IRS Scrutiny of 501(c)(3)s
by Linda Beale
IRS Scrutiny of 501(c)(3)s
As most everybody is aware by now, the IRS has been under considerable strain for a number of years from budget and staff reductions that have left it underfunded, understaffed, and under pressure. This is part of the right’s effort to “shrink the government to a bathtub and drown it.” If the main organization for helping Americans understand their tax obligations is understaffed, it is likely that many people will become irritated with the agency and blame it (and taxes) for all their problems. If the main organization for enforcing the U.S. tax laws fairly has too few people to audit the most likely scoflaws and too little money to prepare guidance and rulings to make it harder for scofflaws to scoff at the law, then many people will become irritated with the agency and blame it (and taxes) for their problems while many other people (especially the privileged rich) will continue to scoff at the law by overstating their basis when they sell capital assets, hiding assets in tax havens, and just hiring lots of expensive tax attorneys and accountants to come up with schemes for wiggling through the loopholes in the Code to avoid more taxes.
And of course, if the main organization for ensuring that tax-exempt organizations are not abusing their tax exempt status by using “dark money” to allow the domestic elite and foreign powers to influence and control federal elections and legislation, then odds are the rich and elite and foreign powers will wield more and more influence and control over who gets elected and what kind of legislation they pass. Odds are we will see even more of the kinds of absurd legislation disenfranchising the poor and minorities by making it harder to vote, harder to get a State-issued I.D. card, harder to wait in line for hours at the polls (if you will be fired for not reporting to work), etc.
None of this is any surprise.
None of it is good government.
All of it is supported by the current radicalized uber-right-wing Republican Party hacks that are running many state governments and hold the majority right now in the U.S. Senate and House of Representatives.
As the New York Times editorial board noted, “[c]laiming a ‘social welfare’ tax exemption has become a tool for powerful political operatives like Karl Rove, the Republican campaign guru. His Crossroads GPS group, which has 501(c) status, has spent $330 million on ads and candidates since it was created in 2010.” See Editorial, Dark Money and an I.R.S. Blindfold, New York Times (Apr. 28, 2016). And of course, with all the ranting about it being a problem to pick a group with “Tea Party” or “Progressive” in their name for closer scrutiny (when any common sense analysis will tell you that such a group is quite likely to be engaged in forbidden lobbying activities), “the IRS has groiwn ever more gun-shy about enforcement.”
So the latest bill wreaking havoc on democracy, put forward by Republican Peter Roskam in the House of Representatives, would eliminate the current law that requires those who donate more than $5000 to a nonprofit to be disclosed to the IRS (though redacted for public versions of organizations’ tax forms).. See, e.g., Richard Rubin, House Republicans Seek to Block IRS Collection of Non-profit Donor Data, Morningstar, Apr. 28, 2016. That means a foreign corporation or a foreign sovereign power could contribute enormous sums to shape the legislative and regulatory regimes in our country, and there would be NO WAY TO POLICE THE PROBLEM.
Further, it is hard to understand why any donor to a tax-exempt organization should be entitled to anonymity. The organization is able to avoid paying any taxes on the funds received, and–especially under the current malevolent eye from Congress towards the IRS–the IRS is hamstrung in enforcing the law against political campaigning with 501(c)(3) funds. What we should do instead of allow complete anonymity and the power plays that encourages is the opposite: the name of every donor who gives anything more than some de minimis threshold amount to any tax-exempt organization should be publicly available, and the amount given should be publicly available. After all, if money is “speech”, “speech” is supposed to be heard. Remember the old saying about the tree that fell in the forest and whether there would even be any sound if there were no eardrum available to hear it. That’s certainly the case with speech. If giving money is a form of speech, than the gift and giver shouldn’t be hidden under a bushel but should be broadcast far and wide for anyone who wants to know.
Note that the bill would also mean that the ‘dark’ groups under 501(c)(4) wouldn’t even have to provide information about the number of large versus small donors that it has.
By the way, if you have any doubts that Peter Roskam has no interest in the best interests of ordinary Americans, remember that back in November he was one of the gang of four that proposed pre-empting the rule expected from the Labor Department to impose a “best interest” standard on retirement advisers. They were so worried (weepy face) that some professionals who handle money for retirees might refuse to do it any more if they weren’t allowed to continue paying more attention to lining their own pockets rather than providing sound advice to their clients. See Teresa Tritch, A New Threat to Your Retirement, New York Times (Nov. 19, 2015) (with a swarmy picture of Peter Roskam).
Dark money group spends $58,000 attacking Consumer Financial Protection Bureau
Fortune 500’s Massive Use of Offshore Tax Havens
Levin Floor Statement on IRS Publication 17 Resolution
April 29, 2016 in Compliance, Corporate Transparency, Enforcement, Lobbying, Right Wing Rhetoric, Tax Legislation, Treasury/IRS in the News | Permalink | Comments (0)
Technorati Tags: 501(c)(3), best interests, dark money, disclosure, IRS, lobbying,Peter Roskam, right wing, speech, tax enforcement, tax exempt organization
APRIL 24, 2016
172 rightwingers on the Republican Study Committee want to “terminate” the tax code
Somehow it seems that the more absurd the congressional Republicans get, the greater their hubris and gall in proposing ideas that would hit government programs hard and create havoc for critically important government activities.
The latest is the right-wing “Republican Study Committee”, a caucus of 172 of the far-right members of the GOP, and their “Fixing the Tax Code” release. They argue, for example, for Goodlatte’s bill to “terminate the tax code” in 2019 in order to “force” Congress to implement a new tax system by a firm deadline. (Goodlatte, by the way, is a typical obstructionist right-winger Republican from Virginia who has evidenced numerous rather absurd positions in the past. He should not be listened to by anyone.) Their recommendations–more redistribution to the wealthy by lowering rates overall to 25% and cutting the tax on the types of income that the wealthiest Americans receive most of (capital gains and dividends) to a flat 15% rate.
This is, to put it bluntly, insane.
- You don’t set the way the tax code works by some a priori decision to lower rates so the wealthy pay less tax.
- You determine how the tax code works, and how much revenue it should raise, by what kinds of obligations already exist that have to be paid and by considering carefully government programs and appropriate and fair ways to raise tax revenues to fund them.
- You can’t “terminate the tax code” on a fixed date and expect anything other than anarchic chaos to result. It is enormously hard to write a full tax code that adequately addresses all of the human activities (and entity transactions) that have to be taken into consideration. To come up with the 1986 recodification of the tax code took a year and a half of concentrated work by a team of congressional taxwriters trying to reach a bipartisan result–something that hasn’t existed for at least the eight years of the Obama administration. And that group wasn’t trying to completely redo the entire code. It didn’t “terminate” the existing code, but rather worked within that system to make determinations about provisions that were unworkable, outdated, or just plain bad.
- For example, it eliminated the capital gains preference, because it is clear that the characterization of income as capital or ordinary is one of the major complications of the code that allow for gamesmanship by rich people and support redistribution to the wealthy by privileging the type of income they mostly receive. Congress, of course, responded to intense lobbying by the wealthy and reinstated the privileged tax rate within 2 years (retroactively).
This is further evidence that the Republican majority in Congress is incapable of dealing with actual facts about how tax systems work, what revenues are needed, and what the needs in the U.S. are for revenues.
It also reveals the abject hypocrisy of the rightwingers in Congress. They won’t uphold their duty to “advise and consent” on a presidential nominee for the highest court in the land, because they want to be able to obstruct the appointment of anybody that isn’t as right-wing as they are. They claim it is because the people should have their voice heard by electing the next president (though that’s just a sham argument–they want to obstruct things they don’t like, whatever the Constitution should actually allow).
But they don’t see any problem with a radical treatment of the tax code along the lines they want, even though they may not be in the majority of the Congress after this election. Hypocrits. Liars. Self-serving corrupt ideologues. That’s what this right-wing caucus is all about.
cross postedwith ataxingmatter
I would love to see Bernie Sanders make this a major issue during the general-election campaign when he’s campaigning for Dem candidates for Congress and for state legislatures.
I can imagine huge rallies where Sanders is campaigning with down-ballot candidates and making these points, and the audience cheering and booing as he talks about this.
This is truly a subject for a political revolution.
Here are firm reasons people hate the IRS:
Very nice piece Linda – thank you.
Interesting website Warren. Does it come with its own Kool-Aid or do you have to order that separately?
Do you find anything incorrect at that site?
I am sure you have been following the 501s here in Michigan also. They were proposing the doubling of individual donations without identifying the donor.
Warren, the “people” you refer to hating the IRS and the information you selectively provided to show that courts have not found the IRS liable for statements in their unofficial publications aren’t “people”… they’re corporate entities who were trying to skirt the tax laws and used what everybody knows are unofficial publications… especially the corporate attorneys.
I’m a standard citizen earned income tax payer who reads the official IRS statements AND when vague or not precisely defined for my particular case, I go to the Tax Court’s rulings to find out what I need to known to properly account for my income or investments and pay the required tax.
What you’re trying to imply is that “people” are mad at the IRS because they make statements in IRS publications that are lies and mis-statements of truths . How many actual non-corporate earned income non-proprietors… i.e. the “people” … can you name that that even know of or care one iota about the issues in the cases you cited?
What you linked to is just another example of far right, small government, low taxes capital owners propaganda using selective isolated statements and cases… all of which seem to be circa 1970’s and 1980’s cases.
And then you blame the courts! Great form, Warren. Let’s just do away with gov’t systems and have chaos instead.
You do know, of course, that if you call the IRS with a tax question, and they give you the wrong information, YOU are still responsible and can still be penalized?
“Let’s just do away with gov’t systems and have chaos instead.”
Oh, the classic “all-or-nothing” argument. Either we must have Big Government which tells us what toilets we can buy, what cars we can buy, what additions we can put on our houses, what light bulbs we can buy, what charitable causes our money has to go to, etc., etc., or we must have no government at all.
Let’s look at Sen. Warren’s “Tax Filing Simplification Act of 2016”. It says that, even if you have the government do your taxes for you, “Nothing in this section shall be construed to absolve the taxpayer from full responsibility for the accuracy or completeness of his return of tax.”
This is just?