Companies that made charitable contributions to Black Lives Matter Global Network Foundation, whose leaders were revealed Monday to have purchased a $6 million house with donated funds, won’t be on the hook for tax penalties but may face criticism from shareholders, according to legal experts .
The Oakland, California-based nonprofit is distinct from local Black Lives Matter chapters, some of which have publicly criticized the global network for a lack of transparency and are struggling to raise funds for projects such as local community centers, according to a New York magazine investigation.
“If I were a shareholder of a company that made a large grant to this organization, and the organization later used the money to buy a $6 million home, I might wonder what kind of due diligence the company was doing,” said Leslie Lenkowsky, A professor emeritus at Indiana University who focuses on volunteerism, civic engagement, nonprofits and public policy.
The global network launched in 2013 in response to a Florida jury’s acquittal of George Zimmerman after he fatally shot Trayvon Martin. According to its website, the group’s mission “is to eradicate white supremacy and build local power to intervene in violence inflicted on Black communities by the state and vigilantes.”
Following the 2020 murder of George Floyd by Minneapolis police officer Derek Chauvin, companies across the US donated millions to Black Lives Matter organizations. Press releases from Amazon and Microsoft announcing their donations include links to the global network’s website.
In a report published a year ago, the global network said it took in more than $90 million in 2020, with $8.4 million going toward operational needs such as staffing, administrative expenses and crisis intervention. The report said the group disbursed $21.7 million in grants to more than 33 organizations.
Companies that made sizable donations potentially could face investor criticism at their annual shareholder meetings, Lenkowsky said. But he said the repercussions likely would end there.
“As long as a company gave its money in good faith, it thought it was giving its money to a tax-exempt organization … there’s probably no problem for the corporation,” Lenkowsky said. “And there’s certainly no problem if it were a business expense.”
The global network, on the other hand, potentially could face hefty penalties, Lenkowsky said. While “there are no organizational penalties attached to form 990,” the annual Internal Revenue Service filing the global network reportedly failed to submit for two years, the form “needs to be signed by the organization’s chief financial officer, and signing an incorrect 990 can lead to personal penalties,” Lenkowsky said.
Monday’s New York magazine report details how leaders of the global network bought a $6 million house in Southern California with donated funds, and transferred ownership of the property shortly after its purchase to ensure “that the ultimate identify of the property’s new owner was not disclosed to the public.”
According to the magazine, the 6,500-square-foot home has more than half a dozen bedrooms and bathrooms, a pool and parking for more than 20 cars.
A spokesperson for the global network told the magazine on April 1 that the property was meant to serve as a dedicated space for recipients of a new fellowship. The next day, the global network announced the residence “provides recording resources and dedicated space for Black creatives to launch content online and in real life focused on abolition, healing justice, urban agriculture and food justice, pop culture, activism, and politics.”
The IRS awarded the global network tax-exempt status in December 2020, two months after the purchase, but the global network has not yet filed mandatory disclosures about donations and expenditures for 2020 or 2021, the magazine said. In addition, California Attorney General Rob Bonta has informed the global network that it is delinquent for failing to file state nonprofit disclosures.
A batch of informal financial information the group released in 2021 did not mention the house. However, the spokesperson said the group planned to disclose the house in formal filings it will submit next month.
Les Raatz, an estate planning attorney at Dickinson Wright in Phoenix, said companies that donated to the global network might face an optics problem.
Many companies likely donated to the cause to bolster their reputations “as being responsible for corporate citizens,” he said. But “are they getting their bang for their buck, or are they actually creating perhaps a negative result if [their money] ends up passing to a charity that is in the end questioned?”
Lenkowsky said California officials also could take enforcement action. He noted that in 2018 New York Attorney General Letitia James filed a lawsuit accusing Donald Trump of using funds from the Donald J. Trump Foundation for personal use. Trump ended up paying $2 million to settle the case.
Lenkowsky said he’s confident the scandal wont sour companies on the broader Black Lives Matter movement.
But “once all this has come to light, they won’t give another contribution” to this particular organization, he said.
The global network did not respond to a request for comment.