Federal Directives on Political Violence and Domestic Terrorism: What Tax-Exempt Organizations Need to Know

The Presidential Memorandum (Memo) and corresponding Fact Sheet outline a “comprehensive national strategy” to address “political violence and domestic terrorism,” including directives to the Internal Revenue Service (IRS) to ensure that tax-exempt organizations are not funding activities the Administration classifies as “political violence or domestic terrorism.” This alert provides an overview of the Memo and considerations for tax-exempt organizations.

Background

The Memo includes a list of “common threads” the Administration believes are animating recent acts of political violence, including “anti-Americanism, anti-capitalism, and anti-Christianity; support for the overthrow of the United States Government; extremism on migration, race, and gender; and hostility towards those who hold traditional American views on family, religion, and morality.” The Memo states that the United States requires “a national strategy to investigate and disrupt networks, entities, and organizations that foment political violence so that law enforcement can intervene in criminal conspiracies before they result in violent political acts.”

Investigation Directives

The Memo directs the Federal Bureau of Investigation’s National Joint Terrorism Task Force and its local offices to organize and supervise a national strategy to investigate and prosecute organizations and individuals involved in “political violence and intimidation designed to suppress lawful political activity or obstruct the rule of law.” The strategy includes investigating federal crimes related to “acts of recruiting or radicalizing persons” for “political violence, terrorism, conspiracy against rights” or the “violent deprivation of any citizens’ rights.” The Task Force is directed to investigate funders, officers, employees, and organizations that are “responsible for, sponsor, or otherwise aid and abet” these activities.

The Task Force is also directed to investigate non-governmental organizations (NGOs) and US citizens residing abroad or with foreign ties who violate the Foreign Agents Registration Act (FARA) or fund, create, or support entities that “support or encourage domestic terrorism.”  FARA applies broadly to any organization or individual who acts within the United States on behalf of a foreign principal to, among other actions, influence US policy or US public opinion; collect or dispense money; or represent the foreign principal’s interests before an agency or official of the US government, like making direct contact with government officials.

The Memo directs the US Attorney General (AG) to ensure the US Department of Justice (DOJ) prosecutes all federal crimes arising from these investigations to the fullest extent permitted by law. The AG must also issue guidance to ensure domestic terrorism priorities include “politically motivated terrorist acts such as organized doxing campaigns, swatting, rioting, looting, trespass, assault, destruction of property, threats of violence, and civil disorder.”

The Memo further directs the IRS Commissioner to ensure that tax-exempt organizations are not directly or indirectly funding “political violence or domestic terrorism,” and to refer any such organizations — and their employees and officers — to the DOJ for investigation.

The Memo specifies that investigations should prioritize the following crimes.

• Assaulting federal officers or employees (18 U.S.C. 111).

• Conspiracy against rights or privileges secured by the Constitution or federal law (18 U.S.C. 241).

• Conspiracy to commit any offense against the United States, or to defraud the United States (18 U.S.C. 371).

• Solicitation to commit a crime of violence (18 U.S.C. 373).

• Money laundering (18 U.S.C. 1956).

• Providing material support to terrorists (18 U.S.C. 2339, 2339A, 2339B, 2339C, and 2339D).

• Arson offenses involving explosive materials (18 U.S.C. 844).

• Violations of the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. 1961).

• Major fraud against the United States (18 U.S.C. 1031).

The Memo provides that the AG may recommend designating any group or organization whose members engage in activities defined as “domestic terrorism” as a “domestic terrorist organization,” and must submit a list of such entities to the president.

Compliance Considerations for Tax-Exempt Organizations

Maintaining appropriate governance processes, clear policies, and strong oversight can help to mitigate risk and ensure compliance with applicable state and federal requirements. This can be particularly relevant for criminal offenses like those enumerated in the Memo that require an organization or individual to have acted with intent or knowledge. Accordingly, organizations should consider the following actions.

• Periodically review and ensure compliance with federal, state, and local laws, as well as organizational policies.

• Develop and maintain proper internal controls for financial management, grantmaking, and program oversight, including conducting appropriate diligence prior to making grants, maintaining records of the diligence conducted, and requiring written grant agreements where appropriate.

• Appropriately screen grantees, their banks, and relevant third parties consistent with recommended Office of Foreign Assets Control compliance protocols.

• Disburse grant funds through reliable banking systems or other regulated financial channels rather than sending checks or cash.

• Maintain appropriate records of board meetings, major decisions, and the rationale behind them.

• Timely filing of all required federal, state, and local tax returns and annual reports to maintain compliance with regulatory requirements.

• Offer regular training for board members, staff, and volunteers on legal obligations, ethical conduct, and risk management.

• Consult with legal counsel to review policies, address emerging risks, and respond appropriately to any government inquiries.

• Evaluate international relationships and operations and adopt (or enhance) FARA compliance policies.

• Conduct training on FARA compliance to ensure all Board members, directors, and staff understand your organization’s interactions with foreign principals and follow your internal policies.

ArentFox Schiff regularly advises on the DOJ’s investigations into FARA and other corruption laws, tax compliance, and criminal investigations for NGOs and tax-exempt organizations. For additional guidance on assessing and addressing potential risks, contact your AFS attorney or any of the authors of this alert.

ArentFox Schiff’s Nonprofits and Associations practice is closely monitoring the Trump Administration’s executive orders and presidential memoranda and will publish another client alert when subsequent guidance is released.