requested an Internal Revenue Service

April 4, 2016
VIA CERTIFIED MAIL AND E-MAIL
Margaret Von Lienen
Director, EO Examinations
Mail Code 4910DAL
1100 Commerce Street
Dallas, TX 75242-1198
E-mail: eoclass@irs.gov
Re:
Request for Audit/Investigation of Citizens for Responsibility and Ethics in
Washington
Dear Ms. Von Lienen:
On behalf of the Center for Organizational Research and Education (“CORE”), a nonprofit
organization providing research and education on consumer choices, including those related to
government regulation, I write to provide you with information regarding Citizens for Responsibility
and Ethics in Washington (“CREW”) and to request that the Internal Revenue Service audit or
investigate CREW’s 501(c)(3) tax-exempt status. CREW is a section 501(c)(3) organization that may
be in violation of the Internal Revenue Code (“IRC”). Specifically, and as set forth in greater detail
below, by soliciting and accepting a donation from Herbalife immediately prior to submitting materials
to Congress regarding a short-seller of its stock using the federal government to drive down
Herbalife’s stock price, CREW appears to have engaged in activity designed to impermissibly benefit
donors, contrary to the law.
Law Concerning Private Interest Benefits
A 501(c)(3) organization may not operate for the impermissible benefit of private interests. 26
C.F.R. § 1.501(c)(3)-1(d)(1)(ii) (organizations must serve only a “public rather than a private interest”
and must establish that they are “not organized or operated for the benefit of private interests . . .”).
This prohibition on private benefits extends beyond that covered by the related concept of
inurement1 to include “nonincidental benefits conferred on disinterested persons that serve private
interests.” Am. Campaign Acad. v. Commissioner, 92 T.C. 1053, 1068-1069 (1989). In other words,
while the inurement doctrine prohibits benefits to organizational insiders (e.g., those exhibiting control
Under the private inurement doctrine, no part of a tax-exempt organization’s earnings may inure to the benefit of any
private shareholder or individual, which refers to “persons having a personal and private interest in the activities of the
organization.” 26 C.F.R. § 1.501(a)-1(c) (“The words private shareholder or individual in section 501 refer to persons
having a personal and private interest in the activities of the organization.”). Courts have interpreted this phrase to refer to
any “insider” of the tax-exempt organization. See, e.g., United Cancer Council v. Commissioner, 165 F.3d 1173, 1175 (7th
Cir. 1999) This doctrine requires a tax-exempt organization to operate in such a way that it does not unreasonably benefit
any of its board members, trustees, officers, or key employees. This contrasts with the broader private benefits doctrine,
which, inter alia, also covers organizational outsiders.
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