FWS backs prairie chicken plan of tax-troubled nonprofit

By Corbin Hiar | 08/01/2016 01:06 PM EDT

Prairie chicken.

Prairie chicken. Greg Kramos/USFWS/Flickr

The Western Association of Fish and Wildlife Agencies and a related foundation had been stripped of their nonprofit statuses for repeatedly failing to file annual tax forms when the Fish and Wildlife Service in October 2013 endorsed their blueprint for protecting the lesser prairie chicken, according to IRS records reviewed by Greenwire.

Since then, tax documents show that WAFWA — whose former treasurer may have broken the law by working concurrently at FWS — has received more than $2.2 million from the Interior Department, the service’s parent agency.

While the nonprofit tax exemptions of WAFWA and its Foundation for Western Fish and Wildlife (FWFW) were retroactively restored by the IRS in the fall of 2014, the failure to file years’ worth of forms on time before then could have cost the groups almost $300,000 in fines.

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Those avoidable tax problems — and the service’s failure to notice them — are raising fresh concerns for some conservationists about the soundness of the cooperative effort to recover the prairie chicken. The bird was recently removed from the threatened species list after a judge sided with the oil industry, which claimed that WAFWA’s conservation plan could work on its own.

"It calls into question the oversight and accountability" of FWS, said Jamie Rappaport Clark, the president and CEO of Defenders of Wildlife and a former director of the agency.

Speaking about WAFWA, she asked, "If you can’t even keep up your nonprofit status, how do you expect to manage something as significant and as important as the federal investment to help save [the] lesser prairie chicken?"

WAFWA also changed the way it accepted mitigation payments from companies that harm or kill the birds, and its plan has had higher administrative costs than advertised, IRS records show.

FWS confirmed that it never checked on whether WAFWA and FWFW had filed their required IRS forms. WAFWA was founded in 1922 to promote state-led resource management.

"The Service does not consider an entity’s tax status prior to issuing a grant or cooperative agreement," a spokeswoman said in an email. But prior to every award the agency grants, she said, FWS checks a government database "to make sure the intended recipient and their key project personnel are not suspended or debarred from receiving federal funds under the program."

The Treasury Department also maintains a separate "Do Not Pay List," which further reduces "the likelihood of making payments to an entity or individual ineligible to receive those funds," she added.

Famous for its elaborate mating ritual, the brown-and-white-striped bird has seen its native grassland and prairie habitats slashed 84 percent by energy development, agriculture and roads. There are now just 25,261 breeding prairie chickens left in the wild, down 13 percent from last year (Greenwire, July 1).

WAFWA has been working to conserve the prairie chicken since 2006, when the wildlife regulators of Texas, New Mexico, Oklahoma, Kansas and Colorado — the five states that are home to the bird — signed a memorandum of understanding about managing the species and its habitat.

WAFWA now includes top officials from the fish and wildlife agencies of 23 Western states and Canadian provinces, who sit on committees formed to promote collaborative conservation of a variety of imperiled species and ecosystems. The nearly $840,000 that WAFWA collected from Interior last year, for example, was for its efforts to protect the sage grouse and prairie dog and to fight the sylvatic plague harming black-footed ferrets and other species, according to Larry Kruckenberg, the group’s executive secretary.

Tax troubles

Former Treasurer Stephen Barton fell behind on WAFWA’s tax filings after fiscal 2008, IRS records show. At the time, he was also overseeing the state group as chief of administration and information management in the service’s wildlife and sport fish restoration program.

Steve Barton
Stephen Barton. | Photo courtesy of Facebook.

A recent report on his conflicting roles by the Interior Department’s Office of Inspector General found Barton began working for WAFWA on an unpaid basis around 2004 and was hired by FWS in September 2007 (Greenwire, June 8).

But earlier that year, as WAFWA became more involved in efforts to conserve the lesser prairie chicken and other Western species, the group concluded that it would be necessary to pay Barton for his services. The OIG found that in 2008, he went on to make nearly $35,000 in his position with WAFWA on top of his $155,000 federal salary — even though federal law prohibits executive branch employees from being paid for outside work.

From the following year through March 2014, Barton made more than $329,000 working for WAFWA and FWFW, which was established in 2009 to handle tax-deductible payments for wildlife conservation. But during that period, he failed to file any annual tax forms for either group.

As a result of Barton’s inaction, the IRS automatically revoked the nonprofit statuses of WAFWA in November 2011 and FWFW the following May.

Neither WAFWA nor FWS seemed to notice.

In September 2013, the wildlife directors from states within the bird’s range approved "The Lesser Prairie-Chicken Range-wide Conservation Plan."

The 373-page document stated that a lawyer who reviewed liability issues associated with the plan found that "both WAFWA and the Foundation are incorporated in Wyoming as nonprofit corporations and both have been determined by the IRS to be tax-exempt." But that hadn’t been true for over a year, tax records show.

Another lawyer representing WAFWA in a statement to Greenwire laid the blame for his predecessor’s error at the feet of Barton, who left the group sometime in early 2014.

"Based on Mr. Barton’s representations, WAFWA’s Board of Directors believed that when the range-wide plan was created, Mr. Barton had done everything necessary to apply for and properly maintain WAFWA’s and the Foundation for Western Fish and Wildlife’s tax-exempt status," wrote Nicholas Healey, a partner at Cheyenne, Wyo.-based law firm Dray, Dyekman, Reed & Healey PC. When the board learned otherwise, "we acted immediately to rectify the situation," his statement said.

Healey also said that neither group was fined for its failure to file years’ worth of tax forms.

Barton, who is also no longer employed by FWS, did not respond to a request for comment on WAFWA’s allegations.

One month after the state-led rangewide plan was publicly released, FWS backed it — a fateful decision that U.S. District Court Judge Robert Junell would later cite in overturning the bird’s threatened listing (Greenwire, Sept. 3, 2015).

"After an extensive review, the Service found the plan is consistent with criteria proposed last May for conserving the species," the agency said in a October 2013 press release. "The plan calls for providing financial incentives to landowners who voluntarily manage their lands to benefit the species. It also includes a framework for mitigating the potentially harmful effects to lesser prairie-chicken habitat from development activity throughout its range."

The following spring, when the service concluded that Endangered Species Act (ESA) protections were also necessary to recover the bird, the agency exempted companies working with WAFWA from prohibitions on harming or killing prairie chickens.

"The rangewide plan is expected to provide a net conservation benefit to the lesser prairie-chicken population," FWS said at the time in a Federal Register notice.

A bad deal?

But the rangewide plan hasn’t worked out exactly as FWS had hoped.

Texas’ Permian Basin Petroleum Association and four oil-rich New Mexico counties successfully challenged the threatened listing, arguing that FWS had failed to adequately consider the conservation potential of the rangewide plan.

In an attempt to reinstate the listing, Obama administration lawyers representing FWS warned the court that relying on the plan’s voluntary measures without greater habitat protections provided by the ESA could "put the species on a path towards a ‘death spiral’ from which it cannot recover" (Greenwire, Feb. 2).

Tax records make clear that WAFWA has also deviated significantly from the business proposal it included in the rangewide plan.

FWFW, for example, was created to collect tax-deductible payments from land users and manage an endowment based off of those funds. The foundation "has the ability and experience with multi-state funding projects that could ensure that revenue from oil and gas and other industries from a given state can be distributed to benefit LPC conservation," the plan said.

The plan argued against allowing WAFWA to collect the money. A "downside" of such an arrangement, it said, would be that "funds or real property that were contributed would not be tax deductible to the donor," since WAFWA is classified by the IRS as a "social welfare" organization.

But FWFW has taken in less than $14,400 in the past three years, nearly $12,000 of which was collected in fiscal 2013, tax documents indicate.

Meanwhile, the group on May 2, 2014, established the Western Conservation Foundation (WCF) under the same section of the tax code as WAFWA. Since then, that social welfare group — which was mentioned nowhere in the rangewide plan or in subsequent publicly announced updates to the plan — has had revenues of more than $46.8 million, according to its tax records.

WAFWA’s lawyer explained that the organization created a second social welfare group because it belatedly concluded that businesses should not be able to write off their mitigation payments.

"We wanted a separate entity to be the fiscal agent, and after close scrutiny, we determined that was not the 501(c)(3), because enrollment fees were not donations, rather business expenses," Healey said in an email. "In WAFWA’s judgement, the nature of the fiscal agent’s activities simply fits better with a 501(c)(4) ‘social welfare’ organization than a 501(c)(3) ‘charitable’ organization."

He added that FWS was informed of the change in May 2014, "but the plan itself has not been revised."

The rangewide plan also claimed that administrative costs for WAFWA and its fee-collecting group would be much lower than they’ve turned out to be.

In arguing against partnering with the congressionally chartered National Fish and Wildlife Foundation or other big conservation groups to recover the prairie chicken, the plan said those organizations’ "administrative overhead costs could exceed WAFWA’s 5% and could be as high as 35%."

But management and general expenses have made up between 11.2 and 12.2 percent of WAFWA’s total expenses in the past three years, tax documents show.

At WCF, the ratio is even more skewed: Management costs have accounted for 25.7 percent of expenses in fiscal 2014 and 34.6 percent last fiscal year.

Healey suggested that the groups calculate administrative costs differently than the IRS. He claimed that "overall WAFWA expenses have been consistent with projections" of approximately $5.6 million to date.

FWS did not respond to a request for comment on the creation of WCF or a question about the groups’ high administrative costs.

Conservationists, however, are crying foul over the whole situation.

"The deal was the terms of rangewide plan," Defenders’ Rappaport Clark said of the WAFWA prairie chicken recovery effort approved by FWS. "It sounds like there wasn’t close oversight or accountability to comply with the terms of the deal."

Rappaport Clark went on to suggest that the tax forms’ deviation from the plan could be a statutory problem for WAFWA and FWS.

"Whether it’s legal or illegal is one question, which I can’t answer," she said. "But clearly, from what you’re at least observing, what has occurred hasn’t followed the contractual relationship between the two of them and the deal that was made."

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