FSC Expands on Petition to Attorney General for AHF Inquiry

LOS ANGELES—At a press conference which took place at 10:30 this morning, Free Speech Coalition Board Chair Jeffrey Douglas announced that FSC had accumulated enough information by using public filings and documentation from AIDS Healthcare Foundation (AHF) itself to call into question whether that organization had violated its non-profit charter by engaging in political activities in excess of the amount allowed under both Internal Revenue Service regulations and the regulations of the California Attorney General's Charitable Trust Section. "While AHF has waged its latest political campaign, an initiative for the 2016 ballot, there has been a recurring question: how can a non-profit entity spend so much money on political activities without losing its non-profit, tax-exempt status?" Douglas asked at the press conference. "As you know, 501(c)3 organizations the size of AHF are limited to spending $1 million a year on political activities. Anything over this threshold is subject to tax. If a 501(c)3 spends more than $6 million over a four-year period on political activities, the tax-exempt, non-profit status is subject to revocation." Turns out that even publicly available documents reveal that over the past four years, AHF has spent at least $7 million on political activities, and in at least two of those years, the organization exceeded the $1 million political spending cap—including 2015, which still has roughly four more months to run. "It also appears that AHF’s tax documents under-report more than $1 million dollars to state and federal authorities," Douglas added. "According to the documents we found, AHF has spent nearly $7 million on political activities, which is above the $6 million threshold that triggers the revocation of non-profit, tax-exempt status." And apparently, AHF is not above lying to government agencies about its political expenditures. "In 2012, AHF reported to L.A. County $2.3 million in political expenditures in support of Measure B," FSC's investigation revealed. "However, AHF’s tax filings report only $1.6 million in total campaign expenses. That year AHF also paid $100,000 to a lobbyist in Sacramento, and $200,000 to a lobbyist in D.C. bringing their annual total to $2.6 million; $1 million more than they reported to the IRS and the California Attorney General. AHF also reported $400,000 in political expenditures in 2013. After reviewing the public filings from that year, we found close to $800,000 expended. We can provide those documents as well." "Please note that we were unable to find documentation on all of AHF’s political expenditures," Douglas added. "For example, we do not know the amount AHF spent on its campaign for a City Public Health Department, nor do we have any figures from the state of Ohio where they have conducted a substantial political campaign." Also not yet available are the amounts of AHF's contributions to its California political action committee (PAC), Fair4CA.org, which was created by AHF employees and served to push the California legislature to enact AB 1576, which would have required condoms and other barrier protections to be incorporated into all sexually explicit content shot in California, as well as other AHF political objectives. That bill, of course, failed. "All of the contributions by AHF to Fair4CA are attributable to AHF as a political expenditure, and I think the case could be made that any contributions to Fair4CA would count towards AHF's total political expenditures," Douglas added. "For those of you who have repeatedly asked how AHF can continue to spend millions on its political activities while retaining its tax exempt status, we believe these documents give a preliminary answer: They under-report to avoid the revocation threshold," he concluded. Douglas noted that the reason for today's press conference was that "in recent weeks AHF has spent $2 million dollars on pending ballot initiatives for 2016, and the fight over Measure B has heated up. As a result, we have received numerous inquiries about AHF’s political spending. To satisfy our curiosity we decided to review the available public documents.  We simply wanted to answer the lingering question about their political activities. Their harassment of our industry is what motivated us to find out how much they have spent on their obsession with the adult film industry." At the press conference, Douglas handed out a three-ring binder full of documents that FSC has examined in coming to its conclusions. Those documents will also be available for download later today at the Free Speech Coalition website. The binder also contained a letter to Attorney General Kamala Harris, titled simply "Request for Review." that letter stated, in part, "Our organization is concerned that this entity's [AHF] political activities have surpassed the legal spending limits and is in violation of their non-profit status. We have reviewed multiple newspaper reports and publicly available documents that appear to indicate that AHF has spent nearly $7 million over the past 4 years on lobbying/political activities, in excess of legal limits. Attached you will find a collection of the publicly-available documents detailing these activities. It is unclear whether there are additional lobbying/political expenses. Please note that there also apears to be multiple discrepancies between federal tax filings and reported campaign expenditures; this may be an indication of under-reported lobbying/political activity. "We forward these documents to your attention with the request that California's experts and regulatory authorities review and make an independent determination on the legality of AHF's political spending and reporting," the letter concludes. "This request is based exclusively out of concern that all taxpayers are harmed if a non-profit entity is allowed to abuse its tax-exempt status." The letter and accompanying folder were delivered this morning to Attorney General Harris's office in the Ronald Reagan State Office Building at 300 south Spring Street in Downtown. A copy was also sent to the Board of Directors of the AIDS Healthcare Foundation. When asked why FSC hadn't also sent their information on AHF to the Internal Revenue Service, the federal entity in charge of organizations' non-profit status, Douglas replied, "At this time, we are reviewing all options. We are starting with the California Attorney General and will decide whether any other actions are warranted. We feel it is best to have the proper legal authorities review the documents and determine whether they arrive at the same conclusion; that AHF has underreported its political contributions and that it has exceeded the four-year, $6 million limit." Douglas further noted that AHF's situation seems similar to that of Blue Shield of California, which lost its tax-exempt status last year after having accumulated too much "cash on hand" and having failed to allocate the required percentages of money to patient care. "Blue Shield was given multiple chances, several warnings, and they insisted they had met the criteria, but they lost," Douglas said. Perhaps noteworthy: AHF reports an annual income of over $200 million, and assets of $700 million.