Attorney General Ken Paxton is investigating nonprofit Foundation Communities and Love Austin Political Action Committee over what he called a “potentially illegal fundraising scheme" to pass Proposition Q.
Prop Q is the city of Austin tax increase measure currently before voters that would generate $110 million for public safety, parks, and homelessness services.
Campaign finance records show Foundation Communities, which provides affordable housing along with educational, health care and financial services to low-income residents, has donated $75,000 to the PAC so far.
Paxton said the donations were a “sham” and “could be illegal.”
“Every nonprofit, including Foundation Communities, that is unlawfully contributing to an effort to squeeze more taxes out of Texans must immediately stop,” Paxton said in a statement. “We will determine if there is an illegal scheme where organizations that are funded by the government pour money into raising the tax rate in return for potential future benefits.”
Paxton's consumer protection division can look into alleged scams and other deceptive business practices. He's used the power to target organizations that do not align with his conservative political views, including Latino civic groups and hospitals that were providing gender-affirming health care to minors.
Nonprofits are generally prohibited from contributing to PACs, but Andrew Cates, a political attorney and author of Texas Ethics Laws, said this situation is different.
“The thing is, the IRS does not consider measure elections to be quote unquote political activity, because there's not a candidate involved,” Cates said. “So specific purpose PACs for measure elections can accept corporate money from 501(c)(3) charitable organizations, like Foundation Communities.”
Cates said Paxton appears to be arguing that it's unlawful for nonprofits to donate to PACs if they stand to benefit from the outcome of the election — a move he called "ludicrous."
“It’s no different than giving money to somebody who is working to pass a measure that you may stand to benefit from,” Cates said. “That’s just routine politics.”
Paxton’s inquiry isn’t the first into the campaign ethics surrounding Prop Q. Love Austin PAC filed a complaint with the Texas Ethics Commission earlier this month, alleging an anti-Prop Q website was acting outside of local and state laws surrounding political campaigns. That complaint was later dropped by Love Austin.
Joe Cascino, a former staffer of Austin Mayor Kirk Watson who’s heading up communications for Love Austin, told KUT the PAC would “respond to the Attorney General’s inquiry in a timely manner.”
Walter Moreau, the executive director of Foundation Communities, said he is "very confident" the organization followed all campaign finance laws.
"For the past 35 years, Foundation Communities has served the people of Austin by creating and maintaining affordable housing and support services for residents who were struggling with the cost of housing, and those experiencing homelessness," Moreau said. "One of the main goals of Proposition Q is to raise funds for this very work, and that’s why we support the initiative."
Lauren McGaughy and Andrew Weber contributed to this story.
