National Tax Security Awareness Week: Giving Tuesday highlights that scammers may use phony charities to trick taxpayers

On Giving Tuesday, the Internal Revenue Service and its Security Summit partners warned taxpayers to be on alert for scammers using fake charities to commit fraud not just during the holiday season but year-round.

On day two of Nationwide Tax Security Awareness Week, the IRS and its Security Summit partners urge people to make sure their money goes only to legitimate charities. Being alert to potential scams will not only shield a taxpayer’s money but also help protect personal and financial data that can be used in tax-related identity theft.

“People should watch out for fake charities, which create problems on multiple fronts,” said IRS Acting Commissioner Doug O’Donnell. “Not only can well-intentioned donors lose out on their money and a potential charitable donation credit, but their personal financial information could also be stolen. We urge people to act carefully before they give, including following several tips to make sure the charity is legitimate.”

Working together as the Security Summit, the IRS, state tax agencies and the nation’s tax software and tax professional industries are providing tips this week to help protect people against identity theft as well as help safeguard sensitive tax information that criminals can use to try to file fake tax returns and obtain refunds. This effort is part of National Tax Security Awareness Week, now in its seventh year.

Scammers often take advantage of people’s generosity by setting up fake charities to trick unsuspecting donors into giving away not only money, but also their sensitive personal information. They can use the holiday season and other timely events, such as recent disasters, to try to reach out to people and lure them into a donation. Scams requesting donations for disaster relief efforts are especially common over the phone. However, scammers also use emails, text messages, websites and social media messages that mimic a legitimate charity to trick people into giving money or personal information.

The IRS and its Security Summit partners urge people to make sure their money goes only to legitimate charities. Being alert to potential scams will not only shield a taxpayer’s money but also help protect personal and financial data that can be used in tax-related identity theft.

Tips to avoiding fake charity scams:

  • Don’t give in to pressure. Scammers often use the technique of urgent need to pressure people into making an immediate payment. Legitimate charities are happy to get a donation at any time, there’s no rush. Donors are encouraged to take time to do their own research. Don’t forget that scammers may alter or “spoof” their caller ID to make it look like a real charity.
  • Be wary about how a donation is requested. Taxpayers shouldn’t work with charities that ask for donations by giving numbers from a gift card or by wiring money. That’s a scam. It’s safest to pay by credit card or check — and only after researching the charity. 
  • Don’t give more than needed. Scammers are seeking money, but personal information can be just as valuable. Taxpayers should treat personal information like cash and not hand it out to just anyone. Never give out Social Security numbers, credit card numbers or PIN numbers. Donors should only give limited financial information when the person is sure the charity is legitimate.

Taxpayers who give money or goods to a charity may be able to claim a deduction on their federal tax return by reducing the amount of their taxable income if they itemize and don’t take the standard deduction. However, for people itemizing to receive a deduction, taxpayers must donate to a qualified charity.

NASCO submits comments to the IRS regarding Tax-Exempt Organization Forms

On November 28, 2022, the Board of Directors of the National Association of State Charity Officials submitted a letter in response to the Internal Revenue Service’s Notice and Request for Comments on Tax-Exempt Organization Forms.  NASCO requested that the IRS address the timely availability of Forms 990 and reiterated NASCO’s request that the IRS revisit the use of the abbreviated Form 1023-EZ.  Please find the letter here.

AG Racine Secures Emergency Relief Against Affordable Housing Non-Profit for Abandoning Mission, Attempting to Use Charitable Assets for Private Gain

Attorney General Karl A. Racine today announced that his office succeeded in stopping the Janet Keenan Housing Corporation, which provides affordable housing to low-income DC residents, from attempting to sell their property for private purposes in violation of District non-profit law.

“DC is in the midst of a housing crisis and longtime Black, brown, and low-income residents are being pushed out of the city they call home. Organizations that claim not for profit status are granted favorable tax benefits in exchange for their promise to fulfill their non-profit mission. In this case, the Janet Keenan Housing Corporation falsely said it was focused on providing needed affordable housing, when, in fact, the company prioritized profits in housing over genuine affordable housing work,” said AG Racine. “Most District non-profits follow the law, but when a tax-exempt entity—like the Janet Keenan Housing Corporation—acts contrary to its stated mission and hurts the DC residents it is meant to support, my office will use all available tools to stand up for District tenants.”

In response to the Office of the Attorney General’s (OAG) request for a Temporary Restraining Order (TRO), the court paused the property sale while it considers the Janet Keenan Housing Corporation’s request for approval to sell its property. In addition to the request for emergency relief, OAG also filed a complaint against Janet Keenan Housing Corporation for violations of the District’s Nonprofit Corporation Act (NCA) and common law.

Background on OAG’s Complaint
Janet Keenan Housing Corporation (JKHC) is a nonprofit organization with a stated mission to “preserve and promote affordable housing in the District of Columbia”. They are exempt from taxation and are required by law to operate solely for their charitable purpose.

In 2000, JKHC purchased a property at 1304 Euclid Street NW which had been used as affordable housing for low-income residents since the 1980s. JKHC committed to continue to use the house for this purpose and, since then, has operated the property as a self-run group home for low-income residents, consistent with its charitable mission. Six people currently live at the home.

On September 12, 2022 JKHC notified residents that they were planning to sell the property. By September 21 the house was under contract and the sale was scheduled to close on October 7.

OAG learned that JKHC was selling the property without the condition that the new owner maintain its charitable purpose. The house is a charitable asset and, under the District’s Nonprofit Corporation Act (NCA), non-profits must receive prior authorization from the Superior Court and notify the Attorney General in order to sell or otherwise divert the property from its charitable purpose. OAG warned JKHC that an unauthorized transfer of the property would violate the law, but JKHC moved forward with its efforts to sell.

Allegations against JKHC
By trying to sell the property and failing to ensure that it would maintain its charitable purpose without seeking prior court approval, JKHC is acting contrary to its stated charitable mission in violation of the NCA and common law on three counts:

  • Unauthorized diversion of a charitable asset;
  • Abusing or exceeding their authority; and
  • Acting contrary to their nonprofit purpose.

Additionally, JKHC has violated the NCA and common law by allowing the same person, John Keenan, to serve as both president and treasurer of the organization.

With this lawsuit, OAG is seeking to:

  • Stop JKHC from selling or diverting the property from its charitable purpose;
  • Appoint a receiver or other court-supervised official to ensure the property continues to be used as housing for low-income District residents and to reform JKHC’s board of directors; and
  • Create a trust or other form of monetary relief over any non-profit funds received in violation of District law.

A copy of the complaint is available here.

The case is managed by Assistant Attorney General Tabitha Bartholomew, under the supervision of Public Integrity Section Chief Adam Gitlin. Investigator Willie Haynes also assisted in the investigation.

OAG’s Nonprofit Enforcement Work
Under AG Racine, OAG has invested resources to expand its capacity to enforce District laws governing nonprofits. OAG has litigated and resolved actions against several charter schools and the president of a nonprofit that owned an affordable housing building for mismanagement of nonprofit funds. In May 2022, AG Racine clawed back $750,000 in misspent nonprofit funds from the Trump Organization and Presidential Inaugural Committee. The office has also sued several organizations for misuse of charitable funds, including a local fraternity and the NRA Foundation. Additionally, OAG has obtained an order that District nonprofit Howard Theatre Restoration, Inc. dissolve for failing to function in support of the District’s historic Howard Theatre, investigated the closure of Providence Hospital to ensure nonprofit assets were not improperly removed from the District, and intervened to resolve a board dispute at an internet freedom organization

If you suspect that a nonprofit doing business in the District of Columbia is violating District law, please contact OAG at (202) 727-3400. 

And the FTC Bureau of Consumer Protection Partner Award goes to . . .

We’re told the name Nebraska comes from the Otoe term Ñí Brásg, meaning “serene water.” The Platte River flows across the state until it converges with the Missouri. From there, it meets the Mississippi, creating the unstoppable force that gives it the name “mighty.” Who doesn’t enjoy a bit of heartland geography, but our purpose today is to draw an analogy to the most recent recipient of the FTC Bureau of Consumer Protection’s Partner Award: Nebraska’s favorite daughter – and among the FTC’s favorite partners – Abigail Stempson.

Director of the National Attorneys General Training and Research Institute’s (NAGTRI) Center for Consumer Protection at the National Association of Attorneys General, Abby has devoted her career to the cause of consumer protection. Before coming to NAAG in 2017, Abby was Chief of the Consumer Protection Bureau in the Nebraska AG’s Office, where she was a formidable leader in the fight against fraud and deception. At NAGTRI, Abby heads the nation’s only entity dedicated solely to providing training, research, and expertise to the staff of AGs’ offices and other government agencies committed to protecting the public from consumer fraud and abuse.

In honoring Abby with its Partner Award, the FTC Bureau of Consumer Protection acknowledges her preeminent role as an advocate, a uniter, and a teacher. Our point with the initial geographical reference – and we have one, we promise – is that like the Platte River, Abby’s efforts as an Assistant Attorney General extended across the Cornhusker State from Scottsbluff to Omaha, improving the lives of Nebraskans at all points in between. 

To carry the analogy a step further, Abby’s true superpower is the force she unleashes when she joins with law enforcers nationally to tackle the most challenging consumer protection issues of the day. Consumers and consumer protection agencies have benefited from her leadership at NAGTRI, where she proves every day that we’re best when we work together and her cooperative partnerships with the Bureau of Consumer Protection demonstrate that. Whether it’s crafting law enforcement responses to tech support scams, bringing members of the community together at FTC-AG Common Ground conferences, or meeting the challenges of the COVID pandemic, our joint efforts are more effective thanks to Abby’s legal expertise, leadership, and “can do” approach to collaborative enforcement and education.

Abby has ensured her legacy as a valued partner through her role as an inspiring teacher. She has trained hundreds of State Assistant Attorneys General in the basics – and intricacies – of consumer protection enforcement. Whether through formal training programs or the shoulder-to-shoulder example she sets as she works in the consumer protection trenches, we carry out our shared mission to protect and educate more effectively, thanks to Abby.

For these reasons, the FTC Bureau of Consumer Protection is privileged to present its Partner Award to the mighty Abigail Stempson.