House Ways and Means Committee Chairman Jason Smith (R-MO) urged the IRS to take action to prevent taxpayer-funded fraud from financing terrorist organizations, citing a fraud scheme in Minnesota with alleged ties to the Al-Shabaab terrorist group.
In a letter to the agency January 20, Smith expressed concern over reports that hundreds of millions of taxpayer dollars were moved through a network of non-profit organizations and shell companies.
‘Feeding Our Future’
Smith’s letter refers to the “Feeding Our Future” scandal, in which a Minnesota non-profit organization allegedly defrauded the government of more than $250 million. The program was intended to provide food to low-income children during the COVID-19 pandemic. Federal prosecutors say the funds were used to purchase luxury goods, jewelry, and real estate. This has resulted in the prosecution of nearly 80 individuals by the Department of Justice.
In the letter, Smith expressed concern over reports that a portion of the stolen funds may have ended up with Al-Shabaab, which he described as a terrorist group based in East Africa. The letter cites a “confidential source” who claimed that the “largest funder of Al-Shabaab is the Minnesota taxpayer.” The allegations have also prompted action from the executive branch, with Treasury Secretary Scott Bessent recently launching a probe into the matter.
Smith argues that the case highlights a systemic failure to safeguard taxpayer dollars. The letter points to a state audit which found that the state’s Department of Education “failed to act on warning signs known to the department” before the fraud began, allowing the scheme to go unchecked.
Broader Scrutiny of Tax-Exempt Organizations
The letter frames the Minnesota fraud as part of a larger pattern of misuse by tax-exempt organizations that Smith has been investigating. Smith has issued similar calls for stricter enforcement over the past year, including a request for the IRS to crack down on tax-exempt groups tied to terrorism and political violence.
What makes the Feeding Our Future case particularly notable, according to Smith, is the direct line it allegedly draws between a domestic, taxpayer-funded program and the financing of a designated terrorist organization. The letter argues that while previous investigations focused on groups promoting certain political ideals, this instance reveals a tangible pathway where funds intended for American children were systematically stolen and potentially funneled to terrorists.
According to Smith, these instances demonstrate a critical need for the IRS to be more proactive in revoking the tax-exempt status of organizations that misuse their funds. The letter argues that the “laissez-faire approach implemented under the Biden Administration” has failed to protect American taxpayers from funding illicit activities.
Stricter IRS Oversight
In his letter, Smith urged the IRS to implement a new, “hands-on approach when overseeing and safeguarding taxpayer dollars.” A key concern raised was the apparent delay in the IRS’ own systems for tracking tax-exempt status. An audit found that Feeding Our Future continued to advertise itself as a tax-exempt organization — and was even approved as a food program sponsor by the state — after the IRS had already revoked its status for failing to meet reporting requirements.
Smith said the IRS needs to implement more efficient systems that prevent organizations that have lost their tax-exempt status from receiving benefits. The letter also referenced new federal initiatives aimed at preventing similar schemes from happening again, such as a recent Treasury announcement detailing the formation of a dedicated task force to audit financial institutions that may have facilitated the laundering of funds.
For more on revocations of an organization’s tax-exempt status, see Checkpoint’s Federal Tax Coordinator 2d ¶ T-10485.
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