TLG Managing Partner Jeff Tenenbaum Quoted Extensively in NonProfit Times Article, “Threats and Bluster: The IRS’s Black Cloud Over the Nonprofit Sector”

TLG Managing Partner Jeff Tenenbaum was quoted extensively in an article in The NonProfit Times entitled, “Threats and Bluster: The IRS’s Black Cloud Over the Nonprofit Sector.”

“The shifting of enforcement duties from the IRS to the Department of Justice is important. “I know exactly what’s involved in litigation, and I know exactly what’s involved in an IRS audit and appeal. The two share virtually no similarity,” said Jeffrey S. Tenenbaum, managing partner at Tenenbaum Law Group, a Washington, D.C.-based firm that primarily serves as outside general counsel for nonprofit organizations and related entities.

“In terms of the IRS, there has been a lot of saber-rattling from the President himself and others in the administration about nonprofit organizations and tax-exempt organizations,” Tenenbaum said. “But from what we can gather there has been no meaningful, if any, kind of IRS crackdown or threats to the tax-exempt status of most tax-exempt organizations.”

Tenenbaum noted there are only three ways tax-exempt status can be disrupted. First, it is automatically revoked if an organization fails to file a federal Form 990 three years in a row. The second reason is through an audit, which has due process protections and appeals processes built into it. But this process is not an effective tactic for an administration that seemingly relies on shows of force. Third, an organization’s status can be suspended if it is deemed as supporting or engaging in terrorism.

“During the pendency of [an audit], which can take months, if not years, all of it remains private,” Tenenbaum said. The IRS, by law, is not allowed to publicly disclose any of that the process publicly. “Of course, the organization always has the right to make it public if they wanted to. Most organization organizations don’t. It can take years, and most audits, frankly, end up with some resolution short of revocation, and so it’s not really a very politically favorable alternative for the administration,” said Tenenbaum.

Even if the administration does use this tactic, the impact on a nonprofit would be inconvenience, but probably not devastating. An IRS audit is probably not going to drain the resources of an organization. Tenenbaum said, “It’s not like you can just issue tons of subpoenas and depose all these people and file all these different motions.”

Audits, Tenenbaum added, offer “plenty of time” to comply. An organization might have to retain an attorney or a certified public accountant (CPA) to help defend it, but it’s nothing like litigation, Tenenbaum said.

“I don’t see the IRS audit process as a tool for trying to wear down and beat down and drain the resources of nonprofit organizations,” Tenenbaum continued. “Plus, these are very manpower intensive [on the part of the IRS], and the IRS wasn’t doing many audits to begin with, even before this administration took office. Since then, the administration has cut the number of IRS auditors significantly, so there are very few auditors left to even engage in this.”

The supporting or engaging in terrorist activities means might be the most insidious. Under Internal Revenue Code Section 501(p), an organization’s tax-exempt status can be immediately suspended if the organization is designated or identified a supporting or engaging in terrorist activity or supporting terrorism. But the law was designed to address support of foreign terrorism. “It’s hard for me to see how Section 501(p) could be utilized, at least in a lawful manner, to suspend the tax-exempt status of an organization that is not supporting foreign terrorists,” he said.

Neither Trump’s nor Bondi’s memorandums mention Section 501(p) in their discussions of combatting domestic terrorism.”