IOWA CITY, Iowa (AP) - A charity controlled by Iowa Gov. Terry Branstad missed a legal deadline for disclosing the names of donors who paid for his 2015 inaugural celebration, keeping them secret even as he prepares to become the U.S. ambassador to China.
Tax experts say the lack of disclosure could subject the charity to IRS penalties of $100 per day retroactive to Nov. 15, when the information was due. It also means that weeks after President-elect Donald Trump named Branstad to the important diplomatic post, the public doesn’t know the identities of individuals and corporations who wrote checks totaling roughly $1 million to fund the Republican governor’s inauguration and namesake college scholarships.
The Branstad-Reynolds Scholarship Fund was founded after Branstad and Lt. Gov. Kim Reynolds won election in 2010 to raise private money to pay for their 2011 inauguration. Branstad pledged that the leftover money would be used to award $30,000 annually in scholarships for Iowa college students, although it has fallen short of that goal. If confirmed by the U.S. Senate as ambassador to China, Branstad plans to resign as governor and be replaced by Reynolds.
After winning re-election in 2014, the administration again used the group for inaugural fundraising, bringing in $1.5 million. About $500,000 went to pay for an inaugural ball in Des Moines and other events in January 2015 that celebrated Branstad’s unprecedented election to a sixth term as governor. The rest will go toward an endowment fund for college scholarships.
Because the group is a private foundation, the IRS requires it to annually disclose the names of anyone who gave $5,000 or more. Contributors who donated in 2014 were disclosed in that year’s tax return, filed in November 2015. But those who contributed in 2015 - when $1.1 million rolled in - have been kept secret amid delays in disclosure.
The charity’s 2015 return was due May 15, but it received an automatic three-month extension. The group applied for a second three-month extension through Nov. 15 - the only additional time allowed - saying it was “waiting for additional information needed from a third party.” It finally filed its return Nov. 15 listing amounts raised and spent but disclosing only one contributor: Des Moines-based Principal Financial Group, which gave $25,000.
Branstad spokesman Ben Hammes said the group’s accountant, Robert Buckley, is still gathering information about the other donors and plans to file an amended return. He said getting donor information has been a challenge because the inaugural committee has disbanded. He says the group isn’t trying to hide anything.
Branstad and Reynolds serve as the group’s president and vice president and receive no compensation.
The IRS could subject the foundation to penalties of $100 per day, up to $50,000, because it brought in more than $1 million in 2015. Des Moines accountant Joe Kristan said the IRS generally considers tax returns that are missing information as incomplete and subject to late penalties, which could be waived if the group shows “reasonable cause” for failing to file on time.
“They are running up a daily fine,” said Marcus Owens, former director of the IRS division that oversees nonprofit groups, who said the group has significant compliance issues. He noted that as a director, Branstad has a fiduciary duty to ensure the group complies with state and federal law.
The 2014 donor list includes companies with major state business, philanthropists and Branstad supporters.
At the top was Iowa’s largest electric company, MidAmerican Energy, which donated $100,000. Months later, the company’s CEO complained directly to Branstad about a ruling from the Iowa Utilities Board that made its wind energy projects less profitable. Branstad soon ordered a shake-up on the board, which one ousted regulator said was done to placate MidAmerican.
UnitedHealthcare gave $10,000 months before it won a major contract following Branstad’s decision to privatize Iowa’s Medicaid program. Riverside Casino & Golf Resort, which has lobbied Branstad’s administration to reject a Cedar Rapids casino that could drain its business, gave $25,000.
Hammes said the administration was proud to have private donors support the fund, which has awarded $137,500 to college students since 2011.
Asked whether that might create a perception that donors are giving in hopes of some sort of payback, Hammes responded: “There is no way the appearance that they are getting some favor for anything. This is a wonderful scholarship fund that has been set up to provide money for students.”
The Associated Press first asked Branstad’s office to release an inaugural donor list in September 2015. Hammes said then that the governor’s office didn’t have those records but that he’d try to track them down. He was unsuccessful. After AP asked for the group’s 2015 tax return last month, he released the incomplete document.
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