Breaking (**Final Update**): Hill's Leading Nonprofit Watchdog Sen. Charles Grassley Demands ACORN Probe

FINAL UPDATE 9/24/2009 6:50 PM Eastern time

The senior Republican on the Senate Finance Committee, Sen. Charles Grassley (R-Iowa), asked the IRS to probe ACORN – and asked that ACORN be dropped from the Combined Federal Campaign, a charitable program for government workers.

Grassley, long known as Capitol Hill’s foremost policeman of the nonprofit community, is expected to make his formal announcement this evening. In a letter the senator indicated he has been concerned about ACORN since at least 2006.

Grassley sent a letter to IRS Commissioner Douglas H. Shulman earlier today and a separate, shorter letter to John Berry, Director of the U.S. Office of Personnel Management. Both letters are available here.

In the letter to Berry, he asks that the ACORN Institute “and any other ACORN affiliates, particularly any of those reviewed by my staff, be prohibited from participating in the CFC. The acts perpetrated by ACORN employees were impermissible and should not be supported with CFC dollars.”

CFC refers to the Combined Federal Campaign, which bills itself as “the world’s largest and most successful annual workplace charity campaign.” CFC is a federally administered program that channels donations from federal civilian, postal and military employees into causes deemed worthwhile. It is unclear how much money the ACORN network receives through CFC.

In his letter to Shulman at the IRS, Grassley wrote that he was “encouraged” that IRS “severed all ties” with ACORN. “Aside from the pervasive issues pertaining to several allegations of voter fraud, the recently released investigative videos are very troubling. These videos reveal ACORN employees and/or volunteers offering tax advice specifically to further clearly illegal activities such as prostitution and human trafficking.”

Grassley wrote to the IRS in 2006 asking questions about the tax-exempt status of affiliates within the ACORN network. The IRS responded on Dec. 19, 2006, but ACORN did not, he said. ACORN’s failure to cooperate led him to have him staff investigate ACORN’s organizational structure.

In today’s letter to the IRS, Grassley asks several questions:

Please provide the number of returns prepared at ACORN tax clinics for the last five years. Does the IRS intend to review these returns for accuracy? Please confirm that IRS will terminate its relationship with all organizations in the ACORN family, particularly those reviewed by my staff. Does the IRS intend to renew its relationship with ACORN after ACORN completes its internal review?

Grassley is referring to the IRS announcement yesterday that it dropped ACORN from its Volunteer Income Tax Preparation (VITA) program, a volunteer tax assistance program through which around 3 million low- and moderate-income tax filers received free advice this year. ACORN provided help on approximately 25,000 returns, the IRS said yesterday.

Grassley also wrote “[i]t is disturbing that many of the organizations in the ACORN “family” may not actually meet the definition of related for 990 reporting purposes, even though ACORN deems them to be part of the ‘family.'” A “990” is an IRS Form 990 which is a nonprofit organization’s annual tax return.

In what may foreshadow a future demand for a forensic audit of ACORN, the senator also asks what procedures the IRS follows when “auditing organizations like this where the movement of money appears to be a shell game.” He asks, “Do IRS audit procedures require auditors to follow the money trail to or from a charitable organization to determine whether that money is being used for impermissible activities, including electioneering and promoting illegal acts?”

Finally, Grassley suggests ACORN might be a massive criminal conspiracy. He wrote:

Given what looks like a shell game perpetrated by the ACORN tax-exempt entities appears to be no different than that conducted by the charities involved in the Jack Abramoff scandal, how have IRS rules, regulations, reporting requirements and enforcement actions changed in response to the Abramoff abuses?

Grassley set an Oct. 9 deadline for the IRS to respond.

This breaking story was updated twice.

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