CAIR-California referred the IRS for an investigation into the tax exemption status of the House speaker

FIRST ON FOX: The California chapter of the Council on American-Islamic Relations (CAIR) is facing intense scrutiny as House Ways and Means Committee Chairman Jason Smith referred the group to the IRS for an investigation into whether the nonprofit should lose its tax-exempt status, citing misuse of taxpayer funds, possible violations of the law and support for illegal activity.

“Tax-exempt status is a privilege, not a right,” Smith, a Republican from Missouri, told Fox News Digital on Tuesday. “Organizations that receive special treatment under the tax code must follow the law and operate in the public interest, not illegal activity to bankroll, mislead government agencies, or misuse hard-earned taxpayer dollars.”

Smith sent a letter to Treasury Secretary and acting IRS chief Scott Besent and IRS CEO Frank Bisignano on Tuesday calling for CAIR-California to be reviewed by the IRS, arguing that the nonprofit may no longer meet the legal standards required to operate as a 501(c)(3) organization. The letter states that evidence alleges that CAIR-California misused millions of dollars in federal funds, provided misleading information to the IRS, and conducted material-based activity that resulted in arrests and violations, particularly during campus protests across California.

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The Council on American-Islamic Relations is the leading Muslim American human rights organization, with chapters across the country and its home base in Washington, D.C. Republicans have scrutinized CAIR in recent years, including requests for a Treasury Department review of alleged Hamas ties — allegations the group denies.

CAIR disputed the letter to Fox News Digital on Tuesday, calling it “disgraceful” and based on a “false claim made by a pro-Israel group without fact-checking.”

The New York Post published an article published in March 2025 based on the advocacy group, the Intelligent Advocacy Network, investigation into CAIR-California that found alleged financial irregularities.

CAIR-California includes offices in Los Angeles, the San Francisco Bay Area, Sacramento and San Diego.

The call for an investigation comes as the IRS and other investigators dig into what officials say is an emerging COVID-19-era scheme in Minnesota involving money laundering that has made headlines since before the holiday season. Federal prosecutors have estimated that the fraud could exceed $1 billion and go as high as $9 billion.

Officials have arrested dozens of people, mostly from the Somali community.

“The widespread fraud uncovered in Minnesota has made our efforts to eradicate fraud in the nonprofit sector even more urgent, and we owe it to the American taxpayer to hold these bad actors accountable,” Smith told Fox Digital. “If these allegations are true, CAIR-California does not meet the standards necessary to maintain tax-exempt status, and the IRS should act accordingly.”

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The chairman’s letter details concerns about CAIR-CA’s handling of more than $7 million in refugee legal aid funds intended to help Afghan refugees resettle.

The referral, which cites a New York Post article detailing a previous investigation by the watchdog group, showed that CAIR-CA helped less than 10% of the refugees it promised to help, while allegedly channeling millions of dollars through an unregistered company operating under CAIR-CA’s tax number – potentially exposing the group to False Acts.

House Ways and Means Committee Chairman Jason Smith is urging the Internal Revenue Service to investigate whether the California-based chapter of the Council on American-Islamic Relations should lose its tax-exempt status. (Leonard Ortiz/Digital First Media/Orange County Register via Getty Images)

“Not only is this misdirection of funds potentially in violation of the law, but CAIR-CA’s failure to properly document the use of grant funds will put the organization at risk of violating the False Claims Act by misrepresenting the use of grants,” Smith wrote.

CAIR told Fox News Digital that Smith’s letter was “almost completely wrong,” and based on “a retracted story about CAIR-California that the New York Post had to redact after repeating a false claim made by a pro-Israel group” “is a sign that he and other members of the Israel First Congress have turned into insults and silenced Americans who advocate for Palestinian tax rights against the Palestinian American dollar.” in Gaza.”

CAIR’s gun went on to say, “Contrary to the false claims made by Mr. Smith, CAIR-California is a respected civil rights organization with a long history of legal advocacy and cooperation with federal agencies.”

“Each dollar received by CAIR-California is used strictly for its intended purpose and is subject to strict internal and external oversight, auditing, and reporting. Funds designated to support Afghan refugees are used only to serve that population, in accordance with the terms of the grant. CAIR-California also receives a diverse pool of funds that allows the organization to serve Afghan clients and continue Afghan-to-Afghan e-mail.”

If the IRS revokes a group’s 501(c)(3) status, it can wreak havoc on the organization — donations may no longer be tax-deductible, federal taxes and penalties may apply, and the nonprofit’s funding stream may stop as donors and funders back away.

The letter adds that evidence suggests that CAIR-California “institutionalized and materially supported” college campuses during the anti-Israel protests that swept the country from 2021 until Trump’s presidency, including protests that “resulted in law enforcement and/or arrests.”

The letter alleges that CAIR nationally also encouraged and authorized a “Donald Trump Protest” rally at the Minnesota Republican Party Lincoln-Reagan Dinner during the 2024 election cycle, which the letter says may have violated the ban on 501(c)(3)s from directly or indirectly participating in, or participating in, any political campaign.

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Smith argued that while protests are often allowed, the IRS has found that groups can lose their exempt status if the protests involve civil disobedience or other illegal activities.

“The only allegation in Mr. Smith’s letter that comes close to being accurate is the claim that CAIR has expressed support for college students who have taken a stand to peacefully protest the financial meddling of their university and the Israeli government’s genocide in Gaza,” CAIR said. “We were proud to express solidarity with the students who were peacefully protesting the killing of people in Gaza, who were on the right side of history, like the college kids who were protesting apartheid, the Vietnam War and apartheid in South Africa.”

CAIR sent its own letter to Bessent and the IRS Tuesday morning following Smith’s letter, Fox News Digital learned.

Homeland Security investigators were part of a major fraud investigation Monday in Minneapolis following the release of a video over the weekend about alleged child fraud. (Department of Homeland Security)

Conservatives have previously argued CAIR’s national network is moving from civil rights advocacy to partisan politics and activism — pointing to past allegations by GOP lawmakers of improper political involvement and longstanding concerns about ties to Hamas-linked organizations, which CAIR has repeatedly denied.

Texas Gov. Greg Abbott, for example, has designated CAIR, along with the Muslim Brotherhood, as foreign terrorist organizations under federal law by 2025, saying groups that “support terrorism around the world and subvert our laws through violence, intimidation, and abuse are unacceptable.”

CAIR has opposed Abbott’s nomination, telling the Houston Chronicle in January that he has worked to stop terrorism in the US, including flagging the FBI as the biggest threat to President Donald Trump during his first term, the report said.

“We’re exposing it now in response to these allegations that CAIR — which has really helped stop terrorist acts — is a terrorist organization,” Edward Ahmed Mitchell, CAIR’s deputy national director, told the Chronicle. “CAIR has not only verbally condemned terrorism, but we have taken steps to end terrorism.”

Smith’s transfer raised long-standing concerns about CAIR’s alleged ties to terrorism, including reported links to the defunct Holy Land Foundation, which was convicted in 2009 of providing material support to Hamas.

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“Given the appalling work of CAIR-CA, and the fact that the CAIR network has suspicious ties to terrorist organizations such as Hamas, I ask that you use your authority to investigate CAIR-CA and consider revoking CAIR-CA’s tax-exempt status upon adequate review,” Smith concluded in his letter.