Taxpayer watchdog calls on IRS to probe re-branded Texas ACORN branch

ACORN branches all over the country disbanded in disgrace in 2010, but have come back under new names.

The former Texas ACORN chapter has a new name and a scheme to collect donations and divert them for political use in a way that abuses tax laws governing charitable organizations, according to a Washington-based public interest group.

Cause of Action, a nonprofit taxpayer watchdog, charged in a letter to the Treasury Inspector General for Tax Administration that the tax-exempt Texas Organizing Project (TOP), formed from the ashes of scandal-ridden ACORN, is using money funneled to it by a closely associated group called the Texas Organizing Project Education Fund for political activity.

The fund gave nearly 80 percent of its revenues -- approximately $640,000 -- to the advocacy group in 2010, leading Cause of Action officials to believe its reason for being is to raise charitable donations to send to TOP, which is permitted to fund political activity. TOP has used its website to solicit support for Mary Ann Perez, a Democrat running for state representative.

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“Fiscal sponsorship [has allowed TOP and TOP ED] to use a loophole in the tax code to engage in improper political activities under the radar of the IRS,” Dan Epstein, executive director of Cause of Action, said to FoxNews.com. “Cause of Action is asking the IRS to investigate these groups for potential abuses of their tax-exempt status, and to hold them accountable for any violations they find.”

"Texas Organizing Project Education Fund is abusing this privilege by not sponsoring an individual educational project, but rather sponsoring an entire political entity, the Texas Organizing Project. TOP ED should suffer tax penalties for essentially existing as a channel through which money is being directed to a political organization, but the IRS is either intentionally overlooking this abuse, or is unaware of it," Epstein added.

This marks the third such investigation that the watchdog group has called for accusing other re-branded ACORN branches of being engaged in similar activities.

“While fiscal sponsorships are legal, it is not legal for a 501(c)(3) organization, such as TOP ED, to give any money to an organization that engages in political activity, without triggering various tax consequences,” reads the letter signed by senior counsel for Cause of Action.

Click here to view the full letter

The public advocacy watchdog group also claims in the letter that TOP and TOP ED are an example of former state chapters of ACORN re-branding themselves in the wake of controversies that led to the national parent group shutting down in 2010. Cause of Action claims the defunct non-profit instructed “its affiliates to funnel tax-deductible and/or taxpayer dollars to ACORN over a 40-year period.”

"After ACORN became subject to public scrutiny, and eventually filed for bankruptcy, it re-branded many of its state chapters in order that those organizations could continue pursuing ACORN’s goals," Cause of Action officials said. "TOP is the reconstituted ACORN in Texas.”

Durrel Douglas, a spokesman for TOP ED, responded in a written statement.

"We are not familiar with Cause of Action here in Texas. They have clearly misread our IRS filings, otherwise they would know that the Texas Organizing Project Education Fund does not fiscally sponsor the Texas Organizing project," he said adding that the organizations share overhead costs and follow the same reporting guidelines as numerous other non-profit groups across the country.

"Given that this is an election year, it is unfortunate that this inaccurate reading of our filings seems to be a matter of politics, not the law," the statement added.

Spokesmen for both the IRS and Treasury Inspector General declined to comment on the letter or any resulting investigation.

EDITOR'S NOTE: This story was updated on Aug. 7, after TOP ED officials submitted a written statement in response to the Cause of Action claims. TOP ED did not initially respond to FoxNews.com requests for comment before the story was originally published on July 19.