Congressional Hair on Fire Over Charities and Their Politics

Seems the Republicans and the Dems are all worked up over recent activities engaged in by IRC Section 501(c)(4) organizations – so-called “social welfare organizations” which are tax exempt – as long as they behave, that is.

These are groups which are defined as “civic leagues” or organizations not organized for profit but operated exclusively for the promotion of social welfare.  They are exempt from income taxation if no part of their earnings inures to the benefit of any private individual.  They may engage in political campaign activities on behalf of or in opposition to candidates for public office, but in order to retain tax exempt status, the organization must ensure that its political campaign activities do not constitute its “primary” activity.

But the politicians are all worked up over the fact that IRS is apparently (in the eyes of some) unduly bugging some Tea Party groups, however, scrutinizing their activities to a degree which some  (Republcans) think is bordering on harassment.

So, several Republican Senators wrote to IRS Commish Shulman, last week, and in no uncertain terms passed on to him a bit of their ire, noting that “We have received reports and reviewed information from nonprofit civic organizations in Kentucky, Ohio, Tennessee, and Texas concerning recent IRS inquiries perceived to be excessive.”

Among other things, therefore, these Senators want IRS to explain exactly which IRS officials (by name) are involved in developing and approving the questions being put before the Tea Partiers, and why IRS letters recently sent to these organizations specifically ask for the names of all donors (not just those giving more than $5,000, which is the general requirement of the law) and amounts of their donations, with the notification that such info will be made public.

Not to be outdone, of course, some Senate Democrats (including Shumer, Franken and others) also wrote to the Commish, noting that the lack of clarity in the IRS rules has allowed political groups to improperly claim 501(c)(4) status, and may even be allowing donors to these groups to wrongly claim tax deductions for their contributions.

“We urge the IRS to take these steps immediately to prevent abuse of the tax code by political groups focused on federal election activities.  But if the IRS is unable to issue administrative guidance in this area then we plan to introduce legislation to accomplish these important changes.”

Clearly we haven’t heard the last on this one.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He may be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

Leave comment