Senate should demand full disclosure of Branstad donors before his confirmation

The Branstad-Reynolds Scholarship Fund, which collected money to pay for Governor Terry Branstad’s 2011 and 2015 inaugural celebrations, has not disclosed the names of donors who contributed $1.1 million in 2015, Ryan Foley reported today for the Associated Press. That information should have been included on the non-profit’s 2015 tax return. However, the return filed on November 15, 2016 named only one donor: Principal Financial Group, which gave $25,000.

Before considering Branstad’s nomination to be U.S. ambassador to China, the Senate Foreign Relations Committee should insist that the governor bring his non-profit into compliance with federal law. Senators should also scrutinize all donations to the group, to see whether Branstad did any political favors for individuals or businesses that bankrolled his inaugural.

The whole AP story is worth reading, but here are some key facts: the Internal Revenue Service requires disclosure of donors contributing at least $5,000 to private foundations. The Branstad-Reynolds Scholarship Fund’s 2014 tax return listed donors who gave during that calendar year. Why didn’t the 2015 tax return do the same?

Branstad spokesman Ben Hammes said the group’s accountant, Robert Buckley, is still gathering information about the other donors and plans to file an amended return. He said getting donor information has been a challenge because the inaugural committee has disbanded. He says the group isn’t trying to hide anything.

Based on my experience as a director of charitable foundations and board member of non-profit organizations, I find it highly implausible that no one can access the names of donors to the inaugural committee. Clearly the Branstad-Reynolds Scholarship Fund kept records of the donations, because preparers provided donor information on the 2014 tax return and the amount collected on the 2015 tax return. Someone must have used a list of 2015 donations to add up the total.

Most non-profits keep files on individuals or entities that have contributed, for use in future fundraising. Even if the directors of the Branstad-Reynolds Scholarship Fund don’t ever intend to raise another dollar for college scholarships, bank records should have details on checks deposited in the account during 2015.

The lack of disclosure is not some trivial bookkeeping problem, Foley’s report indicates:

The IRS could subject the foundation to penalties of $100 per day, up to $50,000, because it brought in more than $1 million in 2015. Des Moines accountant Joe Kristan said the IRS generally considers tax returns that are missing information as incomplete and subject to late penalties, which could be waived if the group shows “reasonable cause” for failing to file on time.

“They are running up a daily fine,” said Marcus Owens, former director of the IRS division that oversees nonprofit groups, who said the group has significant compliance issues. He noted that as a director, Branstad has a fiduciary duty to ensure the group complies with state and federal law.

Branstad serves as president and Lieutenant Governor Kim Reynolds vice president of the non-profit. They should be concerned about the potential for fines to deplete money that otherwise could support Iowa college students.

Then again, a hundred dollars a day sounds like a small price to pay to shield Branstad from embarrassing questions. As Foley noted, the largest donor to the inaugural festivities in 2014 was MidAmerican Energy: “Months later, the company’s CEO complained directly to Branstad about a ruling from the Iowa Utilities Board that made its wind energy projects less profitable. Branstad soon ordered a shake-up on the board, which one ousted regulator said was done to placate MidAmerican.”

For more background on the Iowa Utilities Board reshuffle, see here or here. You can also read the whole letter from former board member Sheila Tipton to Branstad, accusing the governor of doing “a disservice to the citizens of this State” by making personnel decisions “in order to appease MidAmerican Energy.” Tipton charged that the governor’s action looked like “an attempt to ‘bring the agency in line’ and to influence its future decision-making in a way that favors the utilities.”

Foley noted that another 2014 donor to the Branstad-Reynolds Scholarship Fund was UnitedHealthcare. That insurance company was among the applicants the Iowa Department of Human Services selected in the summer of 2015 to manage Medicaid for more than half a million Iowans.

Who knows what companies or individuals got what they wanted from the Branstad administration after helping to pay for his 2015 inauguration parties?

President-elect Donald Trump will nominate many people who are more controversial than Branstad, and Senate Democrats understandably plan to pick their battles during the confirmation process. Although the Iowa governor is widely considered a good choice to lead American diplomatic efforts in China, given his experience, he should not get a pass on running a non-profit that violates federal tax law. Before voting on Branstad’s nomination, senators should review all gifts to the 2015 inaugural to see whether now-secret donations are hiding any pay-to-play governance.

UPDATE: None of the journalists at the January 4 Associated Press legislative seminar at the Capitol asked Branstad about the failure to disclose the names of donors to his 2015 inaugural. Here’s hoping someone on the “Iowa Press” panel will ask the governor when Branstad appears on Iowa Public Television’s flagship political program on January 13.

LATE UPDATE: The Branstad-Reynolds Scholarship Fund finally submitted an amended filing to the IRS, Foley reported for the AP on January 25.

The filing reveals that 68 Iowa companies, lobbying groups or individuals gave $5,000 or more to pay for events celebrating Branstad’s inauguration to an unprecedented sixth term and, months later, to his becoming the nation’s longest-serving governor. The charity will use the proceeds for college scholarships and grants to promote Iowa history under Branstad’s name.

The largest donor was Des Moines-based Principal Financial Group, which gave $125,000. Other powerful Iowa companies dot the list, such as the Hy-Vee grocery store chain; the state’s two largest power companies, MidAmerican and Alliant; farm equipment maker John Deere; and gas station chains Casey’s and Kum & Go. Groups representing real estate agents, soda companies, nursing homes and bankers also chipped in, as did a number of casino interests.

The late filing could mean thousands of dollars in IRS late penalties for the charity, the Branstad-Reynolds Scholarship Fund, which has so far reported spending ten times as much on events celebrating Branstad as it has on scholarships.

  • Scholarship fund?

    Why would contributors to a scholarship fund approve if their money actually pays for an inaugural ball? How does the IRS allow this bait and switch?

    It sounds pretty fishy to me even before we get to the missing money.

    • they knew it was going to the inauguration

      Only the leftover funds were for scholarships. From Foley’s story:

      The Branstad-Reynolds Scholarship Fund was founded after Branstad and Lt. Gov. Kim Reynolds won election in 2010 to raise private money to pay for their 2011 inauguration. Branstad pledged that the leftover money would be used to award $30,000 annually in scholarships for Iowa college students, although it has fallen short of that goal. If confirmed by the U.S. Senate as ambassador to China, Branstad plans to resign as governor and be replaced by Reynolds.

      After winning re-election in 2014, the administration again used the group for inaugural fundraising, bringing in $1.5 million. About $500,000 went to pay for an inaugural ball in Des Moines and other events in January 2015 that celebrated Branstad’s unprecedented election to a sixth term as governor. The rest will go toward an endowment fund for college scholarships.

  • Why is anyone suprised?

    The corruption of Emperor Terry is beyond anything seen in recent Iowa history. We are in for a long 2 years at a minimum. Reynolds has been trained to be compliant to all the oligarchs. It will be interesting to see who gets blamed when Iowa Medicaid collapses.

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