The U.S. House Committee on Oversight and Accountability has signaled it will be investigating IRS violations with regard to environmental, social, and governance (ESG).
Specifically, a press release says Committee Chairman James Comer (R-KY) is "seeking more information to determine whether ESG related actions by retirement plan administrators violate the “exclusive benefit” requirements of the Internal Revenue Code (IRC)."
Comer sent a letter to IRS Commissioner Daniel Werfel with a list of information he wants to see on state pension fund compliance with the IRC that deals with “exclusive benefit” provisions.
The letter expresses the Committee's concerns that some state pension funds are prioritizing political or ideological goals over the financial interests of their beneficiaries, which could be a violation of tax law.
The IRC provides tax incentives for employer-sponsored retirement plans, but these plans must meet certain requirements to maintain their qualified status, including operating for the "exclusive benefit" of employees.
The letter dives into the background of "exclusive benefit" or "exclusive purpose and cites an example of the California Public Employees Retirement System (CalPERS), which has been using their shareholder voting rights to pursue political agendas, such as anti-oil and gas policies, which may violate the "exclusive benefit" rule.
Comer's letter says CalPERS' pledge to vote against Exxon Mobil's entire Board of Directors due to the company's litigation against activist groups Arjuna Capital and Follow This, which have goals that may not align with maximizing shareholder value.
Information requested from the IRS in the letter would be due by June 20, 2024. The key items requested include the process used to determine plans' compliance with the "exclusive benefit" requirements, copies of IRS guidance on meeting the "exclusive benefit" test, and the number and details of enforcement actions taken against plan sponsors related to the "exclusive benefit" test from fiscal years 2018-2024.
The Committee already held one hearing on ESG policies back in May at which Comer, in his opening remarks, ripped ESG as "just window dressing for liberal activism and radical far-left ideology."
"Because the Left are not big fans of diverse thought or individual freedom, they are using the “feel good” language of ESG to force compliance to their ideology," Comer said. "That’s why I am concerned that asset managers and activist shareholders are pushing a political agenda with their clients’ money, agreeing to ESG pledges pushed by global advocacy groups."
President Biden’s first veto was on the bill ending a Department of Labor rule allowing retirement plan managers to consider ESG factors in investment decisions.
In February 2023, Financial Services Committee Chairman Patrick McHenry (NC-10) announced a working group to combat ESG practices and policies.
McHenry's working group followed investigations of ESG complaints involving Climate Action 100+ by the U.S. House Judiciary Committee in December 2022.
More To The Story
North Carolina State Treasurer Dale Folwell has been keeping an eye on ESG battle for a few years now and he even called for the ouster of Blackrock CEO Larry Fink in December 2022.
Last legislative session, lawmakers passed House Bill 750 to address ESG issues in North Carolina. Governor Roy Cooper vetoed the bill followed by an override of the veto by the General Assembly.
Under the law, state entities are prohibited from creating or using ESG criteria or economically targeted investments requirements when making employment decisions, including in hiring, firing, or evaluating employees. The law also gives Folwell's position power to make decisions in investments.
MTS Calendar Alert:
On June 11, the Select Subcommittee on the Coronavirus Pandemic is going to interview former NY Governor Andrew Cuomo.
The Subcommittee has already interviewed at least six of his top advisers during the pandemic with Melissa DeRosa, the former Secretary to the Governor, on deck for an upcoming transcribed interview.
"Governor Cuomo will be asked to explain the circumstances surrounding his issuance of New York’s deadly “must-admit” COVID-19 nursing home guidance."
In other words, Cuomo will be grilled on his pandemic nursing home scandal that resulted in the deaths of around 15,000 people.
The media hailed Cuomo as pandemic response leader. That was until the nursing home scandal started to unravel.
Remember, in response to the report issued by the task force looking into Cuomo’s nursing home policies, he was quoted as stating, “Who cares [if they] died in the hospital, died in a nursing home? They died.”
His aides were also caught re-writing the task force’s report. Also, the NY Attorney General’s office and FBI both got involved.
Read the Subcommittee’s press release for more details: Former New York Governor Andrew Cuomo to Appear for Transcribed Interview