A group of community and labor organizations is accusing Walmart of inappropriately using the nonprofit Walmart Foundation to help reduce local opposition to its expansion efforts in some urban areas like Washington, Boston, Los Angeles and New York.
The group argued in a complaint with the Internal Revenue Service dated Monday that the Walmart Foundation violated terms of its tax-exempt status by targeting millions of dollars in donations that would directly benefit the retailer.
The Walmart Foundation’s contributions in some cities rose steadily as Walmart tried to curry local support and gain access in those markets, according to the complaint. The foundation donated just over $200,000 to organizations in Los Angeles in 2008 and 2009, the complaint said, but raised that amount to $1.4 million in 2011, just as plans to open a store were getting underway. In 2013, the year that store opened, donations dropped to about $230,000.
“I think if this is truly charitable donations, they would be giving this every year,” said Matt Ryan, the executive director of the nonprofit advocacy group Alliance for a Greater New York, which signed the complaint. “I would characterize it as part of a smoke-and-mirrors campaign that Walmart would run when they’re trying to move into a city.”
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In a statement, a spokesman for Walmart, Kevin Gardner, said that the Walmart Foundation took tax code and regulations “very seriously” and that the allegations had no merit.
“The Walmart Foundation focuses giving in critical areas such as hunger, veterans and disaster relief,” Mr. Gardner said in an email. “We provide support for these and other important causes in communities across the U.S. and around the world, not just to particular areas or cities, and it’s unfortunate to see criticism of the foundation’s charitable giving.”
Paul C. Light, a professor of public service at New York University, said: “The optics here are pretty bad. The optics tell us what they’re doing, but is that enough to jerk the foundation’s charter?”
More troubling, Mr. Light said, is the accusation that the foundation explicitly excluded grantees that painted Walmart in a bad light.
“It comes very close to a directive, and the I.R.S. could say, ‘Look, this is not a grant, this is a contract,’ ” Mr. Light said.
The group’s complaint was first reported by The Washington Post.
Walmart’s vast footprint has made the retailer a dominant force in small towns and cities across the country. But the company’s sales have been sluggish and it has looked at big cities as a way to increase its customer base and sales. Community advocates say that this expansion comes at the expense of local businesses, and hurts low-wage workers by pushing down pay.
In 2010, Walmart’s investor meeting ended with the song “New York, New York,” and the Walmart Foundation’s contribution to New York-based organizations rose to $1.4 million from $90,000 the year before, according to the complaint. The next year, donations rose to $6.5 million as concerns for small businesses and workers’ rights prompted community groups to fight the company’s efforts to open a store in East New York.
“I think what we say is that they bought people’s support,” said Jonathan Westin, the executive director of New York Communities for Change, an advocacy group. Mr. Westin said that recipients of foundation grants sent activists to community board and other public meetings to advocate for the company.
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