Families for Excellent Schools Advocacy has been given the death penalty by Massachusetts Office of Campaign and Political Finance; but what of Families for Excellent Schools Inc., banned-in-Boston for only four years? Could a visit by the tax man or state attorneys general be next up for the secret FES “Organization”?

FESA claimed to be a 501(c)(4) “social welfare” organization, which can keep its donors secret. But OCPF saw right through its ruse and found FESA was a political committee under Massachusetts law, forcing it to disclose nearly all its contributors and dissolve its organization.

I say nearly all because one of FESA’s newly disclosed donors was Families for Excellent Schools Inc., which is not a 501(c)(4) but a 501(c)(3). FESI’s contributors are secret too. Contributions to a 501(c)(3) charity are tax deductible but a (c)(3) is barred from political activities. However, a 501(c)(3) can engage in some “lobbying activity” and that includes a ballot measure. Here is an explanation from the IRS: 

So how does IRS determine if “a substantial part” of FESI’s activities was devoted to lobbying? Here is IRS’s explanation:

If a 501(c)(3) violates the substantial part test it could lose its tax exempt status and suffer additional penalties.

Now back to OCPF’s forced disclosure by FESA: among the newly revealed contributors, FESI passed $2,427,000 across the desk to FESA, which then shipped it to the Great Schools Massachusetts Ballot Committee. But don’t forget, in a fit of transparency that must have roiled the FES Wall St.  Headquarters, FESI was already on the OCPF books for having kicked $1,230,000 directly to GSM. Also, FESI reported $73,930 to OCPF as in-kind contributions to GSM. Put it together and FESI’s contributions were worth $3,730,930.

But that’s not all because we’re talking “lobbying activities” here. According to records available at the Lobbyist Division of the Office of the Secretary of State, FES disclosed $420,791 in “Operating Expenses” (including $339,675 for “Advertising”) and $129,500 in “Salaries Paid” in 2016. That adds up to $550,291.

Put together the amounts expended for “lobbying activities” now on record at OCPF and SoS, and Families for Excellent Schools Inc. expended $4,281,221 in 2016.

So was lobbying “a substantial part” of FESI’s overall activities in 2016? The IRS would examine “all the pertinent facts and circumstances.” FESI commits its secret skullduggery in New York and Connecticut as well, so that might factor in. I don’t know. The name of this blog is “MassPoliticsProfs” not “MassTaxLawProfs.”

FESI continues to hide its donors so that is still “dark money.” But from the OCPF disclosures we do know something very interesting: the FESI money likely originated in Massachusetts. Putting FESI money aside, there were a mere handful of individual contributors to Great Schools Massachusetts from New York. (Education Reform Now Advocacy of New York, dark money daddy of Democrats for Education Reform Massachusetts, also kicked in over $300,000). Contributions to FESI, as a 501(c)(3), are tax deductible. So that $4,281,221 served some Massachusetts plutocrat(s) very well as a deduction. As a taxpayer you picked up the deductible part of those “lobbying activities.”

What are the chances of IRS combing through all this? Perhaps FES will successfully hide behind the lobbying fig leaf, but let’s not be fooled. In its most recent Consolidated Financial Statements filed with Attorney General Maura Healey’s Office, it states that “the Organization (FESI and FESA) works to build coalitions of families and their allies and run campaigns that change education policy.” (italics mine)

FESI has to register with state regulators where it operates, including New York, Connecticut, and Massachusetts. Activists in New York are already pressing NY Attorney General Eric Schneiderman to investigate FES’s tax status. Will Attorney General Healey take up the case? If she lifts the lid on the dark money/privatization cabal, many secrets will spill out.

The Washington Post recently adopted a new slogan: “Democracy dies in darkness.” I agree.

[Full disclosure: as an educator in the UMass system, I am a union member. I write about dark money (and other things). I don't write about education policy.]