NEW YORK — A group of community and labor organizations is accusing Wal-Mart Stores Inc. of inappropriately using the nonprofit Walmart Foundation to help reduce local opposition to its expansion efforts in some urban areas like Boston, Washington, Los Angeles, and New York.
The group argued in a complaint filed with the Internal Revenue Service and dated Monday that the foundation violated terms of its tax-exempt status by targeting millions of dollars in donations that would directly benefit the retailer.
The Walmart Foundation’s contributions in some cities rose steadily as Walmart tried to curry local support and gain access in those markets, according to the complaint. The foundation donated just over $200,000 to organizations in Los Angeles in 2008 and 2009, the complaint said, but raised that amount to $1.4 million in 2011, just as its plans to open a store were getting underway. In 2013, the year that store opened, donations fell to about $230,000.
“I think if this is truly charitable donations, they would be giving this every year,” said Matt Ryan, executive director of the nonprofit advocacy group Alliance for a Greater New York, which signed the complaint. “I would characterize it as part of a smoke-and-mirrors campaign that Walmart would run when they’re trying to move into a city.”
[The Boston Business Journal reported the complaint alleges Walmart sought to open stores in Somerville and Watertown in 2011; Boston-area donations were at $125,000 in 2009 but spiked to $1.14 million in 2012, the complaint says.]
Nonprofit foundations are prohibited from extracting services on behalf of a company or diverting funds away from the public to private interests. But they offer corporations undeniable benefits, including good publicity and lucrative tax advantages. And while a pattern of spikes in donations may raise eyebrows, some nonprofit experts say, it may not be enough to prove the Walmart Foundation ran afoul of IRS rules.
Last year, Walmart and the foundation donated $1.4 billion around the world, according to the foundation’s website.
In a statement, a spokesman for Walmart, Kevin Gardner, said the foundation takes the tax code and regulations “very seriously” and the allegations have no merit.
“The Walmart Foundation focuses giving in critical areas such as hunger, veterans and disaster relief,” Gardner said in an e-mail. “We provide support for these and other important causes in communities across the US and around the world, not just to particular areas or cities, and it’s unfortunate to see criticism of the foundation’s charitable giving.”
Paul C. Light, professor of public service at New York University, said: “The optics here are pretty bad. The optics tell us what they’re doing, but is that enough to jerk the foundation’s charter?” More troubling, he said, is the accusation the foundation excluded grantees that painted Walmart in a bad light. “It comes very close to a directive, and the IRS could say, ‘Look, this is not a grant, this is a contract,’” Light said.
Walmart’s vast footprint has made the retailer a dominant force in small towns and cities across the country. But its sales have been sluggish, and it has looked at big cities as a way to increase its customer base and sales.