Nonprofit Tax Havens Are a Thing?

While the news is full of stories about the current do-nothing Congress (see here and here and here for examples) and even this here little blog pokes light at the lack of working days under the dome of the United States Capitol, there are moments when the members of the House of Representatives and the United States Senate (and even…gasp…the President of the United States) can actually come together and pass legislation.

Although funding the federal government doesn’t seem to be one of those things.

However, in the lane of cooperation, the federal government did pass Public Law 113-163, which started life as S.1799 and which is officially known as the Victims of Child Abuse Reauthorization Act of 2013.

The Victims of Child Abuse Act (VOCA) of 1990 created a program that would allow the Department of Justice (DoJ) to “…make grants to develop multidisciplinary child abuse investigation and prosecution programs.” The DoJ created the Office of Juvenile Justice and Delinquency Prevention (OJJDP) to distribute those grants to establish regional and local children’s advocacy centers, strengthen court appointed special advocate programs, and improve the prosecution and court management of child abuse cases. The head of the OJJDP is the Administrator and it is this position’s role to make those grants (and if you like to see the actual law, you can pop on over to Title 42, Chapter 132, Subchapter I, Section 13003 of the United States Civil Code to see the technical legal language concerning the Administrator and grants).

The reason the word “Reauthorization” is in the title of Public Law 113-163 is because funding for VOCA was not included in President Obama’a budget for Fiscal Year 2014 (FY14). In 2013, the junior Senator from Delaware, Democrat Chris Coons, introduced legislation that would restore $20 million in funding to VOCA programs for FY15.

Helping abused kids is a rather non-partisan issue in the halls of Washington so it is not surprising that in June of 2014, the Senate passed S.1799 by unanimous consent and on the next month, the House passed the legislation by voice vote. The President signed the bill in August and the OJJDP is back in the grant-making business until the end of FY18.

But none of the above is why I chose to write about VOCA, the OJJDP, Senator Coons, or child advocacy centers. Instead, what I found intriguing about S.1799 is some of the wording that happens after the text that extends funding through the end of Fiscal Year 2018.

Section 2(b) of Senator Coon’s legislation adds text to the original 1990 law that created VOCA (also known as Public Law 101-647 which was first known as S.3266 and was introduced by the then-junior Senator from Delaware, Joe Biden, the current Vice President).

Section 214(c)(1) has now been added to PL 101-647 that mandates that the DOJ’s Inspector General conducts audits “of recipients of grants under this subtitle to prevent waste, fraud, and abuse of funds by grantees.” Obviously, these audits weren’t being done before which is why the Senator from Delaware had to add this language to look for malfeasance on the part of grant recipients.

Has the news been filled recently with child advocacy center grant recipient using federal money in a wasteful manner? I have not been able to find any, but then I must admit my on-line search was not entirely exhaustive.

In a like vein, section 214(c)(2)(b) states that the “Administrator may not award a grant…to a nonprofit organization that holds money in offshore accounts for the purpose of avoiding paying the tax described in section 511(a) of the Internal Revenue Code of 1986.”

Basically said, if you are a nonprofit helping abused children and you also store money in a bank outside of the United States to avoid paying a certain tax, the OJJDP wants nothing to do you.

Again, has the news been filled recently with nonprofits stashing dollars in the Cayman Islands to avoid paying Uncle Sam?

I find it weird that the United States government would let it be known via legislation that nonprofits are not welcome to park their cash outside America. However, this same government has absolutely no issue with giving the green light to companies that do make a profit to put money away in international banks to avoid paying federal business taxes.

According to this Newsweek article, “Apple and GE owe at least $36 billion in taxes on profits being held tax-free offshore, Microsoft nearly $27 billion and Pfizer $24 billion…” all in perfectly legal and Congress-approved ways. This article from Bloomberg states that companies like Apple and IBM have parked a combined $1.95 trillion (yes, with a “T”) overseas to avoid paying taxes. These companies still can play with the United States government.

But if you’re the Pennsylvania Alliance for Child Advocacy (or a similar-named outfit), don’t even think about opening up a bank account in Ireland…you tax dodger, you.

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