Read the letter submitted with the Pope Foundation tax filings
Source: IRS Tax Form 990-PF

View Pope Foundation 990-PF tax forms (PDFs)

Millionaire Art Pope and his family’s high-profile Raleigh foundation have attracted attention in recent months for their generous funding of think tanks that advance politically conservative causes. Some of the former legislator’s wealth has helped usher Republicans into the majority at the state capital, where they demand budget and tax reform and more accountability from state education officials, fellow lawmakerseven from the governor herself.

Yet a detailed review of tax documents for the John William Pope Foundation shows Pope, its president, failed to file its tax returns for eight years. Meanwhile, Pope served in the Legislature, and he, or money from the foundation, helped launch three new policy groups.

In 2005, when the foundation finally filed tax returns for July 1996 through June 2004, five filings included a letter to the Internal Revenue Service asking the government to waive any penalties. A hurricane, a lack of staff, Pope’s divorce and becoming a single father all prohibited him from “performing the tax filing duties for this Foundation on a timely basis,” the letter said. At the time, the fair market value of the foundation’s total assets was $53 million. In 2010, the assets were worth more than $148 million, according to tax documents.

Whether the foundation owed any back taxes or fines is not public information, according to the IRS. But David Riggs, vice president of operations and programs for the Pope Foundation, said the organization didn’t incur any major penalties. He declined to further research or discuss the late returns at the request of the Independent Weekly. “We abide by the letter of the law and we seek to comply 100 percent of the time,” Riggs said.

Reached by phone, Pope declined to participate in a recorded interview and abruptly hung up. (Earlier in the day, another Indy reporter interviewed Pope, who said he was recording their conversation.)

It wasn’t the first time Pope had been questioned about the tax filings. Allegations that the foundation had failed to file returns surfaced in a 2005 civil lawsuit brought against Pope and others regarding his late brother’s estate. But even as The News & Observer reported on the lawsuit, one article made only passing mention of the foundation’s lax reporting.

Tax-exempt organizations, including foundations, don’t have to pay income taxes except on revenue from investments and business not directly related to their charitable activities. From 1997 through 2004, the Pope Foundation reported a net income on its investments of $18.5 million, and, according to its tax returns, owed roughly $288,000 for those years.

Under the law, nonprofit organizations that miss tax filings could have to repay the taxes, plus penalties and interest, or face tax liens, said Marty Martin, a Raleigh-based attorney who has been working with nonprofit groups since 1990. If the organization doesn’t comply, members of its board could be held liable for unpaid taxes or even face criminal charges for tax evasion, he said.

New, more stringent federal laws now automatically revoke the tax-exempt status of an organization that doesn’t file its return for three consecutive years. But the tax-exempt status of the foundation was never revoked or otherwise affected, Riggs said.

As the letter to the IRS claimed, Pope was hampered by complications from Hurricane Fran in 1996 and then later was juggling several responsibilities. Because the foundation failed to file a return for 1996, subsequent returns couldn’t be filed, the letter said. Then, Pope was experiencing personal hardshipa divorce that resulted in sole custody of his daughter, the letter said. The foundation also lacked staff.

For three years, Pope earned a salary as foundation president, ranging from $22,000–$32,000 annually for eight to 15 hours of work per week, according to tax records. But after 1999, he was an uncompensated volunteer, the letter said.

Despite these inconveniences, Pope had time to serve in the Legislature. In 1999, he was appointed to replace outgoing state Rep. Chuck Neely, R-Wake, who left office to run for governor. Pope held that seat until 2002.

And while the IRS was missing Pope Foundation paperwork, Pope was also fortifying his powerful political network. Between Pope’s last year in office and the time the IRS finally received the belated filings, the Pope Foundation had helped fund the beginnings of three major organizations: the North Carolina Institute for Constitutional Law, The John William Pope Center for Higher Education Policy and the John W. Pope Civitas Institute.

Several experts say it’s uncommon for a private foundation to fail to file tax returns, as the Pope Foundation did, but that public charities might face more scrutiny than a small private foundation.

“In general, the larger the foundation, the more likely it is to file, because it’s better known and more exposed,” said Edward Skloot, a professor at the Sanford School of Public Policy at Duke University. In light of national media reports of malfeasance at some nonprofits and charities, the public has increasingly pushed for greater transparency for tax-exempt organizations, Skloot said.

“The most important things people are concerned about are salaries and [fringe benefits] of senior officers. Those are two things people want to see first to be sure that someone isn’t getting paid an outrageous sum of money,” he said.

Although private foundations fall under the same category of tax exemption as a public charity, there could be less public scrutiny for foundations because they “aren’t generally out there soliciting donations from the public,” said David Heinen, director of public policy and advocacy for the N.C. Center for Nonprofits.

Instead, private foundations take one source of moneytypically a largesse from a family or philanthropistand distribute that. As Riggs points out, the Pope Foundation has given thousands of dollars to local charities, the arts, cultural amenities and food shelters. But the majority of the foundation’s grants have gone to conservative causes in recent years, including the Civitas Institute, the John Locke Foundation and the N.C. Institute for Constitutional Law.

Riggs contested the relevance of the late tax filings, because the foundation doesn’t solicit public or taxpayer money.

“It’s a private foundation,” Riggs said. “The family is on the board. They’re accountable to themselves.”

Still, as evidenced by the eight-year lapse in tax filings, that level of accountability might not have been enough.