The Interreligious Foundation for Community Organization (IFCO) is a multi-issue U.S. ecumenical agency whose tax-exempt status is being challenged by the Internal Revenue Service (IRS). In order to understand this challenge, we will look at IFCO’s background and the purported bases for the IRS’ position before concluding that people concerned about U.S.-Cuba normalization should support IFCO in this matter.
According to its own website, IFCO “is a multi-issue national ecumenical agency, which was founded in 1967 by progressive church leaders and activists. For [nearly 50 years it] . . . has assisted hundreds of community organizations and public policy groups – by providing technical assistance, training organizers, making and administering grants, and using our global network of grassroots organizers, clergy, and other professionals to advance the struggles of oppressed people for justice and self-determination.”
“IFCO has assisted the poor and disenfranchised in developing and sustaining community organizations to fight human and civil rights injustices. This work includes education about the realities of the poor in the U.S. and the third world and to organize and to assist local communities who are organizing around issues of racial, social, and economic justice. . . . In pursuit of this mission, IFCO promotes, funds and coordinates domestic and international community development efforts – programs designed to improve people’s own communities.”
“IFCO’s international work, which began in Africa in the 1970s, has focused on Central America and the Caribbean since the early 1980s. IFCO’s project Pastors for Peace was founded in 1988,” and in 1992 it started its annual “Friendshipment” caravans which IFCO/Pastors for Peace delivers to Cuba” to provide “humanitarian aid to the Cuban people . . . as a nonviolent direct challenge to the brutal US economic blockade of Cuba. The caravans, brigades and delegations have also provided an opportunity for numerous US citizens to see Cuba with their own eyes.”
IRS Challenge to IFCO’s Tax-Exempt Status
On October 3, 2015, IFCO publicly announced that the IRS planned “to revoke the group’s non-profit tax exempt status because of its humanitarian work in Cuba and other countries.” This announcement was the result of the organization’s learning that the IRS Appeals Office planned to uphold the revenue agent’s recommendation to revoke our 501(c)3 status . . . . [because of IFCO’s] humanitarian aid to Cuba as well as IFCO’s fiscal sponsorship of a humanitarian flotilla that delivered aid to the people of Palestine.”
On August 24, 2016, the organization apparently told a journalist, “The IRS claimed that our work to bring humanitarian aid and build friendship with the Cuban people was done in violation of the Treasury Department’s ‘Trading with the Enemy Act.’”
On September 1, 2016, IFCO’s Executive Director, Gail Walker, stated that the IRS had abandoned its efforts to remove its tax-exempt status because of its Cuba programs and instead was basing its efforts on IFCO’s alleged sloppy record-keeping.
The IRS, on the other hand, has not made any public comment about IFCO’s tax-exempt status.
U.S. Legal Requirements for Tax-Exempt Organizations
The IRS summary of the U.S. legal requirements for tax-exempt (501(c)(3)) status states the following:
- “To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.”
- “The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”
- Political activities and legislative activities (commonly referred to as lobbying) are two different things and are subject to two different sets of rules and have different consequences of exceeding the limitations. The rules applied in a given situation depend on several issues: the type of tax-exempt organization (different rules apply to private foundations than to other section 501(c)(3) organizations), the type of activity (political or lobbying) at issue, and the scope or amount of the activity conducted.”
The U.S. Trading with the Enemy Act
On April 6, 1917, the U.S. Congress declared war on Germany followed by a similar declaration against Austria-Hungary on December 7, 1917. In between these events–on October 6, 1917–the Trading with the Enemy Act (12 U.S.C. §§ 95a–95b and 50 U.S.C. App. §§ 1—44) was enacted. Here are the relevant provisions of this statute:
- Section 2(b) defines “enemy” as including “The government of any nation with which the United States is at war, or any political or municipal subdivision thereof, or any officer, official, agent, or agency thereof.”
- Section 3(a) makes it unlawful for “any person in the [U.S.], except with the license of the President, granted to such person, . . . to trade, or attempt to trade, either directly or indirectly, with, to, or from, or for, or on account of, or on behalf of, or for the benefit of, any other person, with knowledge or reasonable cause to believe that such other person is an enemy or ally of enemy, or is conducting or taking part in such trade, directly or indirectly, for, or on account of, or on behalf of, or for the benefit of, an enemy or ally of enemy.”
- Section 5(b)(1) of this statute: “During the time of war, the President may, through any agency that he may designate, and under such rules and regulations as he may prescribe, by means of instructions, licenses, or otherwise (A) . . . regulate, or prohibit, any transactions in foreign exchange . . . and (B) . . . regulate . . . or prohibit. . . transactions involving, any property in which any foreign country . . . has any interest. . . .”
- Section 16 provides that any person who “willfully violate[s]” the statute or any regulation thereunder “shall, upon conviction, be fined not more than $1,000,000 [or $100,000 for natural persons] or imprisoned for not more than ten years.
On December 28, 1977, this Act was amended by Public Law 95-223, which provides in section 101(b) that “authorities conferred upon the President by section 5(b) of the Trading With the Enemy Act, which were being exercised with respect to a country on July 1, 1977, as a result of a national emergency declared by the President before such date, may continue to be exercised with respect to such country . . . . [upon a determination by the] President [to] extend the exercise of such authorities for one-year periods upon a determination for each such extension that the exercise of such authorities with respect to such country for another year is in the national interest of the United States.”
This authority has been annually used by every president since 1978 to extend the prohibitions of the Act with respect to Cuba. Should a president fail to renew this designation, the statute’s application to Cuba will die as will the president’s executive authority to relax and modify regulations causing the embargo to automatically revert, word-for-word, to the strict form they had on March 1, 1996 under the Helms-Burton Law and thereby require congressional action to change its terms.
The latest such annual extension occurred on September 13, 2016, when President Obama signed a document determining “that the continuation for 1 year of the exercise of . . . [certain authorities under the Trading With the Enemy Act] with respect to Cuba is in the national interest of the United States.”  Those authorities are found in the Cuban Assets Control Regulations, 31 C.F.R. Part 515. Specific information about these regulations is set forth in a U.S. Department of the Treasury website.
I personally am glad that IFCO has been engaged in providing certain goods to Cuba, and I have enjoyed riding around in Cuba in a garishly decorated Pastors-for-Peace bus that was left there after one of IFCO’s caravans. I have signed a petition asking the IRS and Congress to stop this persecution of IFCO and urge others to do the same. I also am pleased that IFCO has obtained the support in this dispute from many Cuban organizations: the Cuban Council of Churches, Havana’s Martin Luther King Center, the Religious Organizations of Cuba, Cuba’s Institute of Friendship with the Peoples (ICAP) and Cuba’s First Deputy Education Minister.
The U.S. use of the Trading of the Enemy Act with respect to Cuba after the December 17, 2014, announcement of the beginning of normalization of U.S.-Cuba relations is paradoxical and contradictory on its face. However, as noted above, this statute gives the president authority to relax the embargo, which President Obama has done. Without the annual renewals regarding Cuba under this statute, the president would not have any such authority and the embargo would be tightened unless and until Congress passes a law to end the embargo, which certainly will not happen during the remaining months of Obama’s presidency.
This statute, however, is not directly linked to the tax-exempt status of IFCO or any other organization, and the IRS does not have authority to enforce it. Perhaps the IRS’ apparent abandonment of this ground for revoking IFCO’s tax-exempt status is the IRS’ implicit recognition of the validity of the argument against any IRS use of the Trading with the Enemy Act.
Instead the Department of Justice has the authority to enforce statutes that carry criminal penalties for their violation. As previously mentioned, the Trading with the Enemy Act calls for a fine of not more than $1,000,000 [or $100,000 for natural persons] or imprisonment for not more than ten years. Thus, if IFCO were charged with such a crime and found guilty after a trial in federal court, IFCO would be subject to such a fine. I suspect that the fine would be relatively small in light of the organization’s overall religious purposes, its not making a financial profit from such activities, its not secretly conducting its activities regarding Cuba, its not having been previously challenged by the U.S., and IFCO’s not adversely affecting U.S. national security.
Moreover, I do not see how IFCO’s caravans to Cuba could be deemed to be attempting to influence legislation as a substantial part of its activities or participating in any campaign activity for or against political candidate, all of which are illegal for a 501(c)(3) organization and would be a ground for revoking tax-exempt status.
However, I must confess that I am not familiar with the case law interpreting these provisions. As always I invite comments of concurrence or disagreement or pointing out errors and omissions.
 IFCO, About IFCO.
 IFCO Press Release, IRS Attacks Faith Based Civil Rights Group for Humanitarian Work with Cuba (Oct. 3, 2015).
 Whitney, Pastors for Peace Close to Losing Tax Exempt Status Courtesy of IRS Assault, CounterPunch (Sept. 2, 2016); Torres, IRS goes after Pastors for Peace for sending aid to Cuba, InCubaToday (Aug. 24, 2016); Barbosa, Solidarity organization harassed for its work in Cuba, Granma (Sept. 13, 2016).
 IRS, Exemption Requirements—501(c)(3) Organizations; IRS, Exempt Purposes—Internal Revenue Code Section 501(c)(3); IRS, Political and Lobbying Purposes.
 Muse, Press Release: Presidential Embargo Authority over Cuba: Renew it or Lose it, Latin America Goes Global (Sept. 2, 2015).
 White House, Presidential Determination—Continuation of the Exercise of Certain Authorities Under the Trading with the Enemy Act (Sept. 13, 2016);Obama renews Act trading with the Enemy supporting the blockade of Cuba, CubaDebate (Sept. 13, 2016); Muse, Press Release: Presidential Embargo Authority over Cuba: Renew it or Lose it, Latin America Goes Global (Sept. 2, 2015).
 Cuban Council of Churches, Communioqué from Cuban Council of Churches, Granma (Sept. 1, 2016); Reuters, Cuban Churches Denounce U.S. Probe of Humanitarian Aid Project, N.Y. Times (Sept. 7, 2016); Gomez, Love should not pay taxes, Granma (Sept. 7, 2016); Cubans support ecclesiastics Pastors for Peace, “Love and faith cannot pay taxes, CubaDebate (Sept. 7, 2016); Statement by religious organizations of Cuba in support of IFCO/Pastors for Peace, Granma (Sept. 1, 2016); Rodriguez, Pastors for Peace faces attack on solidarity work, Granma (Aug. 30, 2016).