CASA de Maryland faces challenge over tax-exempt status

A public interest group that pushes for immigration controls has asked Maryland to investigate the tax-exempt status of CASA de Maryland, a high-profile immigrant rights group that the Immigration Reform Law Institute says repeatedly engaged in political advocacy, breaking the law governing nonprofits.

In lengthy complaints sent to several Maryland agencies over the past week, IRLI charged that CASA regularly lobbies the state on legislation, endorses political candidates and supports Democrats through get-out-the-vote volunteer efforts, all while taking tax-deductible donations as a nonprofit.

In one instance uncovered by IRLI, CASA is listed as having endorsed Peter V.R. Franchot in one of his campaigns for comptroller of Maryland. As comptroller, Mr. Franchot administers some of the tax breaks for which CASA is eligible. The Office of the Comptroller is one of the offices with which IRLI filed its complaint.

IRLI also sent the complaint to the Internal Revenue Service last year, asking it to rescind CASA’s tax-exempt status at the federal level.

“IRLI wants the IRS and state agencies to cut off CASA’s source of tax-exempt money and state funding, so it can’t use taxpayer money for political purposes,” said Monique A. Miles, a staff attorney for IRLI. “CASA thinks it’s too big and well-connected to fail, like ACORN did, but there are watchdog organizations like IRLI who are looking out for taxpayers’ best interests.”

CASA denied the charges, and Political Director Kim Propeack said IRLI’s complaint is a “blatant attempt to distract or hinder CASA.”

Ms. Propeack said the organization has been audited for the past five years by Ribis, Jones & Maresca, an accounting firm that helps dozens of nonprofits, and she said CASA adheres to strict procedures that make sure it stays within the law.

CASA insists on the highest standards for operations, including compliance with all regulations,” she said. “We perform annual compliance reviews with outside legal counsel, and every staff member attends mandatory compliance training.”

She said Mr. Franchot’s case was an error on the part of his campaign, not CASA‘s.

It’s not uncommon for one group to question whether an opposing organization is playing by the rules, though the IRS rarely takes action unless the violation is egregious.

Still, the charges against CASA underscore just how much room there is in the list of activities allowed under the law.

CASA, whose full name is Central American Solidarity and Assistance of Maryland, organized in 1985 as a 501(c)(3), which grants special tax status to religious, charitable or educational groups. Donations to those groups are tax-deductible and the organizations get other tax exemptions. But with that comes strict rules on what groups can do — including a ban on most political activity, and limits on lobbying.

CASA offers services and referrals to low-income Hispanics, and is a major player in the national immigration debate. It also runs day-laborer centers in Maryland, often aided by taxpayers’ funding.

Political reach

Several years ago, CASA created a specific political arm, CASA in Action, which is incorporated under a different section of the tax code and is allowed to take political stances, though donations to that group are not tax-deductible. Ms. Propeack is director of CASA in Action.

IRLI, though, says the original CASA toed the line on political action, and sometimes strayed over it.

In 1,500 pages of supporting documents, IRLI argues that CASA lobbies for legislation that would benefit immigrants and against bills that would crack down on illegal immigration, and said CASA helps organize politically oriented rallies and conducts get-out-the-vote activities aimed at motivating Hispanics and immigrants to turn out at the polls.

IRLI also charges that CASA’s leaders regularly endorse political candidates, including Mr. Franchot. The comptroller’s office has been asked to investigate CASA.

His campaign website did list CASA de Maryland as an endorser.

Mr. Franchot’s office said it cannot comment on IRLI’s request for an investigation into CASA.

Spokesman Joseph Shapiro initially referred questions about the endorsement to Mr. Franchot’s campaign office. A message left there went unreturned, but Mr. Shapiro called back to say that the campaign told him it had made a mistake earlier, and that the endorsement was from Gustavo Torres, CASA’s executive director, not from the organization itself.

Mr. Shapiro said he doubted the campaign still had the document to show that the endorsement was from Mr. Torres individually.

Ms. Propeack said CASA tries to correct such instances.

Mr. Torres regularly endorses candidates in his personal capacity, which analysts said is legal.

In another charge, IRLI says CASA appears to mingle tax-deductible funds for main CASA with political funds for CASA in Action.

CASA de Maryland allows donors to join the main CASA organization or CASA in Action, for a $25 fee. Those who joined by filling out a paper application saw the fee broken down: $16 goes to main CASA — that money is tax-deductible — and the rest goes to CASA in Action, where the money was not deductible.

But for online membership applications, it’s unclear how the money is segregated. The membership page on main CASA directs users to CASA in Action on several occasions.

CASA told The Washington Times that it will remedy that error.

Crossing the line

Lloyd Hitoshi Mayer, a professor at Notre Dame Law School who specializes in nonprofit tax law, said groups are allowed to engage in some lobbying on issues of public interest. The bright line they cannot cross, however, is endorsing or opposing a candidate.

“The key thing here is campaign intervention. Lobbying — groups complain about that all the time, and I’ve been on both sides of the complaint,” Mr. Mayer said. “It’s the political campaign intervention which is deadly.”

But he said it must be clear that the group’s resources were used to endorse a campaign and that leaders are able to engage in political activity in their personal capacities.

Mr. Mayer said the IRS ran audits in 2004, 2006 and 2008 on some groups where questions had been raised, but that the agency has not said anything about audits during the 2010 election cycle, nor announced any plans for audits this year.

In those earlier instances, groups usually pleaded ignorance and were issued a warning.

CASA reported nearly $10 million in grants and donations in 2009, and generated another $2.1 million in revenue from its programs and $74,538 from investment income.

That same year, CASA paid $4.3 million in salaries and benefits and spent $2.2 million on the rest of its expenses, including lobbying. It ended the year with $12.8 million in net assets.

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