Green Watch

Hucksterism and Self-Dealing at the Sierra Club

Environmentalists rake in big bucks from Global Warming activism and the War on Coal

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The Sierra Club and its sister foundation have abandoned their traditional charitable mission of conserving America’s wilderness lands in order to chase dollars that can be had for themselves and their leaders and donors by engaging in business activities—including promoting some businesses at the expense of other businesses. They have left not only their mission but the law governing nonprofits far behind.

When a group like the Sierra Club morphs from a mainstream conservation group into a radical “green” organization, you would expect it to take extreme positions on the issues with which it deals. But you might be surprised by the extent to which the tax-exempt Sierra Club, its affiliated foundation (also tax-exempt), and its board members gain financially from the War on Coal and other causes the Club supports.

The Sierra Club generates about a million dollars a year in taxable unrelated business income on which there is no evidence that it is paying taxes or intends to. Further, as a nonprofit organization, it may not compete with commercial businesses, yet there is clear evidence it does. The Club operates a store selling all manner of goods. Worse, the Club has become the marketing arm for two private companies selling solar panels. Each of these activities is suspect. None of these activities represents the core purposes of the Sierra Club. Both types of activities—direct sales in competition with for-profit businesses, and acting as the marketing arm for private companies—constitute participation in commercial business.

Both the Sierra Club and its affiliated Sierra Club Foundation, have received tax-exempt status from the U.S. Internal Revenue Service, whose rules prohibit a variety of actions. Among the prohibitions is an absolute ban on “net earnings of such entity inur[ing] to the benefit of any private shareholder or individual.” In addition, the Sierra Club is subject to tax on its unrelated business income if (a) the income arises from a trade or business, (b) the trade or business is regularly carried on, and (c) the trade or business is not substantially related to the organization’s tax-exempt purpose.

Meanwhile, the Club takes political positions that happen to further its money-making efforts. This is what’s known among economists as Bootleggers-and-Baptists. (The term is not meant as an offense to Baptists or, for that matter, bootleggers. It’s what economists call the concept.) Thirty-one years ago, economist Bruce Yandle offered what he has called “a perhaps novel but crude theory” on the manner in which people [Click here for the full story]