The RAF highlights that both groups derive significant income from consulting and other business-related activities.
The RAF also accuses PESP of using inflammatory language that conflicts with IRS educational institution standards and not adequately disclosing its spending, thereby evading public scrutiny.
Jim Baker, the executive director of PESP and PESA, stated that they haven’t faced complaints and are compliant with federal laws. He did not comment further after being presented with the complaint.
Beyond their criticisms of the private equity sector, PESP has also voiced strong opposition to Israel amid ongoing conflicts, describing incidents in Gaza with controversial language that has drawn attention.
