Whistleblower Targets Tax Shelter Promoting Do-Good Technology

The offer was perfectly timed.

As the 2024 tax filing season closed, Solidaris Capital LLC pitched a proposal to accountants and wealth advisers looking for ways to slash their clients’ tax liabilities for 2025.

The company described its “transformative intangibles” offering as a chance for the uberwealthy to invest in 180 shell companies that would acquire allotments of digital technology at a relatively low cost and give investors the chance to donate the technology to charities at a higher valuation. Participants could then harvest generous tax deductions.

The pitch documents don’t specify how generous, but investors in the strategy are “effectively guaranteed” they’ll be able to claim a tax deduction of five times their initial investment, according to a Senate whistleblower complaint obtained by Bloomberg Tax. In that scenario, a $50,000 minimum investment in the technology via the shell companies would morph into a $250,000 charitable deduction at the end of the tax year.

Solidaris says it makes no specific guarantees to investors.

Three wealth advisers—who received Solidaris pitch proposals, attended presentations, reviewed investment documents, and spoke to company representatives—described the process for Bloomberg Tax on the condition of anonymity.

Working off a playbook refined over several years, Solidaris and its partners in 2025 proposed four separate plans, each investing in 45 shell companies, and each looking to raise $90 million from wealthy investors.

In one plan, the investors could vote to donate license rights to a technology designed to help blind people navigate in urban environments. In the second, they could vote to distribute digital coloring books to pediatric cancer patients. And in the two others, they could choose to donate crime-fighting artificial intelligence technology to local police departments. All four plans were described in private placement documents as Regulation D private offerings, allowing the promoters and sponsors to raise capital without registering the investments with the Securities and Exchange Commission.

Elements of the strategy including outsized charitable deductions, complex procedures, and unusually high fees, warrant government scrutiny, according to former Internal Revenue Service, SEC, and Department of Justice officials who reviewed the documents for Bloomberg Tax.

“It undermines fundamental economics and human behavior,” said Miles Fuller, a former senior counsel at the IRS Office of Chief Counsel. “One dollar does not turn into five dollars overnight. And if it did, it is unlikely the beneficial party would then donate the five dollars to charity rather than sell and pocket the profit.”

The Solidaris-led strategy to collect $360 million total from investors last year could generate charitable deductions of $1.8 billion this tax season, assuming high-wealth investors vote to donate the technology and then claim a deduction worth five times their investments. That would cut an estimated $667 million from their federal returns and $90 million from state returns for tax year 2025.

Solidaris says its investments “multiply good on a local, state, and national scale.” It also said it plays no role in whether investors vote to donate the technology. The company has not been charged with any wrongdoing.

Under the Internal Revenue Code, whether a tax shelter is allowed or not can be an open question until the government weighs in. And that can take years, especially when the shelter is novel or complicated.

A determination of legality of any shelter may only come after a pattern of auditing, enforcement, litigation, and adjudication. In some cases, Congress has intervened directly to close a gap or loophole in the tax code. Bloomberg Tax is unaware of the government taking any such actions in connection with Solidaris’ transformative intangibles strategy.

The CEO

Geoffrey Dietrich is chief executive of Solidaris, managing partner of the law firm Cantley Dietrich LLC, and founder of the investment management group Cirrus Investments LLC.

A Dallas tax attorney and graduate of the US Military Academy and Brigham Young University Law School, Dietrich declined to comment on the record. But Solidaris provided written responses to a series of questions from Bloomberg Tax about its transformative intangibles strategy.

The company said it is dedicated to full tax compliance and has received no inquiries from the IRS, SEC, Financial Industry Regulatory Authority, or state regulators.

“Our guiding principle is compliance, and everything stems from that,” Solidaris said in written responses to Bloomberg Tax. “We’ve built our professional team with individuals who have expertise and experience in IRS litigation and representation, taxpayer representation, and a deep educational and experiential understanding of tax law and tax policy.”

Solidaris and its predecessor entities have been operating its transformative intangibles strategy since at least 2021. The company told Bloomberg Tax it doesn’t indemnify investors against penalties if their tax deductions are disallowed by the government. The company encourages people to seek advice from their own attorneys and financial advisers before investing and includes cautionary statements in its pitch documents.

Whistleblower Complaints

The company and its strategy are the target of a whistleblower’s complaints filed with the IRS, the SEC, and the US Senate Finance Committee, Bloomberg Tax has learned. Solidaris disputes all of the allegations.

On March 16, Solidaris filed a complaint with the Senate Finance Committee claiming a whistleblower was misusing the process to influence litigation involving the company.

The tax attorney whose client filed the Senate whistleblower complaint told Bloomberg Tax the client is not involved in litigation with Solidaris and has no affiliation or financial relationship with the parties involved. The tax attorney spoke on the condition of anonymity to protect the whistleblower’s identity.

Ryan Carey, an aide to Senate Finance Committee ranking member Ron Wyden (D-Ore.), told Bloomberg Tax in a statement: “Finance Committee staff received a complaint last fall from a whistleblower with information related to an alleged tax scheme involving Solidaris Capital. Like any submission of this nature, of which the Finance Committee receives many, staff are carefully reviewing the facts before taking any action. Any allegations of improper coordination with third parties involving Finance Committee staff are patently false. Senator Wyden intends to follow up with the promoters of this alleged scheme in due time.”

The whistleblower alleges Dietrich and his affiliates are “bastardizing the charitable contribution deduction mechanism,” a legal tax break that has proven particularly challenging for the IRS to police.

In a statement to Bloomberg Tax last fall, Wyden said the government should take a closer look.

“Any potential abuse of the charitable deduction deserves close scrutiny,” Wyden said. “This transaction demonstrates the need for clear rules around the tax treatment of digital assets.”

Brian Galle, a professor of law at the University of California, Berkeley, and a former prosecutor in the Justice Department’s tax division, told Bloomberg Tax the strategy “can be replicated easily and that’s the kind of thing you want to shut down pretty fast. Of course, this assumes you have a live, awake, and alert IRS, and it’s not clear we have one right now.”

The whistleblower’s attorney told Bloomberg Tax the client’s initial whistleblower complaint about Dietrich and the transformative intangibles strategy was filed to the IRS in October of 2024. The IRS said it doesn’t comment on “specific taxpayers, cases or potential investigations.”

Rod Rosenstein, former principal deputy assistant Attorney General for tax enforcement in the Department of Justice, declined to comment specifically on the Solidaris transactions.

But he said in general a tax shelter delivering a deduction several times beyond a taxpayer’s initial investment should be closely examined by the Justice Department and the IRS. Currently, that’s a process that can take years.

“The IRS and the Justice Department should be far more proactive. Their enforcement strategies are largely reactive and very selective. They tend to let these schemes fester,” said Rosenstein, now a partner in the Washington, DC, office of Baker McKenzie. “They should identify these schemes early on, make some strong statements, and take civil injunctive action.”

The Process

Tax-sheltering strategies, whether legitimate or illegal, grow out of real or perceived gaps in the Internal Revenue Code. Promoters pore through the code to find exceptions and exclusions and build shelter structures designed to exploit the gaps.

The Solidaris-led strategy offers investors the chance to buy membership interests in limited liability companies that acquire contractual or license rights to digital technology.

The process is assisted by sponsors, which structure the investment and manage many of the key business and legal features of the deal. In the transformative intangibles transactions, the sponsors also license the tax strategy developed by Solidaris.

The process is further assisted by a managing broker-dealer and a wholesaler. The broker-dealer solicits investors and is responsible for SEC and FINRA compliance. The wholesaler hosts pitch sessions and drives interest in the investment opportunity.

While investors have the option to vote to sell, hold, or donate the technology at the end of the year, they’re expected to vote to donate to charity at an appraised value much higher than their initial investment, leaving them with large tax write-offs, according to the whistleblower complaint. It also questioned the veracity of the appraisal process.

The securities documents explain a process transacted in multiple steps, concluding with an appraisal of the technology and the distribution of charitable donation tax forms reflecting the appraised value. Bloomberg Tax, working through documents with a wealth adviser to whom Solidaris pitched the investments, broke the strategy into eight main steps.

1. The promoter and sponsors set up 180 Series LLCs, through four identically structured investments, which will each accept $2 million from investors. Within the tax shelter, each Series LLC functions as a separate legal entity with its own assets, members, and liability protections from the parent and the other Series LLCs.

2. The promoter, sponsors, broker dealers, and wholesalers recruit investors and sell membership interests in the 180 Series LLCs.

3. A technology company contributes license rights to its technology to a separate holding company.

4. Each LLC buys portions of the holding company in $2 million portions.

5. A tax attorney writes an opinion validating the strategy.

6. The investment window closes in December. Investors in each LLC vote to sell the technology, hold it, or donate it to charity.

7. An appraiser releases a fair market value appraisal of the donated technology.

8. A subcontractor provides charitable donation tax documents to investors reflecting the appraised value of the technology.

Charitable Donations

Under certain circumstances, taxpayers are permitted to claim deductions equal to the fair market value of personal property donated to charity, particularly for assets such as art and antiques. But a five-times multiple in less than a year is inconsistent with IRS rules governing other types of charitable donations, Fuller said.

One of those IRS rules involves syndicated conservation easements, where promoters sell investors stakes in LLCs that acquire land with a restriction on development that can be donated to charity at an inflated appraised value, yielding a big tax deduction.

In 2024, the IRS issued final regulations designating syndicated conservation easements and “substantially similar transactions” as “listed transactions”—a specific category of tax avoidance strategies that impose special reporting duties on participating taxpayers.

The regulations include a rule generally disallowing charitable deductions by partnerships and S corporations that exceed 2.5 times the sum of each partner’s basis, or initial investment in the donated property.

Private placement documents and FAQs in the Solidaris transformative intangibles plans tell investors that the IRS rule on syndicated conservation easements does not apply, in part because charitable donations of real property are not substantially similar to charitable donations of intangible personal property.

Still, the arrangement “looks very similar” to syndicated conservation easements, said Fuller, the former IRS senior lawyer who is now head of government solutions at the tax compliance firm TaxBit, even though “the donated property is now IP or digital technology rather than an easement on real estate.”

In Solidaris’ letter to the Senate Finance Committee, it said: “In the years since these programs began operating, the IRS has not designated this structure as a ‘listed transaction.’ The IRS has not issued promoter penalties. The IRS has not sought injunctions. No Solidaris investor has faced an IRS challenge to their charitable deduction.”

Fees

The private placement memorandums for the 2025 Solidaris transactions show about a quarter of the investor funds are used to purchase digital technology that will eventually flow to charity, with the bulk of the money going to commissions, administrative costs, and licensing fees.

In one example, Solidaris offered the $90 million Colors4Kids investment strategy, which purchased digital coloring books for distribution to pediatric cancer patients. The memorandums state 25%, or $22.5 million if the full $90 million was raised, would be used to buy technology from Rapid City, South Dakota-based Spizzirri Creative LLC, which markets the digital downloads.

Another 62%, or $55.8 million, would go to legal, accounting and management fees, working capital, and audit defense fees, according to the memorandums. Within that broad grouping, 32%, or $28.8 million, was reserved as an intellectual property license fee for Solidaris, the memorandums state.

And about 13%, or $11.7 million, would be paid out as commissions. In Regulation D offerings, promoters are generally permitted to pay commissions to registered broker-dealers and their registered representatives.

The fee structure is highlighted in litigation involving Solidaris and Head Genetics Inc., which markets a saliva-based concussion assessment technology. Solidaris is suing the company in Texas court, accusing it of stealing its “trade secret, turnkey charitable tax and investment strategy.” Head Genetics alleged in court documents that the Solidaris plan included “egregious and unjustifiable fees masquerading as ‘operating expenses.’”

Solidaris told Bloomberg Tax its private placement memorandums explain “all relationships and all fees in detail—every fee is transparent and all parties choose to invest based on the complete information that we provide, as well as the advice and counsel of their own professional advisors.”

The Technology

In one example, the Solidaris Hear2There transaction involves a technology developed by Atlanta-based Foresight Augmented Reality LLC, which markets systems that broadcast geographic and public accommodation information through Bluetooth connections to visually impaired users from beacons placed in hospitals, offices, and transportation systems. Solidaris has designated a Spartanburg, S.C., charity called SpartansFirst to receive allotments of Foresight software and beacons.

Dennis Hayes, founding chairman of SpartansFirst, said last August his small regional charity accepted hundreds of thousands of Hear2There beacon bundles in 2024 in working with Solidaris, and was scheduled to receive hundreds of thousands more in 2025. To date, SpartansFirst has only donated the navigation systems to a brewery and a handful of restaurants in South Carolina, according to the charity’s website.

“We have been working diligently to figure out how to get these distributed,” Hayes, who is blind and a supporter of assistive technologies, said in an interview. “It’s almost as hard to give away something for people to try out as it is to sell it to them. They haven’t heard of it. They don’t know what it is.”

Roberto Manduchi, who researches assistive technologies for the visually impaired as a professor of computer science and engineering at the University of California, Santa Cruz, said he had never heard of the system developed by Foresight. He noted the market for assistive technologies is limited and already dominated by giants such as Apple, Google, and Meta.

‘Good and Legitimate Work’

The charities participating in the transformative intangibles transactions in 2025 operate with relatively small staffs and budgets. Yet they’ll purportedly be distributing digital technology with a potential fair market value of $1.8 billion for charitable deduction purposes.

Spartanburg Supports Law Enforcement & First Responders, doing business as SpartansFirst, had gross receipts of less than $50,000 in 2022, according to its most recent 990-N (e-Postcard) tax return. SpartansFirst founder Hayes didn’t respond to a request for comment on his charity’s relationship to Solidaris and the status of its tax returns.

The New Orleans-based charity Kids Join the Fight, which supports pediatric cancer patients, says nothing about its relationship with Solidaris under the Colors4Kids transformative intangibles transaction or its intentions to distribute digital coloring books in 2024 on its form 990 tax return. The charity, which had total revenue of $1.7 million in 2024 and one employee, accepted coloring book digital downloads purportedly worth millions of dollars in tax deductions and was scheduled to accept another allotment in 2025.

The charity’s founder and its tax attorney declined to discuss the 2024 tax return.

The Secure Tomorrow and Secure Community programs were scheduled to provide crime-fighting AI technology to local police departments, leading to potentially hundreds of millions in tax deductions. The technology donations would be coordinated through a Richardson, Texas-based charity called The Clarion Project, whose mission is to expose and reduce the threats of violent extremism.

The Clarion Project’s 2024 990 return shows it had $2.3 million in total revenue and 20 employees. The return doesn’t mention receipt of digital technology from Solidaris or related entities.

Neither Kids Join the Fight nor The Clarion Project filed Schedule Ms with their 990 tax returns in 2024. Schedule M is the form on which charities must disclose noncash contributions of more than $25,000, including donations of intellectual and intangible property. SpartansFirst hasn’t filed any type of tax return since 2022, according to the IRS’s public database of returns for tax-exempt organizations. Clarion did not respond to requests for comment.

“If a donor claims a deduction for noncash property donated to charity but the charity fails to report the donation on its Form 990, a question may be raised as to whether the property was actually received by the charity and, if so, whether the charity believed the property had any value,” said Karin Gross, a 39-year veteran of the IRS Office of Chief Counsel and a specialist in charitable deduction law at K. Tyson Law PLLC.

Solidaris noted it has no duty to provide legal or tax advice to the charities after the donations of digital technologies are made.

“All of these charities have access to their own outside counsel and tax advisors, independent of Solidaris,” the company said in a response to Bloomberg Tax. “Charities exist for the sole purpose of creating and undertaking charitable purposes, and it is certainly not up to us how they file with the IRS. Some of these are leading-edge, smaller charities who are interested in participating in our unique and beneficial structure—they are doing good and legitimate work, that benefits our society in a positive way, and we want to help further their mission.”