Whoa, There! Trump Faces Hurdles As He Moves To Dissolve Charity

Donald Trump announced in a surprise Christmas Eve statement that he plans to dissolve his scandal-plagued charitable organization to avoid any “possible conflict of interest.”

But doing so won’t be nearly as simple or as speedy as he may wish. Unfortunately for the President-elect, shuttering the Donald J. Trump Foundation will require cooperation from the charity’s chief antagonist, New York’s Democratic Attorney General Eric Schneiderman.

Schneiderman’s office is currently investigating allegations of self-dealing and other violations of IRS regulations by the charity, and his spokeswoman Amy Spitalnick told TPM on Tuesday that the foundation “cannot legally dissolve” until that investigation is complete.

The Empire State’s attorney general is also responsible for approving the plan of dissolution that any nonprofit registered in New York that hopes to close down must file. Nonprofit law experts told TPM that in order for that to happen, Schneiderman’s office would need to determine that all of the Trump Foundation’s outstanding taxes were paid, that all funds were properly used by the foundation and that all remaining assets are put toward charitable purposes.

Those experts warned that the process is likely to drag on for a year or more—long after Trump is installed in the Oval Office.

“In this particular situation they’re unlikely to approve the dissolution because there’s an ongoing investigation,” Seth Perlman, of Perlman and Perlman, a New York City firm that specializes in nonprofit law, told TPM in a Tuesday interview. “Investigations have no time limit. They can go on ad infinitum.”

Only a legal battle or a consent agreement reached between the attorney general’s office and the charity could bring a formal closure to the investigation, Perlman said.

“Under a consent agreement, there may be some penalties involved or some sort of disgorging of funds from the organization which the attorney general believes should not have been there or were misused,” he told TPM. “But there are some allegations here that are fairly serious. So I have to assume that this investigation will take place over a long period of time.”

Perlman argued that what Schneiderman’s office finds out in the course of its probe will be essential to determining how the Trump Foundation will come to an end.

Schneiderman’s office is looking into a number of widely-reported instances of alleged self-dealing at the charity. These include Trump’s reported use of foundation money to settle several lawsuits in Florida and to purchase items, such as self-portraits and sports paraphernalia, at events hosted by other charities.

Trump was also forced to pay a penalty tax and to reimburse his own charity for $25,000 after the Washington Post revealed that the it violated laws prohibiting charities from making political contributions by paying that amount to an organization supporting Florida Attorney General Pam Bondi’s re-election effort. At that time, Bondi’s office was considering joining an investigation into the now-defunct Trump University; her office ultimately did not sue.

The Washington Post also reported in November on IRS filings in which the foundation appeared to admit that it violated the legal prohibition against self-dealing in 2015 and prior years.

Philip Hackney, who formerly worked in the IRS chief counsel’s office and now teaches at Louisiana State University, told TPM that Trump’s decision to close the foundation now could be an effort to prevent making such an embarrassing and potentially legally damaging admission in the future.

“The determination to shut this thing down was probably a smart legal move given the baggage that it had at this point,” Hackney said, noting that the foundation would have to admit self-dealing in prior years once again on its 2016 IRS forms.

“Every time you do that you’re putting yourself at some legal risk in terms of how you describe yourself” as a nonprofit, he said.

According to Hackney, the Trump Organization would have to comply with IRS Code Section 507, which oversees the closure of private foundations, to ensure that any outstanding taxes owed for that sort of self-dealing is paid out. The code also ensures that all of a charity’s remaining assets are put toward charitable purposes and not pocketed by its trustees or directors.

“It’s not immediate. You don’t just get to say ‘I’m shutting down’ and go. You’ve got to go through approved, official channels,” Hackney said.

The President-elect has made no mention of these headaches in his public comments about the foundation, claiming in his Saturday statement that the charity operated “at essentially no cost for decades, with 100 percent of the money going to charity.” That assertion, which he later repeated on Twitter, overlooks both the allegations of self-dealing and the annual legal and accounting fees paid out by the nonprofit.

Hackney suggested that dissolving the Trump Foundation would still leave intact the far graver conflicts of interest posed by having Trump’s adult sons, Eric Trump and Donald Trump Jr., run the family business while he runs the country.

“His charity operations were the least part of his conflicts of interest,” he said, describing the foundation as an “accounting error compared to the type of conflicts that were talking about with the Trump Organization.”

“As a means of eliminating conflicts it’s not much of a stance at all,” Hackney added.

Dear Reader,

When we asked recently what makes TPM different from other outlets, readers cited factors like honesty, curiosity, transparency, and our vibrant community. They also pointed to our ability to report on important stories and trends long before they are picked up by mainstream outlets; our ability to contextualize information within the arc of history; and our focus on the real-world consequences of the news.

Our unique approach to reporting and presenting the news, however, wouldn’t be possible without our readers’ support. That’s not just marketing speak, it’s true: our work would literally not be possible without readers deciding to become members. Not only does member support account for more than 80% of TPM’s revenue, our members have helped us build an engaged and informed community. Many of our best stories were born from reader tips and valuable member feedback.

We do what other news outlets can’t or won’t do because our members’ support gives us real independence.

If you enjoy reading TPM and value what we do, become a member today.

Latest Dc
Masthead Masthead
Founder & Editor-in-Chief:
Executive Editor:
Managing Editor:
Associate Editor:
Investigations Desk:
Director of Audience:
Editor at Large:
General Counsel:
Head of Product:
Director of Technology:
Associate Publisher:
Front End Developer:
Senior Designer: