An attorney for JZ Knight has sent a complaint to the IRS alleging an Olympia think-tank has violated the conditions of its tax-exempt status.
The attorney claims the Freedom Foundation — a right-leaning think-tank currently embroiled in litigation with Knight’s company, JZK, Inc. — violated its 501(c)(3) tax-exempt status by supporting partisan candidates and causes. The Freedom Foundation denies the allegation.
Brooke Johnson, an attorney specializing in nonprofits and intellectual property who has been retained by Knight and JZK, Inc., filed the complaint with the IRS on Oct. 24, according to a press release from the company. The complaint alleges the foundation has engaged in “sharply partisan activities, which have included intervention in a number of political campaigns.” Those partisan activities, Johnson alleges, are outside the scope of a 501(c)(3) organization.
According to the IRS, a 501(c)(3) “may not attempt to influence legislation as a substantial part of its activities and … may not participate in any campaign activity for or against political candidates.” A 501(c)(3) organization is also “restricted in how much political and legislative (lobbying) activities … (it) may conduct.”
Johnson argues the foundation has long operated outside the scope of a 501(c)(3) organization by “conducting attacks on Democratic politicians and progressive issues, intervening in political campaigns and conducting excessive partisan political activity while it supports Republican candidates and promotes conservatism and right wing causes.”
Freedom Foundation Attorney David Dewhirst said the foundation supports no candidates from either political party. The notion that it supports candidates is a total falsity, he said.
“We never have, we never will,” he said. “We just don’t do that. We’re about ideas and advancing ideas.”
The conflict between Knight and the Freedom Foundation began in 2012, when the foundation criticized political donations Knight made to the Washington state Democratic Party and local candidates. The foundation called on the recipients of the donations to return the money (most did), citing videos of Knight channeling Ramtha, the 35,000-year-old Lemurian warrior turned spiritual teacher, as he made disparaging remarks about gays, Catholics and Jewish people. The foundation later released additional videos. JZK, Inc. has stated the videos were taken out of context.
Knight and the foundation came to a head again this year, when the foundation again criticized Knight’s political donations — this time, $65,000 to the Thurston County Democratic Central Committee.
JZK, Inc. sued the foundation in May after one of its employees, Glen Morgan, submitted a video of an event at the Ramtha’s School of Enlightenment to the Thurston County Board of Commissioners. JZK, Inc. contends distributing the video, and attempting to place it in the public record, violated the company’s copyright.
Dewhirst claims the IRS complaint is the latest instance of a pattern of litigiousness on Knight’s part.
“It’s an attempt at a political hack job against an organization JZ happens to disagree with,” he said of the IRS complaint. “But we welcome this type of scrutiny. I mean, it’s happened in the past and just like then, our accounting, our finance practices, are impeccably maintained. We know that if the IRS actually chose to waste taxpayer’s money on an inquiry, we would pass with flying colors.
“We’re going to win in court in that (copyright) case and we’re certainly not going to allow JZ Knight to intimidate or harass or tire us. This seems to be just a desperate attempt by a woman whose grand delusions and political influence came to a jerking halt when the Freedom Foundation shined a light on her political donations,” Dewhirst said. “Does she suggest in all of this immense documentation … that taxpayers have no right to know whether their elected officials or candidates are accepting large amounts of money from an anti-semitic, anti-hispanic, anti-Christian, homophobic, racist bigot? Well, we disagree and that’s the reason she’s co-opted one more lawyer in her endless fight to silence her opponents.”
Allegations of Partisanship
In materials sent to the IRS, Johnson points to the foundation’s efforts to pressure candidates to return Knight’s donations as evidence of partisanship.
She writes that “concerns over the Foundation’s exempt status initially came to my clients’ attention after the Foundation violated their intellectual property rights to achieve the goal of requiring Democratic candidates for office — and only Democratic candidates — to return certain campaign contributions.”
She goes on to write that the foundation has “consistently shown an extremely strong conservative bias.”
Johnson cites several articles the foundation wrote about Knight’s contributions as evidence that it allegedly singled out democrats for scrutiny.
Summarizing one post, Johnson wrote, “This post features a quote from the Foundation’s attorney stating that ‘the Freedom Foundation is a nonpartisan organization, (and) had a Republican taken money from someone who said what JZ Knight did, it would call on them to explain it, too.’”
She goes on to dispute the claim in the article by noting the foundation’s libertarian and conservative ties and pointing out events put on by groups such as the “Island County Republican Party Rally” and “Libertarian Party’s Day at the Capitol” where foundation staff spoke.
“Notably, no references are made to speaking engagements at which representatives from multiple parties would be present, nor is any reference made to staff members’ speaking engagements at Democratic party events,” Johnson wrote. She provides a “representative sample” of speaking engagements listed on the foundation's website and writes, “Not surprisingly, all of the speaking engagements relate to Republican and Libertarian organizations; no speaking engagements appear with respect to either left-leaning or even nonpartisan groups.”
Johnson alleges the foundation is completely funded by Republican and Libertarian sources. She cites records from the Washington State Public Disclosure Commission and provides a “representative sample” of organizations who donated to the foundation, including republican organizations in several counties.
“It has become clear that the Foundation is operating far outside the scope of activities permitted a 501(c)(3) organization — and has been for some time,” Johnson states in her cover letter to the IRS. “The most grievous of these activities is the Foundation’s repeated willingness to engage in sharply partisan activities, which have included intervention in a number of political campaigns … the law clearly demonstrates that the Foundation’s activities are not only inappropriate, but have led to exempt status denials or revocations for similar organizations in the past.”
The company argues in its press release the foundation benefits from a “virtual government subsidy” by not paying taxes, as it “actively denounce(s) government subsidies for others.”
Criticizing Democrats and Republicans
Dewhirst said the foundation goes after people of any political party who they feel violate the values the foundation stands for. He said Johnson cherry-picked articles from the foundation’s website to show a bias against democrats.
“There’s no shortage of material to be found from Freedom Foundation staff who take strong stands against anybody — Republican, Democrat, Independent, anybody — who betrays the principals of government accountability and taxpayer responsibility and things like that,” he said.
A search of the foundation’s website, www.myfreedomfoundation.com, turned up articles critical of Republicans. One article, “State Senator Proposes to ID Bicycle ‘Operators,’” criticizes legislation passed by State Sen. Randi Becker, R-Eatonville. One article criticizes republican support of a prevailing wage bill and another is critical of former Republican state senator Cheryl Pflug.
“We didn’t publicize the fact that JZ Knight was giving large amounts of money to Democrats because she was giving it to Democrats; we would have done it if she were giving that amount of money to Republicans or Independents or anybody else,” Dewhirst said. “What matters to us is that we think people ought to know that an avowed racist, an avowed bigot, is donating huge amounts of money to the politicians that then exercise power over the people. We’re unapologetic for the role that we played in bringing that to light and we would have done it regardless of the party to whom those tainted funds were channeled.”
Dewhirst said the Freedom Foundation engages in a variety of activities, none of which compromise its nonprofit status.
“We’re committed to advancing individual liberty, free enterprise, limited and accountable government,” Dewhirst said. “We do that in a variety of ways, but like any other think-tank on any end of the spectrum, there’s a wide range of things we engage in, none of it political in a way that would disqualify us as a 501(c)(3).”
He said the complaint is an “attempt at harassment.”
“It’s not going to go anywhere because there’s no basis to it,” he said. “They haven't actually provided any evidence to even remotely challenge our status as a legitimate 501(c)(3).