Livestrong, Lance Armstrong and the IRS

Forbes published an article yesterday that discusses the distinct possibility that LiveStrong may be in trouble with the IRS. As it turns out, non-profit organizations are prohibited by law from exerting political influence. In addition, if reports are true that Lance has often taken a cut of the funds that donors thought they were giving to Livestrong, the IRS certainly will want to know more about that behavior too. Here are some excerpts from the Forbes article:

In 2006, after internal legwork, the IRS reviewed the (Livestrong) foundation in what Livestrong officials called a normal examination. In recent weeks, agents have been reassessing the non-profit, according to two people with knowledge of the review process. ...While it is unclear what operations at Livestrong may have piqued the interest of agents, issues have emerged that resound with charity watchdog groups. 

Livestrong — like its founder — is no stranger to scrutiny. It was previously featured in this 2011 Outside Magainze exposé authored by Bill Gifford , in which Gifford alleged no illegal activities at Livestrong, but rather set out to correct common misconceptions about the Foundation, including where the majority of the money it raises is spent (to increase cancer awareness, not to fund cancer research) and differentiating between Livestrong.org (the Foundation’s site) and Livestrong.com (a for-profit site that received a license to use the Livestrong name from the Foundation in exchange for stock.) 

...(R)enewed interest by the IRS could present a serious challenge to the future of Livestrong. For example, Armstrong has apparently (been) accused of leveraging the Foundation’s donors for political influence, which if true, would run afoul of the rules governing Livestrong’s tax-exempt status:   

In October, Betsy Andreu and Kathy LeMond described to Roopstigo a 2008 email Armstrong had sent to Sen. John Kerry that threatened to use the Livestrong database against the Democratic Party if then-presidential hopeful Barack Obama did not attend the cyclist’s cancer summit. Although there is no evidence that Armstrong acted on the ultimatum—Obama was in Germany and did not attend the event—it is against 501(c)(3) regulations for a tax exempt organization to wield political influence either for or against political candidates. 

Roberts’ report also echoes a concern surrounding the blurry line between Armstrong-the-individual and Armstrong-the-Livestrong-fundraiser that was discussed at length in Gifford’s Outside column. My guess is that if the below is true, the IRS would be very interested in determining where exactly Lance ends and Livestrong begins. 

Also, last month, anecdotes surfaced of Armstrong receiving six-figure daily fees for ride-with-Lance-type benefits. One 2005 event was in Canada for the British Columbia Cancer Foundation’s Tour of Courage. And in Norway, the newspaper VG reported a disagreement over whether $400,000 went to Livestrong or Armstrong for a 2009 visit to Oslo. When it was established that the appearance deal was to pay Armstrong, and not Livestrong directly, cyclist Dag Erik Peterson said he still thought the money was for the charity, saying that he saw Armstrong riding in Livestrong cycling gear and “mixed his roles. That’s not fair.” 

This is the sort of thing that drives philanthropy experts crazy, because it becomes unclear whether Livestrong is acting in the best interest of its charitable mission, or in the best  interest of Lance Armstrong. 

Daniel Borochoff, president of the non-profit philanthropy watchdog group, Charity Watch, says Armstrong “was acting as a related party, you can’t hide that fact.” Borochoff suggested the fees received by Armstrong should have been reported to the charity’s board. They were not. 

Just when Lance thought there was light at the end of the tunnel, the IRS may just squash that idea for a while...