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IRS Revokes Tax-Exempt Status For Group Headed By Singlaub

December 18, 1987

WASHINGTON (AP) _ The Internal Revenue Service has revoked the tax-exempt status of a foundation headed by retired Maj. Gen. John Singlaub, saying it failed to prove it was not helping the Contras militarily in Nicaragua.

The U.S. Council for World Freedom, which raises money to help foreign anti-communist movements, will file a federal court lawsuit next week to fight the IRS decision, spokesmen said Friday.

Spokeswoman Joyce Downey denied the organization engaged in anything other than humanitarian aid but acknowledged the group bought two helicopters, four small planes and three high-speed boats. All were for medical transport and humanitarian suplies for the Contras, not for military use, she said.

The only piece of equipment that was actually delivered to Central America before the Singlaub group became involved in the IRS investigation was a helicopter - dubbed the ″Lady Ellen″ after contributor Ellen Garwood of Texas, who provided the money to buy it.

In a Nov. 25 revocation letter to the Phoenix, Ariz.-based group, the IRS said the tax-exempt status was being lifted because the group had failed to establish its activities were all charitable, did not have ″sufficient controls and accountability″ to ensure the activity was charitable and did not show its activities were helping to decrease the burden on the U.S. government.

But the council said in a statement, ″We are confident the U.S. Council for World Freedom will be vindicated and that its members will once again be allowed to execute their constitutional right to aid anti-communist causes worldwide.″

IRS spokesman Wilson Fadely said Friday that under IRS privacy regulations, he could not discuss any details of the case.

Military aid is not a permitted activity for tax-exempt charitable organizations.

Singlaub figured prominently in the Iran-Contra affair, telling congressional investigators that he helped solicit donations from third countries to help the Contras, travelled the country raising private money for them, and helped them buy weapons during the time Congress banned U.S. government aid.

The council’s attorney Thomas Spencer said Friday that the IRS applied unfairly strict standards of proof in its investigation, faulting the council for failure to prove it did not fund military operations.

The IRS also said the organization had not proved its tax-exempt function would lessen the burden on the U.S. government which is a criteria for granting tax-exempt status.

The council, however, cited a letter to it from what Downey described as an attorney adviser in the State Department legal office, saying the council had provided ″privately funded clothing, medical supplies, transportation and other assistance to the resistance,″ and that that work had lessened the burden on the government. It was ″of particular value because it helped the freedom fighters survive while the question was being resolved in Congress,″ the council quoted the letter as saying.

Spencer and Downey said that while the appeal is pending they will try to find another tax-exempt foundation or start a new one so that contributors can still give money for the council’s purposes.

The IRS investigation was requested in September 1985 by Rep. Thomas Luken, D-Ohio, and 36 other members of Congress after reports by The Associated Press and other news agencies linked Singlaub to Contra assistance during the congressional ban on U.S. aid.

Luken said in a statement regarding the IRS decision: ″United States foreign policy ought to be conducted by public officials, not self-appointed soldiers of fortune.″ He referred to Singlaub’s organization a ″renegade operators who have abused the exemption available to charities under the tax code.″

Downey said the IRS investigators indicated in an interview with her and Singlaub that they ″had a big hangup over the medevac helicopter we provided to the Nicaraguan resistance. We assured them and provided them the documentation that the airship had been stripped of everything possible that made it a gun mountable airship.″

The boats bought by the council were to be used for evacuated the wounded also and the small planes for non-combat transportation, such as flights by the Contra commander, she said.

The council was founded in 1981, and raised about $500,000 in 1986, Miss Downey said. This year, it raised very little money because Singlaub was tied up with the IRS and Iran-Contra investigations, she said.

It provided clothing and other non-lethal supplies to the Contras and other resistance movements, with about 60 percent of its work going to help the Contras, said Spencer.

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