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IRS Says LaRouche-Linked Foundation No Longer Tax Exempt

September 11, 1986 GMT

WASHINGTON (AP) _ A foundation that is part of political extremist Lyndon H. LaRouche’s network of organizations has lost federal tax-exempt status, but still claims contributions to it are tax deductible.

The Internal Revenue Service has removed Fusion Energy Foundation Inc. from the public list of organizations with tax-exempt status under Section 501 (c) (3) of the IRS code, said Steve Pyrek, IRS spokesman in Washington.

LaRouche is one of the directors of the Fusion Energy Foundation, which raises millions of dollars a year through contributions, loans and sales of magazines.

″Fusion Energy currently does not enjoy tax-exempt status, and any contribution to it would not be deductible on federal income tax returns as charitable contributions,″ said Bob Kobel, public affairs officer for the IRS at its Brooklyn, N.Y., office, which maintains records of tax-exempt organizations.

Christina Huth, spokeswoman for LaRouche at his Leesburg, Va., headquarters, declined to comment. Paul Gallagher, executive director of Fusion Energy, said he would not respond to the question of whether the foundation is tax exempt.

The foundation is among several LaRouche-related organizations named in court documents as being under investigation for what federal prosecutors in Boston claim is a massive, nationwide pattern of credit-card fraud.

The IRS had granted tax-exempt status to Fusion Energy Foundation in July 1978, and last listed it as having that status in August 1985, Pyrek said.

Kobel said the IRS could not discuss the circumstances or the exact date of the revocation of tax-exempt status because federal law prohibits disclosure of certain taxpayer information.

However, in response to requests under the Freedom of Information Act, the IRS said it has no record that the foundation had filed the required tax forms since the returns covering the first half of 1983. Separately, Kobel said a common reason for revocation of tax-exempt status is failure to file the required tax reports of contributions and expenses.

Tax-exempt status is important for non-profit groups which seek contributions, since it means contributors can deduct the amount of the contribution from their federal income taxes.

The LaRouche organization frequently describes Fusion Energy Foundation as a tax-exempt organization. In the current July-August issue of Fusion magazine, published by the foundation, an advertisement for the group says, ″Donations to the Fusion Energy Foundation are tax-deductible.″

In May, Gallagher, while testifying under oath at a hearing conducted by the Maryland state securities commissioner, maintained that the foundation has 501 (c) (3) tax-exempt status. Maryland is one of at least eight states that has moved under state securities laws to halt activities by LaRouche fund- raisers.

Fusion Energy, incorporated in New York as a non-profit foundation, is being investigated by the New York attorney general’s office for alleged violations of state laws on charitable solicitations.

David Fishlow, spokesman for Attorney General Robert Abrams, said the investigation includes Fusion’s claim that deductions to it are tax deductible.

LaRouche disciples are commonly seen in airports selling Fusion magazine, which is produced by the group. The publication advocates use of fusion energy and other nuclear-energy technologies. The magazine solicits contributions in the name of the foundation. LaRouche followers also ask for loans and contributions in its name by telephone.

LaRouche, a frequent fringe candidate for president who directs a multimillion-dollar network of organizations, has said he receives no income and has filed no federal tax returns for more than 12 years.

Federal prosecutors have described Fusion Energy Foundation in court documents as among several LaRouche-related groups that are closely related and that funnel money back and forth between each other. Employees of one LaRouche group commonly do work for others, too.

In an affidavit filed in federal court in Boston, the FBI said Fusion Energy Foundation also controls other investments, and cited bank records showing large transfers of money from Fusion to other LaRouche-related entities, as well as large checks to ″cash.″

In response to requests under the Freedom of Information Act by The Associated Press, the Internal Revenue Service released copies of the federal tax forms filed by Fusion Energy Foundation for the years ended Aug. 31, 1983, and Aug. 31, 1981.

The document, a disclosure of financial information called IRS Form 990, is required to be filed annually by all tax-exempt organizations receiving contributions of more than $25,000, said Pyrek.

The report for the year ended Aug. 31, 1981, including the period of the 1980 election in which LaRouche was candidate for president, showed the group had revenues of $3.6 million, and spent $374,096 more than it took in. In the year ending Aug. 31, 1983, Fusion Energy reported receiving $1.1 million.