More than a dozen community groups have filed a complaint with the Internal Revenue Service alleging that the Walmart Foundation violated its tax-exempt status by using charitable funds to smooth the retailer's entry into urban markets, the Washington Post reports.
In a twenty-two-page complaint detailing Walmart's marketing and lobbying activities as it sought approval to open stores in New York City, Boston, Chicago, Los Angeles, and other cities, the groups allege that the foundation appeared "to target its donations and influence its grantees primarily to assist Walmart to achieve those expansion goals, ultimately providing Walmart more than an incidental benefit." The foundation's tax-exempt status as a 501(c)(3) organization prohibits it from operating in the sole interest of private individuals or entities, and its funding guidelines explicitly state that grants cannot be made to any program that "directly benefit Wal-Mart Stores, Inc."
The organizations filing the complaint — which include groups that joined organized labor in opposing the retailer's efforts to open stores in their cities — point to instances in which the foundation dramatically increased charitable giving in cities and neighborhoods where the company was seeking approval to open a store, in some cases awarding grants to organizations that might have otherwise opposed it, advertising charitable donations as a benefit of allowing stores to open, and encouraging grantees to support the company's efforts.
For more than two years before Walmart opened two stores in Washington, D.C., in 2013, the company hired lobbyists, ran paid advertising, and negotiated details with city officials, while the Walmart Foundation awarded grants to various nonprofits in the city, including D.C. Hunger Solutions, the Historical Society of Washington, D.C., and the Greater Washington Urban League. In a community benefits agreement concluded between Walmart and the District of Columbia, the company said it would provide $21 million in "charitable partnerships" over the next seven years, in addition to creating job training programs, hiring minority-owned firms for construction work, and pledging not to sell guns or ammunition.
"[The] Walmart Foundation’s activities are impermissible under the [Internal Revenue] Code," the complaint states.