A nonprofit housing organization has received a federal tax exemption retroactive to 2004 despite being linked to a corruption investigation into the Los Angeles labor union that founded it, according to Internal Revenue Service records and officials.
The charity had been operating without an exemption since the Service Employees International Union local launched it more than four years ago. It also has been suspended by California tax authorities for not filing all of its returns, officials said. And the SEIU has accused two former officers of the local of taking improper payments from the nonprofit.
Attorneys for the Long Term Care Housing Corp. said they applied for the retroactive federal exemption in August -- after The Times raised questions about its tax status. Last week, the attorneys said the IRS had granted the exemption in a September letter.
An IRS spokeswoman confirmed that the retroactive exemption was awarded but declined to discuss the matter in detail, citing taxpayer privacy statutes.
Nonprofit watchdogs said the IRS should not have approved the retroactive exemption.
"The IRS really just hands out tax-exempt status like it's throwing around candy," said Sandra Miniutti, vice president of Charity Navigator, an online rating service. "There really is no oversight at the federal level."
Rep. Xavier Becerra (D-Los Angeles), who sits on a House subcommittee that oversees the IRS, said he did not know why the agency would approve an exemption for a group involved in a corruption scandal. But he noted that the agency has suffered staff cuts that reduced its ability to tackle complex matters.
Becerra said the case underscored the need for more policing of charities.
Marcus Owens, a former head of the IRS division for tax-exempt organizations, said an office of the agency might have issued the exemption letter without realizing an investigation was underway.
"It's something of an assembly line," he said.
The nonprofit's primary mission is to develop housing for the SEIU local's members, most of whom earn about $9 an hour caring for the elderly and infirm.
The SEIU's United Long-Term Care Workers, California's largest union local, is being investigated by the U.S. Labor Department, FBI and U.S. attorney's office, people familiar with the probe say.
Financial transactions involving the housing group are part of the investigation, they say.
