Channell Loses Tax-Exempt Classification

The Internal Revenue Service on Thursday revoked the tax-exempt status of a foundation headed by Carl R. (Spitz) Channell for violating its stated charitable purpose by raising money to provide military aid for the Nicaraguan contras .

“Effective immediately the National Endowment for the Preservation of Liberty is no longer eligible to receive tax-exempt contributions from the general public,” an IRS statement from the Baltimore regional office said.

Channell on Wednesday pleaded guilty to one count of conspiracy to defraud the government of taxes owed on more than $2 million in contributions that he collected for military aid through the national endowment.

The IRS began looking into Channell’s interwoven network of political and tax-exempt organizations after his ties to Lt. Col. Oliver L. North, a former White House aide, and his involvement in the private contra aid network became known.

Raised $7 Million

The National Endowment for the Preservation of Liberty was the largest organization Channell headed, raising an estimated $7 million last year.

Some of Channell’s contributors said they believed the money they gave was to be used for public education, pro-contra advertising and humanitarian aid to the rebels in Nicaragua.

The IRS statement said Channell’s contributors would not have been eligible to deduct their contributions if they were aware his tax-exempt status was about to be revoked or if a contributor “was in part responsible or was aware of the actions . . . of the organization that brought about this revocation.”

IRS spokesman Wilson Fadley said that typically when tax-exempt status is revoked, the IRS determines whether that action requires retroactive tax payments on what is determined to be past taxable income. He refused to say what would happen in this case.