You don't even need to be an employee to have potential knowledge of a tax law violation. Suppose, for example, one of these organizations funds your trip to Israel to engage in "direct action" or interfere with Israeli security operations. I am not a lawyer (tax or otherwise) and none of the following constitutes legal advice or a professional opinion of the tax deductibility of the actions described but it is hard to see how an expenditure of this nature could qualify as tax-exempt. The Internal Revenue Service says, in fact, that organizations that plan and carry out activities "contrary to public policy," a category that includes domestic civil disobedience, cannot be tax exempt. It is unknown whether this extends to sponsorship of civil disobedience abroad.
Rev Rule 75-384,J, "Activities that are Illegal or Contrary to Public Policy" says in part,
(1) Substantiality Test
Violation of constitutionally valid laws is inconsistent with exemption under IRC 501(c)(3). As a matter of trust law, one of the main sources of the general law of charity, planned activities that violate laws are not in furtherance of a charitable purpose." A trust cannot be created for a purpose which is illegal. The purpose is illegal ...if the trust tends to induce the commission of crime or if the accomplishment of the purpose is otherwise against public policy....
(4) Planning Illegal Acts
Not only is the actual conduct of illegal activities inconsistent with exemption, but the planning and sponsoring of such activities are also incompatible with charity and social welfare.Rev.Rul.75-384 holds that an organization formed to promote world peace that planned and sponsored protest demonstrations at which members were urged to commit acts of civil disobedience did not qualify for IRC 501(c)(3) or (4) exemption. G.C.M.36153, dated January 31,1975, states that because planning and sponsoring illegal acts are in themselves inconsistent with charity and social welfare it is not necessary to determine whether illegal acts were, in fact, committed in connection with the resulting demonstrations or whether such a determination can be made prior to conviction of an accused. However, it is necessary to establish that the planning and sponsorship are attributable to the organization, if exemption is to be denied or revoked on this ground.
Note the line, "Violation of constitutionally valid laws is inconsistent with exemption under IRC 501(c)(3)." It's easy to envision the IRS condoning violation of laws whose legitimacy the U.S. Constitution does not recognize, e.g. promotion of Christianity in Iran or Saudi Arabia or the transmission of information about the Tiananman Square Massacre to China. On the other hand, the ISM engages in behavior in Israel, such as interfering with security checkpoints and harboring terrorists, that also would be illegal in the United States.
Furthermore, 501(c)(3) tax-exempt organizations that are affiliated with the International Solidarity Movement's network are in fact on record as planning and carrying out acts of domestic civil disobedience, and/or encouraging "tax resistance" (i.e. not paying taxes that might support the war in Iraq). The latter hardly seems to be a good way to get on the IRS's good side.
Incidentally, anyone who can connect any 501(c)(3) tax-exempt Palestine Solidarity Movement affiliate to planning illegal acts of civil disobedience should report it to the following address, although it does not look as though a reward is offered for doing so. Send documented proof of the planning and/or execution of the illegal action along with the organization's name and address, and preferably its Employer Identification Number (EIN) to:
Internal Revenue Service
Exempt Organizations Examination
Division 1100 Commerce Street
ATTN: SE:T:EO:E Dallas,
The International Solidarity Movement has meanwhile touted itself as 501(c)(3) tax-exempt, which is not entirely true (like most other things the ISM tells people). Donors are told to give money to tax-exempt organizations that channel funds to the ISM. The purposes for which these funds are then used, such as sending activists to Israel and so on, hardly seem eligible for tax-exempt treatment.
It's usually a disgruntled employee or recently-discharged employee who drops a dime (American slang for "calls the authorities," from the time when you could still make a phone call for a dime) on his or her former employer, although it might also be an outsider who doesn't like the organization or who just needs some money. Again, if you have inside knowledge of anything that you think violates U.S. tax laws (such as diversion of tax-exempt funds for non-exempt purposes), here is where to report it. The page includes a link to the necessary form ( Form 3949-A) and instructions on where to send it. You can also download Pub 733, "Rewards for Information Given to the IRS" to understand the rewards that are available for doing this.
Remember, the Feds never got gangster Al Capone for murdering people. They got him for not paying his income taxes, and this may be a good way to put down the ISM/PSM multi-headed Hydra as well.