Why We're Paying Attention to the IRS Whistleblower Program

At Beyond Advisers, we believe in strengthening the systems that protect the public interest—and sometimes that means shining a light on tools that are quietly doing the work. In this Hard Reset Media article, Beyond Advisers CEO explores the IRS whistleblower program, a powerful but underused mechanism that has returned over $6 billion to the U.S. Treasury by empowering insiders to expose large-scale tax fraud.

Scott draws on his background in public interest law and systems-level reform to explain why this program matters now more than ever—and why its neglect is a missed opportunity for accountability and trust-building.

Read the article below.

An IRS Whistleblower Program That May Be A Front For Targeting Nonprofits

Instead of bringing forward valid claims, experts think it could handicap the philanthropic world at-large

By Ariella Steinhorn

Last week, the Internal Revenue System rolled out a new whistleblower incentive program. At face value, it seems like a good thing; a program that will root out fraud and waste, which is what whistleblower programs are meant to do. But it may have an ulterior motive, according to some.

I spoke with Scott Curran, a former lawyer at the Clinton Foundation who now runs a consultancy to help philanthropies and nonprofits with their compliance. I’ve included our conversation here:

What do you do and why does your consultancy exist?

Most nonprofits don’t have a general counsel, so I perform a similar function on a consulting basis. I love good governance—and on the one hand I love whistleblower protections. I often help clients implement them if they don’t already have whistleblower policies or programs already in place.

What do you think of this whistleblower program?

My first question was whether or not it solves a problem that actually exists. Nonprofits have transparency baked into them already through their annual reporting and transparency requirements. Most major philanthropic organizations with which I work—and those that are likely to be targeted under this new framework—also already have a whistleblower policy or a process via third-party whistleblower services in place. I’m not aware of any credible evidence suggesting this new approach solves an actual problem that existing transparency and whistleblowing frameworks do not. It seems as though it may be “a solution without a problem” that may be being implemented for ulterior motives.

What do you think are the motives behind this?

Incentivizing politicized targeting of organizations with which “whistleblowers” may not agree. Effectively deputizing and incentivizing nonprofit detractors via a program like this could give rise to harassment and intimidation via weaponized whistleblowing in philanthropy.

A high volume of claims may be cited as reasons for the IRS to investigate or otherwise target nonprofits, regardless of the actual credibility of the submissions. Further, a high volume of whistleblower complaints could overwhelm IRS systems and processes that are already stretched thin.

Frivolous claims could undermine the credibility of many organizations in the nonprofit sector, which is the third-largest sector behind retail and manufacturing. This disruption may be intentional and part of a bigger politically-motivated plan to intentionally undermine the sector and disrupt its efforts and effectiveness.

How does this fit into the administration’s plan?

The administration has been clear about their plan and intent to “flood the zone” to create chaos, overwhelm, and a chilling effect in various sectors, including the nonprofit sector. My assumption is that Stephen Miller and Steve Bannon are behind it since “flooding the zone” has been, by their own description, their strategy well before the November election.

I actually wonder where the President’s thoughtful advisors are, the people who care about churches, soup kitchens, after school programs, and the land that farmers, hunters, and fishermen care deeply about, nearly all of which are served and protected by great nonprofits that have served these interests for generations. The President should be leaning on advisors that understand the value of these institutions to the communities that stand to be impacted, including but by no means limited to many that are resource-restricted, rural communities in deeply red states. Targeting nonprofits hurts these communities and the nonprofits they rely on too. It’s bad for everyone.

Further, no President can weaponize the IRS against 501c3s. Under Section 7217 of the Internal Revenue Code it is illegal for the President or members of the Executive Branch to direct, request, or influence IRS personnel to conduct or terminate an audit or investigation of a specific taxpayer, including a charity, unless done through a proper channel. It seems this effort is intended to push the boundaries of what “proper channels” means.

How does a small nonprofit without a budget know how to navigate?

Not all of them will know how to navigate this new framework or the consequences that result from it. Many are stretched thin to navigate existing governance and compliance obligations. And to the extent this is a politicized targeting effort, it scares them. It is likely to have the intended chilling effect, because detractors, competitors, or even disgruntled former employees could be emboldened to submit whistleblower claims that may not be credible but could still wreak havoc on an organization. Other organizations might pivot, pull back, or stop their work altogether until things are more settled.

How do we move forward from here?

Nonprofits need to double down on core functions—especially including good governance, compliance, legal, and operations work that keeps them going and allows them to tell their story of positive social impact for all communities and stakeholders, regardless of any political affiliation. That has always been part of what makes the nonprofit sector—and America—great.