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[The IRS], 501(c)(4)'s, and Political Activity

2

Posts

  • spool32spool32 Contrary Library Registered User regular
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    VorpalCururu
  • shrykeshryke Member of the Beast Registered User regular
    Vorpal wrote: »
    Right. It's a multi-tiered problem.

    -conservative groups were wrongly selected for extra scrutiny
    -that scrutiny was wrongly and excessively intrusive and burdensome

    You can see how that would perfectly fan the flames of 'the IRS is out to get us'.

    If you the extra scrutiny you receive is of an appropriate level, it doesn't really matter if you got selected for it incorrectly. You supply the needed information and move on with your life. But if the scrutiny is clearly over the line and asking questions it shouldn't and taking years and years - you are going to think you are being harassed.

    We know that conservative groups were wrongly chosen for extra scrutiny via the filter. I don't know that there's any evidence that *just* conservative groups received the extra harsh level of scrutiny. We know lots of them did. It's entirely possible all groups chosen for extra scrutiny had to wait too long. Or a random sampling of them. Do we know of any progressive groups that had to wait 2-3 years for their application to be granted?

    Also, since I agree that the delays were a very bad thing that need to be fixed, it's obvious I've read the report and AManFromEarth has not. I think you are directing your advice to the wrong quarter.

    Except if you'd read the report, you'd already know the answer to this part since it's in there.

    And the answer is that almost all the potential political cases (of which only about 1/3rd were tea-party-related) were delayed.

  • shrykeshryke Member of the Beast Registered User regular
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    AManFromEarthSammyFArdol
  • BSoBBSoB Registered User regular
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Vorpalspool32spacekungfumanCururu
  • VorpalVorpal Registered User regular
    shryke wrote: »
    And the answer is that almost all the potential political cases (of which only about 1/3rd were tea-party-related) were delayed.

    Yes, but the delays varied in length. About 20% only waited one year. Additionally I didn't see a breakdown provided sorting the cases selected for extra scrutiny correlating delay with political affiliation (and indeed, it would be somewhat sinister if there was).

    If you know of a specific progressive group that had to wait 2-3 years, feel free to point it out. I would not be at all surprised there is one (or even more than one). I just don't think from the report you can automatically assume one exists, although I think it is probable. But who knows? It could have just been a mad rush of conservative groups trying to create 501(c)(4)'s and so 80% of the ones forwarded for extra review were conservative, only about 1/4 of which were part of the tea party filter, and the 20% that were not conservative got approved in one year.

    Unlikely, but possible.

    steam_sig.png
    PSN: Vorpallion Twitch: Vorpallion
  • VorpalVorpal Registered User regular
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    That's not suspicious at all.

    Not being primarily political is not at ALL the same thing as not being political.

    I could easily see a group concerned about environmental issues wanting to form before an election because one of the people in it has a strong environmental record and the other pumps pollutants into rivers, even if the groups primary focus is not political.

    steam_sig.png
    PSN: Vorpallion Twitch: Vorpallion
    spool32
  • PhyphorPhyphor Building Planet Busters Tasting FruitRegistered User regular
    Vorpal wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    That's not suspicious at all.

    Not being primarily political is not at ALL the same thing as not being political.

    I could easily see a group concerned about environmental issues wanting to form before an election because one of the people in it has a strong environmental record and the other pumps pollutants into rivers, even if the groups primary focus is not political.

    But you would expect lots of scrutiny of that behaviour to ensure you were legitimate and not just forming just to influence the election, no?

  • Jebus314Jebus314 Registered User regular
    I will say that the absolute lack of statistical breakdown for political leanings in the IG report is somewhat suspicious. Considering the primary agenda behind the entire investigation you would think it would be important to establish just who was being delayed. At this point I don't see any information confirming or denying that the remaining non tea party applications were also conservative, or progressive, or some mix. Nor do they address the ratio of political leanings for any of the groups who were asked to provide unreasonable documentation.

    The irs FAQ page for this mess indicates that no political biases were found by any investigating parties, but what else are they going to say? You can download a list of all tax exempt groups that exist, and a shorter list of all the ones approved since they centralized the review process, but both are alphabetical with no indication of acceptance date. Obviously both conservative and progressive groups appear on both.

    "The world is a mess, and I just need to rule it" - Dr Horrible
  • spool32spool32 Contrary Library Registered User regular
    Phyphor wrote: »
    Vorpal wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    That's not suspicious at all.

    Not being primarily political is not at ALL the same thing as not being political.

    I could easily see a group concerned about environmental issues wanting to form before an election because one of the people in it has a strong environmental record and the other pumps pollutants into rivers, even if the groups primary focus is not political.

    But you would expect lots of scrutiny of that behaviour to ensure you were legitimate and not just forming just to influence the election, no?

    If evenly applied, sure. But we know it was not.

  • BSoBBSoB Registered User regular
    Phyphor wrote: »
    Vorpal wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    That's not suspicious at all.

    Not being primarily political is not at ALL the same thing as not being political.

    I could easily see a group concerned about environmental issues wanting to form before an election because one of the people in it has a strong environmental record and the other pumps pollutants into rivers, even if the groups primary focus is not political.

    But you would expect lots of scrutiny of that behaviour to ensure you were legitimate and not just forming just to influence the election, no?

    The point is I would assume that virtually every single entity filling for a 501c4 does so with the intent of participating in an election.

    If your filter is "everyone who wants to participate in an election." Then you're picking pretty much everyone. Which is fine, if you're actually looking into everyone.

  • Harry DresdenHarry Dresden Registered User regular
    edited May 2013
    Vorpal wrote: »
    Right. It's a multi-tiered problem.

    -conservative groups were wrongly selected for extra scrutiny
    -that scrutiny was wrongly and excessively intrusive and burdensome

    You can see how that would perfectly fan the flames of 'the IRS is out to get us'.

    The IRS doing anything is enough to make conservatives think 'the IRS is out to get us.' Its mere existence is an abomination to them that they want it erased from government.

    Harry Dresden on
  • HamurabiHamurabi Cambridge, MARegistered User regular
    I still don't really follow the logic of why this is an outrage.
    • The job of the IRS is to make sure groups applying for tax-exempt status aren't exclusively political.
    • During 2009 and 2010, there were a slew of groups forming that were probably exclusively political in nature; many of them would have been Tea Party groups given the political climate surrounding the ACA.
    • To deal with this avalanche of new applications, the IRS uses specific phrases that would be tied to Tea Party groups as an heuristic device, despite the ridiculous ease with which this could appear as an impropriety.
    Where is the scandal? Unless these folks were only targeting Tea Party groups -- which would be a problem -- I just don't see it.

  • BSoBBSoB Registered User regular
    Hamurabi wrote: »
    I still don't really follow the logic of why this is an outrage.
    • The job of the IRS is to make sure groups applying for tax-exempt status aren't exclusively political.
    • During 2009 and 2010, there were a slew of groups forming that were probably exclusively political in nature; many of them would have been Tea Party groups given the political climate surrounding the ACA.
    • To deal with this avalanche of new applications, the IRS uses specific phrases that would be tied to Tea Party groups as an heuristic device, despite the ridiculous ease with which this could appear as an impropriety.
    Where is the scandal? Unless these folks were only targeting Tea Party groups -- which would be a problem -- I just don't see it.

    Imagine you have a DWI check point, where you stop every driver that appears drunk, and every driver that appears black.

    I mean, if they were targeting only black people, that would be a problem, right?

    spacekungfumanVorpalgjaustin
  • Harry DresdenHarry Dresden Registered User regular
    edited May 2013
    BSoB wrote: »
    Hamurabi wrote: »
    I still don't really follow the logic of why this is an outrage.
    • The job of the IRS is to make sure groups applying for tax-exempt status aren't exclusively political.
    • During 2009 and 2010, there were a slew of groups forming that were probably exclusively political in nature; many of them would have been Tea Party groups given the political climate surrounding the ACA.
    • To deal with this avalanche of new applications, the IRS uses specific phrases that would be tied to Tea Party groups as an heuristic device, despite the ridiculous ease with which this could appear as an impropriety.
    Where is the scandal? Unless these folks were only targeting Tea Party groups -- which would be a problem -- I just don't see it.

    Imagine you have a DWI check point, where you stop every driver that appears drunk, and every driver that appears black.

    I mean, if they were targeting only black people, that would be a problem, right?

    Being conservative isn't a class or race related issue. They're also organizations, not individual people. The IRS is a law enforcement agency, it is vital that they be able to narrow down suspects.

    Harry Dresden on
  • tyrannustyrannus Registered User regular
    edited May 2013
    If the IRS has credible evidence (which is typically does) that many organizations that apply for 501(c)(4) status do so for the protection it applies to donors, and there's a dramatic increase in 501(c)(4) applications due to the Tea Party, it would not be out of line to want to have substantiation behind the purpose of filing the 501(c)(4) application and whether or not they would be able to comply with the IRC regulations.

    They approached it with appropriate scrutiny, it's just that their method was too selective. They are typically understaffed, but certain keywords on returns will typically flag a return for agent review. They just happened to add "patriot" and shit to the computer. Which was, you know, lazy.

    tyrannus on
    spacekungfuman
  • tyrannustyrannus Registered User regular
    Here's part of the audit technique guide the IRS uses for 501(c)(4)s. Everything seems appropriate.
    Spoiler:

  • poshnialloposhniallo Registered User regular
    Racial profiling isn't a good analogy. This is a specific search for political viewpoints. Any approach is going to involve political words, whether those are 'communist' 'jihad' or whatever.

    If standards were applied evenly, then I don't see a problem. The imaginary persecution complex of the US right-wing may disagree, of course.

    I figure I could take a bear.
    Harry Dresden
  • Sir LandsharkSir Landshark Registered User regular
    edited May 2013
    I wonder if full list of the keywords used is available

    Sir Landshark on
    Please consider the environment before printing this post.
  • SavantSavant Registered User regular
    edited May 2013
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    Savant on
    shryke
  • tyrannustyrannus Registered User regular
    "landshark" will 100% flag you for an audit

    spacekungfuman
  • Sir LandsharkSir Landshark Registered User regular
    tyrannus wrote: »
    "landshark" will 100% flag you for an audit

    That's profiling!

    Please consider the environment before printing this post.
  • HamurabiHamurabi Cambridge, MARegistered User regular
    The other big question is why these organizations aren't either just blanket tax-exempt, or none of them are.

  • spacekungfumanspacekungfuman Poor and minority-filled Registered User, __BANNED USERS regular
    tyrannus wrote: »
    If the IRS has credible evidence (which is typically does) that many organizations that apply for 501(c)(4) status do so for the protection it applies to donors, and there's a dramatic increase in 501(c)(4) applications due to the Tea Party, it would not be out of line to want to have substantiation behind the purpose of filing the 501(c)(4) application and whether or not they would be able to comply with the IRC regulations.

    They approached it with appropriate scrutiny, it's just that their method was too selective. They are typically understaffed, but certain keywords on returns will typically flag a return for agent review. They just happened to add "patriot" and shit to the computer. Which was, you know, lazy.

    I agree, but I am not aware of any keyword based flagging like this having been done before. It isn't just lazy. It's lazy in a novel way. And the IRS is many things, but it is rarely novel.

    AManFromEarth
  • spacekungfumanspacekungfuman Poor and minority-filled Registered User, __BANNED USERS regular
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

  • Harry DresdenHarry Dresden Registered User regular
    tyrannus wrote: »
    If the IRS has credible evidence (which is typically does) that many organizations that apply for 501(c)(4) status do so for the protection it applies to donors, and there's a dramatic increase in 501(c)(4) applications due to the Tea Party, it would not be out of line to want to have substantiation behind the purpose of filing the 501(c)(4) application and whether or not they would be able to comply with the IRC regulations.

    They approached it with appropriate scrutiny, it's just that their method was too selective. They are typically understaffed, but certain keywords on returns will typically flag a return for agent review. They just happened to add "patriot" and shit to the computer. Which was, you know, lazy.

    I agree, but I am not aware of any keyword based flagging like this having been done before. It isn't just lazy. It's lazy in a novel way. And the IRS is many things, but it is rarely novel.

    How else would you go about organizing their categories? Keep in mind this isn't a multi-national corporation with "fuck you" money.

  • SammyFSammyF Registered User regular
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    As to a couple of your questions, it is being linked to the Office of the President because Congressional Republicans are desperate for a scandal so that they can make people hate the president. Also remember that 2014 is an election year, and if they can get their base angry and Obama's base sad then they'll win big. Just like they did in 2010.

    And a lot of the problems go back to Citizens United, Super PACs, and the relationship between money and politics more generally.

    So I guess what I'm saying is ABOLISH THE DONOR SYSTEM NOW

    Is it not possible that the Democratic action fund, well, didn't meet the requirements of a 501c4?

    And if the Republican SuperPACs (since that's what I understand most of these 501c4s to be) had their approval unnecessarily delayed until after the elections I don't think you can just shrug it off like nothing happened.

    It seems to me that when the IRS came clean about this they would have mentioned that they were also targeting left-wing groups to downplay the partisan optics, but hey, maybe they are just that incompetent.

    Wanted to pop in to throw out a quick clarification: Super PACs are not 501(c)(4) organizations. They're 527's that file quarterly with the FEC, which recognizes them as "Independent Expenditure-only filers."

    It's an entirely different section of the law and a different problem.

  • spacekungfumanspacekungfuman Poor and minority-filled Registered User, __BANNED USERS regular
    tyrannus wrote: »
    If the IRS has credible evidence (which is typically does) that many organizations that apply for 501(c)(4) status do so for the protection it applies to donors, and there's a dramatic increase in 501(c)(4) applications due to the Tea Party, it would not be out of line to want to have substantiation behind the purpose of filing the 501(c)(4) application and whether or not they would be able to comply with the IRC regulations.

    They approached it with appropriate scrutiny, it's just that their method was too selective. They are typically understaffed, but certain keywords on returns will typically flag a return for agent review. They just happened to add "patriot" and shit to the computer. Which was, you know, lazy.

    I agree, but I am not aware of any keyword based flagging like this having been done before. It isn't just lazy. It's lazy in a novel way. And the IRS is many things, but it is rarely novel.

    How else would you go about organizing their categories? Keep in mind this isn't a multi-national corporation with "fuck you" money.

    I propose that they don't. I think they should just continue to assign applications to examiners and review them in sequence, just like they always have. The sorting didn't actually reduce work load,mince each application still needed to be a signed to a reviewer. . .

  • tyrannustyrannus Registered User regular
    edited May 2013
    tyrannus wrote: »
    If the IRS has credible evidence (which is typically does) that many organizations that apply for 501(c)(4) status do so for the protection it applies to donors, and there's a dramatic increase in 501(c)(4) applications due to the Tea Party, it would not be out of line to want to have substantiation behind the purpose of filing the 501(c)(4) application and whether or not they would be able to comply with the IRC regulations.

    They approached it with appropriate scrutiny, it's just that their method was too selective. They are typically understaffed, but certain keywords on returns will typically flag a return for agent review. They just happened to add "patriot" and shit to the computer. Which was, you know, lazy.

    I agree, but I am not aware of any keyword based flagging like this having been done before. It isn't just lazy. It's lazy in a novel way. And the IRS is many things, but it is rarely novel.

    The state of New York has a system that looks for keywords and is also able to recognize trends and ratios to determine if something is cockeyed. When it determines that, it'll flag a return for closer inspection.

    http://www.rgbrenner.com/blog/2012/01/24/watson-assisting-ny-state-to-catch-tax-cheats/?doing_wp_cron=1368754539.9994480609893798828125

    The IRS apparently has,allegedly, something like this in place now.

    tyrannus on
  • SavantSavant Registered User regular
    edited May 2013
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

    The main argument from O'Donnell and co. is that the IRS regulations on the subject are inconsistent with the law and the English language, and have been for a very long time. Mostly centering around how they inserted the word "primarily" to replace "exclusively" for the purposes of social welfare.

    But again, the last clause of the law seems pretty clear that the activities that should constitute promotion of social welfare are pretty narrow, and not subject to the sorts of games that the subsequent IRS regulations have allowed. For example, spending on a political party seems like it is directly contrary to having the earnings "devoted exclusively to charitable, educational, or recreational purposes", and the tax exemption should be denied outright. It doesn't seem like you need to be a lawyer to understand what the base law says. It's worded so "you can only be doing these things and get this tax exemption," not "as long as you don't do anything specifically prohibited, you get tax exemption."

    I know these folks like to play somewhat childish games like "you said I couldn't do X, but you didn't say I couldn't do Y which is essentially the same!", but the consequence of this scandal is that they should update the regulations to be more straightforward and follow the law much more closely. Which to my reading means they should basically eliminate the 501c4 tax exemption for most if not all of these political groups.

    Savant on
    tyrannusHappylilElfMoridin889fugacityshryke
  • MillMill Registered User regular
    tyrannus wrote: »
    If the IRS has credible evidence (which is typically does) that many organizations that apply for 501(c)(4) status do so for the protection it applies to donors, and there's a dramatic increase in 501(c)(4) applications due to the Tea Party, it would not be out of line to want to have substantiation behind the purpose of filing the 501(c)(4) application and whether or not they would be able to comply with the IRC regulations.

    They approached it with appropriate scrutiny, it's just that their method was too selective. They are typically understaffed, but certain keywords on returns will typically flag a return for agent review. They just happened to add "patriot" and shit to the computer. Which was, you know, lazy.

    I agree, but I am not aware of any keyword based flagging like this having been done before. It isn't just lazy. It's lazy in a novel way. And the IRS is many things, but it is rarely novel.

    How else would you go about organizing their categories? Keep in mind this isn't a multi-national corporation with "fuck you" money.

    I propose that they don't. I think they should just continue to assign applications to examiners and review them in sequence, just like they always have. The sorting didn't actually reduce work load,mince each application still needed to be a signed to a reviewer. . .

    This is what they should have done. Then when people start bitching about the process taking too long, they can kindly point out that they are understaffed and it's not their problem if people at the back of the long get screwed since everyone is getting the same scrutiny. If they really want to be slick they can then pull up several of federal and state level programs with awful waiting lists for other services just to drive the point home that it isn't unique to the IRS.

    Worst case, the right bitches how useless government is and that things should be privatized because they are incapable of seeing that this is a case of "getting what you pay for." in this case, it's long waiting periods for people at the back of the line when the agency in charge doesn't have enough people. Best case, maybe enough people on the right will briefly remove their heads from their asses and realize that maybe they shou . . . pfhahahahahah can't finish the sentence because it's just won't happen with the chucklefucks running the current GOP. Those guys believe in too much fairy dust and bullshit to make any progress towards effective governing.

  • LanzLanz Registered User regular
    So from the Administration thread:
    There is this interesting (possible) point. They didn't have to apply for tax exempt status to begin with, so them applying at all is the weird thing.
    There's been an interesting trajectory to the IRS controversy over the last several days. Initially, the condemnations were just about universal -- no one was prepared to defend a policy in which the tax agency treated some groups unfairly based solely on ideological grounds. The IRS has to be neutral and even-handed at all times, and anything short of that standard is scandalous.

    But yesterday, I started noticing some pushback from credible observers wondering whether the story isn't quite what it appeared to be at first blush. Jeffrey Toobin, for example, asked whether the IRS actually did anything wrong.

    How can anyone still wonder about that, given the apparent consensus? Noam Scheiber raised an interesting point I hadn't seen elsewhere.
    It turns out that the applications the conservative groups submitted to the IRS -- the ones the agency subsequently combed over, provoking nonstop howling -- were unnecessary. The IRS doesn't require so-called 501c4 organizations to apply for tax-exempt status. If anyone wants to start a social welfare group, they can just do it, then submit the corresponding tax return (form 990) at the end of the year. To be sure, the IRS certainly allows groups to apply for tax-exempt status if they want to make their status official. But the application is completely voluntary, making it a strange basis for an alleged witch hunt.

    So why would so many Tea Party groups subject themselves to a lengthy and needless application process? Mostly it had to do with anxiety -- the fear that they could run afoul of the law once they started raising and spending money. "Our business experience was that we had to pay taxes once there was money coming through here," says Tom Zawistowski, the recent president of the Ohio Liberty Coalition, which tangled with the IRS over its tax status. "We felt we were under a microscope. ... We were on pins and needles at all times." In other words, the groups submitted their applications because they perceived themselves to be persecuted, not because they actually were.

    Jamelle Bouie added, "This helps explain why the IRS decided to apply scrutiny at all. Applications are unusual, and when you receive a large number of them from a particular set of right-leaning groups, it's bound to raise suspicion. As Scheiber notes, 'The IRS was unexpectedly flooded by dodgy 501(c)4 applications and was at a loss over how to manage them.'"

    I have a little background covering tax law as it relates to non-profits, and I'll confess this is new to me. But it turns out, it's true -- 501(c)4 don't have to apply to the IRS; they can simply claim the status and proceed accordingly.

    Indeed, there's a handy visual in the IG report (pdf) that came out this week, responding to the controversy. (I added the red oval to highlight the relevant portion.)

    imagesizer?file=steve-benen35E6BDC3-D2C3-68F9-9CDC-8CFA5660AA1E.jpg&width=600

    This seems important rather important. All of these groups sent in applications, overwhelming confused IRS bureaucrats who struggled, not only to deal with the paperwork, but with the ambiguities of tax law as it relates to political groups seeking tax-exempt status.

    So, it would appear that the overwhelmed officials, seeing tons of Tea Party groups filing for (c)4 status, started wondering if perhaps these political entities didn't really deserve it. As we know, some liberal groups ran into trouble, too.

    The angle I don't understand, though, is why these groups would send in unnecessary applications in the first place. Scheiber's report says the groups were worried about adverse tax consequences down the road, but why would that stop them? If they hoped to influence the elections, by the time they faced after-the-fact scrutiny, the elections would be over.

    (If there any experts on tax law and non-profits reading this, and want to weigh in, I'm eager to hear from you.)

    Regardless, these details seem to cast the story in a different light. More from Scheiber:
    So the crime here had nothing to do with "targeting" conservatives. The targeting was effectively done by the conservative groups themselves, when they filed their gratuitous applications. The crime, such as it is, was twofold. First, in the course of legitimately vetting questionable applications, the IRS appears to have been more intrusive than justified, asking for information about donors whose privacy it should have respected. This is unfortunate and intolerable, but not quite a threat to democracy.

    Second, the IRS was tone deaf to how its scrutiny would look to the people being scrutinized, given that they all subscribed to the same worldview, and that they were already nursing a healthy persecution complex. Which is to say, the IRS didn't go about its otherwise legitimate vetting in a very politically-correct way.

    Just to clarify, I'm not endorsing a "nothing to see here" argument, and I'd like to see more information about all of this. But these additional details do cast the story in a different light, and raise questions about just how "scandalous" the actions were.

    It's another angle to consider as the story unfolds further.

    SEGATA SANSHIRO! LIVE AGAIN!
    Lanz.gif
  • spacekungfumanspacekungfuman Poor and minority-filled Registered User, __BANNED USERS regular
    Savant wrote: »
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

    The main argument from O'Donnell and co. is that the IRS regulations on the subject are inconsistent with the law and the English language, and have been for a very long time. Mostly centering around how they inserted the word "primarily" to replace "exclusively" for the purposes of social welfare.

    But again, the last clause of the law seems pretty clear that the activities that should constitute promotion of social welfare are pretty narrow, and not subject to the sorts of games that the subsequent IRS regulations have allowed. For example, spending on a political party seems like it is directly contrary to having the earnings "devoted exclusively to charitable, educational, or recreational purposes", and the tax exemption should be denied outright. It doesn't seem like you need to be a lawyer to understand what the base law says. It's worded so "you can only be doing these things and get this tax exemption," not "as long as you don't do anything specifically prohibited, you get tax exemption."

    I know these folks like to play somewhat childish games like "you said I couldn't do X, but you didn't say I couldn't do Y which is essentially the same!", but the consequence of this scandal is that they should update the regulations to be more straightforward and follow the law much more closely. Which to my reading means they should basically eliminate the 501c4 tax exemption for most if not all of these political groups.

    It is extraordinarily difficult to prevail on a claim that the treasury regulations are inconsistent with the code, since the department of treasury is charged with interpreting the tax code, and is entitled to signifigant deference in its determinations. Congress can always overrule regulations with changes to the code though.

  • Harry DresdenHarry Dresden Registered User regular
    Savant wrote: »
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

    The main argument from O'Donnell and co. is that the IRS regulations on the subject are inconsistent with the law and the English language, and have been for a very long time. Mostly centering around how they inserted the word "primarily" to replace "exclusively" for the purposes of social welfare.

    But again, the last clause of the law seems pretty clear that the activities that should constitute promotion of social welfare are pretty narrow, and not subject to the sorts of games that the subsequent IRS regulations have allowed. For example, spending on a political party seems like it is directly contrary to having the earnings "devoted exclusively to charitable, educational, or recreational purposes", and the tax exemption should be denied outright. It doesn't seem like you need to be a lawyer to understand what the base law says. It's worded so "you can only be doing these things and get this tax exemption," not "as long as you don't do anything specifically prohibited, you get tax exemption."

    I know these folks like to play somewhat childish games like "you said I couldn't do X, but you didn't say I couldn't do Y which is essentially the same!", but the consequence of this scandal is that they should update the regulations to be more straightforward and follow the law much more closely. Which to my reading means they should basically eliminate the 501c4 tax exemption for most if not all of these political groups.

    It is extraordinarily difficult to prevail on a claim that the treasury regulations are inconsistent with the code, since the department of treasury is charged with interpreting the tax code, and is entitled to signifigant deference in its determinations. Congress can always overrule regulations with changes to the code though.

    Congress won't be helping any regulation agencies any time soon. The GOP have made sure of that.

  • SavantSavant Registered User regular
    Savant wrote: »
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

    The main argument from O'Donnell and co. is that the IRS regulations on the subject are inconsistent with the law and the English language, and have been for a very long time. Mostly centering around how they inserted the word "primarily" to replace "exclusively" for the purposes of social welfare.

    But again, the last clause of the law seems pretty clear that the activities that should constitute promotion of social welfare are pretty narrow, and not subject to the sorts of games that the subsequent IRS regulations have allowed. For example, spending on a political party seems like it is directly contrary to having the earnings "devoted exclusively to charitable, educational, or recreational purposes", and the tax exemption should be denied outright. It doesn't seem like you need to be a lawyer to understand what the base law says. It's worded so "you can only be doing these things and get this tax exemption," not "as long as you don't do anything specifically prohibited, you get tax exemption."

    I know these folks like to play somewhat childish games like "you said I couldn't do X, but you didn't say I couldn't do Y which is essentially the same!", but the consequence of this scandal is that they should update the regulations to be more straightforward and follow the law much more closely. Which to my reading means they should basically eliminate the 501c4 tax exemption for most if not all of these political groups.

    It is extraordinarily difficult to prevail on a claim that the treasury regulations are inconsistent with the code, since the department of treasury is charged with interpreting the tax code, and is entitled to signifigant deference in its determinations. Congress can always overrule regulations with changes to the code though.

    So...if the executive branch is entrusted with interpreting the tax code, presumably they could update the interpretation, yes? I mean, it seems a large part of why we are having this scandal at all is because the regulations are full of holes and hard for the IRS agents to interpret, so there would be an impetus both from the political and civil service sides of the treasury department to make some changes to make this mess go away.

    I'm not saying that the IRS needs to eat a lawsuit or have congress throw the book at them, but one way or another the 501c4 regulations should be changed because they are messed up and are leading to lots of tax exemptions that clearly don't match up with a plain reading of the law. I could understand there being some complications with the regulation in gray area cases, but spending on political campaigning is well outside of any gray area.

  • spacekungfumanspacekungfuman Poor and minority-filled Registered User, __BANNED USERS regular
    Savant wrote: »
    Savant wrote: »
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

    The main argument from O'Donnell and co. is that the IRS regulations on the subject are inconsistent with the law and the English language, and have been for a very long time. Mostly centering around how they inserted the word "primarily" to replace "exclusively" for the purposes of social welfare.

    But again, the last clause of the law seems pretty clear that the activities that should constitute promotion of social welfare are pretty narrow, and not subject to the sorts of games that the subsequent IRS regulations have allowed. For example, spending on a political party seems like it is directly contrary to having the earnings "devoted exclusively to charitable, educational, or recreational purposes", and the tax exemption should be denied outright. It doesn't seem like you need to be a lawyer to understand what the base law says. It's worded so "you can only be doing these things and get this tax exemption," not "as long as you don't do anything specifically prohibited, you get tax exemption."

    I know these folks like to play somewhat childish games like "you said I couldn't do X, but you didn't say I couldn't do Y which is essentially the same!", but the consequence of this scandal is that they should update the regulations to be more straightforward and follow the law much more closely. Which to my reading means they should basically eliminate the 501c4 tax exemption for most if not all of these political groups.

    It is extraordinarily difficult to prevail on a claim that the treasury regulations are inconsistent with the code, since the department of treasury is charged with interpreting the tax code, and is entitled to signifigant deference in its determinations. Congress can always overrule regulations with changes to the code though.

    So...if the executive branch is entrusted with interpreting the tax code, presumably they could update the interpretation, yes? I mean, it seems a large part of why we are having this scandal at all is because the regulations are full of holes and hard for the IRS agents to interpret, so there would be an impetus both from the political and civil service sides of the treasury department to make some changes to make this mess go away.

    I'm not saying that the IRS needs to eat a lawsuit or have congress throw the book at them, but one way or another the 501c4 regulations should be changed because they are messed up and are leading to lots of tax exemptions that clearly don't match up with a plain reading of the law. I could understand there being some complications with the regulation in gray area cases, but spending on political campaigning is well outside of any gray area.

    Like most sections if the code dealing with exempt orgs, 501(c)(4) is a huge morass. We could really do with substantially longer, updated regulations, but the IRS is already so understaffed that the rarely have time to rewrite regulations. They still have so many sections that are missing regulations and have been for years. The tax exempt group, in collaboration with the executive compensation group, has been promising regs for nearly a decade under section 457 (dealing with certain retirement plans for nonprofits) and they still aren't here.

    You are absolutely correct that they can change their I reforestation though, but there are procedures for doing so. If they want to initiate a change in interpretation, they need to do it through the formal rule making process where they publish the proposed guidance and give people a chance to comment, then publish a final rule. They can only avoid this in their adjudicative function, but they can't be proactive here. They need to wait for someone to ask for a letter ruling on the issue, but they can't issue a letter ruling on whether something can be a 501(c)(4), because that is a factual determination, and letter rulings can only be on conclusions of law.

    Maybe they could issue a revenue procedure describing a new way of processing applications, but that would be subject to notice and comment and there is no way that a rev proc proposing a keyword based sorting system would survive. The out cry would be too great (especially now).

  • nexuscrawlernexuscrawler Registered User regular
    Savant wrote: »
    Savant wrote: »
    Savant wrote: »
    BSoB wrote: »
    shryke wrote: »
    spool32 wrote: »
    spool32 wrote: »
    It is important to point out that none of the conservative groups were denied 501(c)4 status.

    Meanwhile, a Democratic action fund was.

    It's better to be denied than to be jacked off for literally years under the threat of legal action.

    Only if your goal is to influence a specific election year.

    So, exactly the problem then.

    Indeed. Especially since 510c4s are not supposed to be primarily political.

    So needing to get one up in time for a specific election is ... rather suspicious.

    Since one of the major things about being a 501c4 is that you can participate in campaigns and elections, I would say that wanting to participate in a particular election is in fact, not suspicious.

    Lawrence O'Donnell has been going apeshit about this scandal, and it seems like if you read the actual law for 501c4s, they shouldn't be participating in campaigns at all. Here's the exact text for the section that exempts them from corporate taxation:
    (4)
    (A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
    (B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.

    The IRS interpretation from more than half a century ago was to change the word exclusively to primarily for the purposes of social welfare, which of course does not mean the same thing. And it looks like they've devolved from "primarily for the purposes of social welfare" to "aw fuck it, open the floodgates" since Citizen's United.

    The last clause on the sentence really suggests that the law was intended to be very narrow in this exception, since exclusive usage of net earnings to charitable, educational, or recreational purposes doesn't leave much space for spending on political campaigning. So while I could see an organization that say, sets up a creationism museum or instead has workshops that teach about the wonders of socialism could wiggle their way in to this tax exemption by claiming that they are educational or recreational, I see no way how you could interpret this to allow political campaigning groups tax exemption.

    Basically, it seems like none of these political groups should be given corporate tax exempt status at all under this section, no matter where they fall on the political spectrum. Citizen's United still means they can do political campaigning of course, they just aren't entitled to nice perks like tax exemption and anonymous donors.

    The answer is in the regulations:
    Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and § 1.501(c)(6)-1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an “action” organization described in §1.501(c)(3)-1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and § 1.504-1.

    Note that the disqualified activities are limited to those focused on a single candidate, not a political party or an election. This is a very important distinction from 501(c)(3)s and is actually the main reason to elect (c)(4) status.

    The main argument from O'Donnell and co. is that the IRS regulations on the subject are inconsistent with the law and the English language, and have been for a very long time. Mostly centering around how they inserted the word "primarily" to replace "exclusively" for the purposes of social welfare.

    But again, the last clause of the law seems pretty clear that the activities that should constitute promotion of social welfare are pretty narrow, and not subject to the sorts of games that the subsequent IRS regulations have allowed. For example, spending on a political party seems like it is directly contrary to having the earnings "devoted exclusively to charitable, educational, or recreational purposes", and the tax exemption should be denied outright. It doesn't seem like you need to be a lawyer to understand what the base law says. It's worded so "you can only be doing these things and get this tax exemption," not "as long as you don't do anything specifically prohibited, you get tax exemption."

    I know these folks like to play somewhat childish games like "you said I couldn't do X, but you didn't say I couldn't do Y which is essentially the same!", but the consequence of this scandal is that they should update the regulations to be more straightforward and follow the law much more closely. Which to my reading means they should basically eliminate the 501c4 tax exemption for most if not all of these political groups.

    It is extraordinarily difficult to prevail on a claim that the treasury regulations are inconsistent with the code, since the department of treasury is charged with interpreting the tax code, and is entitled to signifigant deference in its determinations. Congress can always overrule regulations with changes to the code though.

    So...if the executive branch is entrusted with interpreting the tax code, presumably they could update the interpretation, yes? I mean, it seems a large part of why we are having this scandal at all is because the regulations are full of holes and hard for the IRS agents to interpret, so there would be an impetus both from the political and civil service sides of the treasury department to make some changes to make this mess go away.

    I'm not saying that the IRS needs to eat a lawsuit or have congress throw the book at them, but one way or another the 501c4 regulations should be changed because they are messed up and are leading to lots of tax exemptions that clearly don't match up with a plain reading of the law. I could understand there being some complications with the regulation in gray area cases, but spending on political campaigning is well outside of any gray area.

    Indeed they should. but you can't expect them to do it 100% smoothly with a fundamental game changer like Citizens United and not a lick of assistance from our legislators. The entirely playing field changed overnight and we left the IRS to twist in the wind and figure it out.

  • BSoBBSoB Registered User regular
    poshniallo wrote: »
    Racial profiling isn't a good analogy. This is a specific search for political viewpoints. Any approach is going to involve political words, whether those are 'communist' 'jihad' or whatever.

    If standards were applied evenly, then I don't see a problem. The imaginary persecution complex of the US right-wing may disagree, of course.

    Yes, the accusation is that the standards were not applied evenly. Which is why there is a problem.

  • Harry DresdenHarry Dresden Registered User regular
    You are absolutely correct that they can change their I reforestation though, but there are procedures for doing so. If they want to initiate a change in interpretation, they need to do it through the formal rule making process where they publish the proposed guidance and give people a chance to comment, then publish a final rule. They can only avoid this in their adjudicative function, but they can't be proactive here. They need to wait for someone to ask for a letter ruling on the issue, but they can't issue a letter ruling on whether something can be a 501(c)(4), because that is a factual determination, and letter rulings can only be on conclusions of law.

    This person would be who exactly?

  • SammyFSammyF Registered User regular
    edited May 2013
    You are absolutely correct that they can change their I reforestation though, but there are procedures for doing so. If they want to initiate a change in interpretation, they need to do it through the formal rule making process where they publish the proposed guidance and give people a chance to comment, then publish a final rule. They can only avoid this in their adjudicative function, but they can't be proactive here. They need to wait for someone to ask for a letter ruling on the issue, but they can't issue a letter ruling on whether something can be a 501(c)(4), because that is a factual determination, and letter rulings can only be on conclusions of law.

    This person would be who exactly?

    An applicant or filer covered by the relevant section of IRC.

    I am honestly surprised to discover that all of these incredibly sketchy applicants weren't just applying so that they could be denied, at which point they could ask for a new ruling that would allow them to undermine campaign finance disclosure even further than it already has been. Independent Expenditure-only and hybrid 527 filers (the so-called super PACs) can already do basically everything a 501(c)(4) can do with the exception of collect money without disclosure. And 527's can do it better because they are explicitly allowed to have electoral activism at the heart of their organization's mission -- and they're still tax exempt. In the wake of citizens united removing the limitations on IE-only 527's with respect to contribution limits and eligible donors, the rapid proliferation of 501(c)(4)'s with explicitly political mission statements felt to me like it was basically bait to start a court case about whether those unlimited and unrestricted contributions really needed to be disclosed after all.

    Basically I figured that ultimately, increased scrutiny and the potential for rejection is what these applicants wanted in the first place, their protestations aside.

    SammyF on
  • shrykeshryke Member of the Beast Registered User regular
    Vorpal wrote: »
    shryke wrote: »
    And the answer is that almost all the potential political cases (of which only about 1/3rd were tea-party-related) were delayed.

    Yes, but the delays varied in length. About 20% only waited one year. Additionally I didn't see a breakdown provided sorting the cases selected for extra scrutiny correlating delay with political affiliation (and indeed, it would be somewhat sinister if there was).

    If you know of a specific progressive group that had to wait 2-3 years, feel free to point it out. I would not be at all surprised there is one (or even more than one). I just don't think from the report you can automatically assume one exists, although I think it is probable. But who knows? It could have just been a mad rush of conservative groups trying to create 501(c)(4)'s and so 80% of the ones forwarded for extra review were conservative, only about 1/4 of which were part of the tea party filter, and the 20% that were not conservative got approved in one year.

    Unlikely but possible.

    I don't need to because, again, if you read the report, it gives you the number that got delayed more then a year. That number is 129.

    We also know the number of groups that were targeted because of their affiliation with the Tea Party. That number is 96.

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