Investigators have questions about Solyndra investor’s charitable tax status

The nonprofit organization that was the largest investor in the failed solar company Solyndra contributes only a small portion of its assets toward community work, raising “serious questions” about its charitable tax status, according to Senate investigators.

Sen. Charles Grassley (R-Iowa) urged federal officials Tuesday to tighten loopholes that he said allow the George Kaiser Family Foundation and similar organizations to sidestep the payout requirements governing most public foundations.

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“The recent Solyndra scandal highlights the need for further reforms,” Grassley said Tuesday at a Senate Finance Committee hearing. “With Solyndra, the government didn’t just lose out on its investment through the $535 million loan guarantee [from the Energy Department]. It also lost out on the tremendous subsidy it provided the George Kaiser Family Foundation through the charitable contribution deduction.”

In a letter to Treasury Secretary Timothy F. Geithner and IRS Commissioner Douglas H. Shulman, Grassley urged them to finalize rules governing what are known as supporting organizations.

Despite its name, the $4 billion George Kaiser Family Foundation, or GKFF, is not a private foundation under tax law. Instead, it was established as a “supporting organization” for another nonprofit group, the Tulsa Community Foundation.

Public foundations must pay out at least 5 percent of their endowment each year, or face penalties. Supporting organizations have no such requirement, and critics claim they serve mainly to allow wealthy families to warehouse wealth while earning lucrative tax breaks.

GKFF was founded by Tulsa billionaire George Kaiser, a fundraiser for President Obama and a frequent White House visitor. Investment funds associated with GKFF owned more than a third of Solyndra, an investment that in 2009 the organization valued at $342 million.

In some past years, GKFF has distributed as little as 0.2 percent of its assets to charity. Under current law, Kaiser would be entitled to tax write-offs for all cash and stock he donated to the organization.

GKFF Executive Director Ken Levit issued a statement Tuesday saying the organization was “prudently preserving resource capacity” as it studied the best ways to battle some of the nation’s most entrenched problems, including generational poverty and early childhood education.

“We are attempting to develop best practice responses locally and are bringing to Oklahoma the most creative approaches developed by others,” Levit said. “The effectiveness of some of these programs is unproven so they are undergoing objective study. We don’t want to throw money at ineffective ideas. All of these efforts are in ramp up stage.”

Last month, GKFF told The Washington Post in a statement that it expected to increase spending in coming years but stressed that it was under no “legal obligation” to do so. Since 2007, GKFF has made about $300 million in charitable grants and has spent millions more on loans and other direct support to community improvement projects.

If GKFF were organized as a private foundation, it probably would be barred from owning a large percentage of any single business, as it did in Solyndra, tax experts said.

“The numbers are troublesome,” Grassley said in his letter. “GKFF’s low pay-out . . . raises serious questions about GKFF’s status as a supporting organization and thus its status as a public charity.”

In 2009, the last year for which records are available, GKFF reported paying out grants of about $46 million, not including management costs. That represents slightly more than 1 percent of its assets. If GKFF had paid out 5 percent of its assets, as most foundations do, it would have spent nearly $200 million that year on charitable grants.

GKFF makes direct payments to some charitable projects that are not reflected in the grant total. Even with those payments included, however, GKFF’s outlays do not add up to 5 percent of its assets.

GKFF says in financial filings that it exists to support the programs of the Tulsa Community Foundation, a nonprofit organization that Kaiser co-founded and formerly headed as chairman. Like GKFF, the Tulsa Community Foundation is not a private foundation under tax law and is not subject to penalties if it annually gives away less than 5 percent of its assets. Two of GKFF’s trustees are current and former board members at the Tulsa Community Foundation; the third trustee is its executive director. The two groups share the same street address.

Solyndra, a Silicon Valley solar panel maker, was a centerpiece of Obama’s initiative to develop clean energy technologies and received the program’s first loan guarantee, for $535 million. Solyndra reported accelerating sales until Aug. 31, when it collapsed and filed for bankruptcy protection.

The collapse has become a political liability for the White House because of ties to Kaiser. At the White House, records show Kaiser has met with presidential adviser Valerie Jarrett and Rahm Emanuel, who was then Obama’s chief of staff.

Kaiser has said he did not lobby on behalf of Solyndra or help it win its loan guarantee.

 
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