Opinion ID: 613010
Heading Depth: 5
Heading Rank: 1

Heading: The Newsletter in 1997

Text: It is undisputed that Care published a single issue of the Al-Hussam newsletter in January 1997. Dawn Goldberg, an IRS employee, testified that she would certainly expect the publication of a newsletter such as the Al-Hussam to be disclosed in response to Question 76 because the instructions say it should be, but, also, it's an activity of the organization. She later repeated that she would expect it to have been disclosed because, as we read in the directions, it falls in the category of `program service.' Consistent with this testimony, a thorough reading of the Form 990 instructions illuminates that the phrases activities and major program activities, used in Question 76 and the Form 990 instructions, encompass an organization's newsletters. In explaining a part of the form preceding Question 76, the Form 990 instructions define the term program services as mainly those activities that the reporting organization was created to conduct and which . . . form the basis of the organization's current exemption from tax. That section then includes the following explanation: Program services can also include the organization's unrelated trade or business activities. For example, publishing a magazine is a program service even though the magazine contains . . . advertising, the income from which is taxable as unrelated business income. Similarly, the instruction for Part III, Statement of Program Service Accomplishments, states: A program service is a major (usually ongoing) objective of an organization, such as adoptions, recreation for the elderly, rehabilitation, or publication of journals or newsletters. Specify the service outputs, products, or other measures of a program service, such as clients served, days of care, therapy sessions, or publications issued. Thus, in the full context of the Form 990 instruction, it is clear that the term activity used in Question 76 encompasses all program services, which are by definition major objective[s] of an organization and which, at the very least, include the publication of journals or newsletters. It is also clear that the publication of the Al-Hussam newsletters, in particular, was a major objective of Care. The evidence revealed that thousands of copies of the newsletters were printed and distributed internationally. Witnesses testified to the newsletters' underlying theme of the promotion of jihad. The newsletters contained descriptions of ongoing fighting happening in different corners of the world, interviews of fighters, and encouraging people to participate in the fight and, . . . if they can't participate, to provide funding. The jury heard excerpts from numerous issues of the newsletters in which readers were exhorted to finance the mujahideen if they could not otherwise join the jihad. The government combined this evidence with expert testimony explaining the concept of economic jihad, the belief that individuals who cannot participate in that fighting themselves . . . should at least finance someone who can. A reasonable jury could have considered the centrality of the Al-Hussam newsletters to Care's organizational mission as evidence both that Mubayyid would have recognized that publication of the Al-Hussam was an activity that should be disclosed, and that the Al-Hussam was willfully not disclosed to the IRS precisely because it reflected Care's non-charitable purposes. Mubayyid attempts to obfuscate Question 76's otherwise clear instruction by pointing to testimony by Dawn Goldberg on cross-examination. When questioned about a separate section of the Form 990 that asks filers to segregate the organization's expenses among three categories program services, managerial services, and fundraisingGoldberg admitted that the filer must use some amount of judgment. She acknowledged that, depending on the facts and circumstances, it might not be unreasonable for a filer to identify all of the printing expenses associated with a newsletter as fundraising expenses. Mubayyid claims that the possibility that he reasonably categorized the expense of publishing the Al-Hussam newsletters as a fundraising expense rather than a program service expense invalidates the argument that the newsletters are necessarily program services that would need to be disclosed in response to Question 76. This argument is unavailing. First, Mubayyid did not attribute Care's printing and publication expenses to fundraising on the Form 990 for 1997. Rather, all of Care's printing expenses for that year were categorized as managerial service expenses. The evidence thus belies Mubayyid's claim that his statement was not false because Care had consistently treated the Al-Hussam newsletters as merely a fundraising device, rather than an activity of the organization. Second, even if the attribution of printing expenses in 1997 was a mere scrivener's error, a reasonable jury could have concluded that Care's designation of the Al-Hussam newsletters as a fundraising activity would not have been a reasonable accounting choice. Dawn Goldberg testified that she looked at thirty-five Al-Hussam newsletters and saw a handful, maybe six or eight little blurbs related to fundraising. Referencing the Form 990 instructions' directive to allocate expenses that relate to more than one functional category, she acknowledged that a small amount of [the publication expenses for the Al-Hussam] might be attributable to `fundraising,' but that the newsletter is primarily educational and informative, and should therefore properly be designated as a program service. In light of the Form 990 instructions including the specific example of newsletters as a program service activityand Goldberg's testimony on the inappropriateness of designating the Al-Hussam as a fundraising device, it would have been reasonable for the jury to conclude that the designation instead reflected an intent to conceal Care's true nature. In any event, the jury was entitled to conclude that Mubayyid understood that Question 76's request for any activity of the organization not previously disclosed called for disclosure of Care's publication of the Al-Hussam newsletters, regardless of whether Care was permitted to allocate the associated expenses as fundraising in other parts of the Form 990. Taking another tack, Mubayyid claims that his answer was not false because the Al-Hussam newsletters had arguably already been disclosed to the IRS on Care's initial application for tax exemption, Form 1023, and therefore were not required to be disclosed in answer to Question 76. Here, Mubayyid refers to a statement in Care's initial Form 1023 that the organization's fundraising efforts would comprise [s]ubstantial efforts . . . by means of: . . . mailings. Again, his argument fails. A reasonable jury could have readily concluded that the Al-Hussam newsletters were not, in fact, the type of mailings disclosed to the IRS in the cursory reference to mailings on the Form 1023. To begin with, the Form 1023 refers to such mailings prospectively, yet the evidence at trial demonstrated that two Al-Hussam newsletters had already been published in Care's name at the time the Form 1023 was filed. Likewise, neither the Al-Hussam newsletters nor the Zakat Calculation Guide were submitted with the Form 1023 as representative copies of solicitations for financial support. Moreover, Robert Charnoff, a former IRS employee who had been responsible for reviewing Care's Form 1023 application, testified for the government that fundraising mailings are typically just a one- or two-page solicitation letter, while the evidence presented at trial demonstrated that the Al-Hussam newsletters primarily consisted of multi-page descriptions of the successes of jihad, exhortations to join the fighting, and reminders of the duty to engage in jihad. They contained only a few small blurbs that might be fairly characterized as overt fundraising. On this basis, Charnoff explained that he would have expected the Al-Hussam newsletter to be identified elsewhere because it's an activity in its own right. We thus conclude that, based on the evidence presented at trial, a reasonable jury could find that Mubayyid understood that the Al-Hussam newsletter was required to be disclosed in response to Question 76 on the 1997 Form 990. [35]