Charity Loses Tax-Exempt Status for Campaign Contributions

The Internal Revenue Service has revoked the tax-exempt status of a California charity after the agency determined that the charity was funneling money to the campaign fund of a former state official.

The decision follows a 2004 investigation by the California Attorney General’s office, which determined that the charity — the San Francisco Neighbors Resource Center — had used intermediaries to donate money to the 2002 campaign fund of former California Secretary of State Kevin Shelley.

According to court records, the charity had been formed in August 1999 to provide bilingual education, housing and health care to the elderly, and youth education in San Francisco.

As part of its initial efforts, the organization had received a $492,500 state grant in 2001 to build a community center. But the facility was never built.

Instead, the California Attorney General’s office determined that the organization had used the community-center project as a way to divert money to Mr. Shelley’s campaign.

Court records show the San Francisco Neighbors Resource Center paid two companies and two individuals who it said had provided construction and consulting work for the project, even though none of them had done any work. The four recipients then donated money in similar amounts to Mr. Shelley’s campaign.

The charity was dissolved in 2004 under supervision from the California Attorney General’s office and Mr. Shelley resigned as secretary of state in 2005.

The IRS, meanwhile, conducted its own investigation and decided in January to revoke the organization’s tax-exempt status. The ruling was not made public until November 30.