The Washington Post has published my letter to the editor responding to an editorial that had depicted the Internal Revenue Service targeting episode as merely the “thoughtless” result of “carelessness” and “incompetence.” Yet the scandal wasn’t just the flagging of right-of-center (c)(4) groups for challenge not faced by their left-of-center counterparts, but the outrageous information demands placed on many of those groups, including copies of all literature distributed, transcripts of speeches and radio guest appearances, printouts of all social media output, names of both donors and family members, and more.
Earlier coverage here.
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Burdensome demands, like asking people about the content of their prayers, have nothing to do with the pretext given by the Washington Post for why the IRS could scrutinize 501(c)(4) groups. Donations to 501(c)(4) groups are not even tax-deductible, unlike donations to 501(c)(3) groups.
The Wsshington Post claimed, “Nonprofits that may engage in political activity deserve IRS attention, because the government should not be subsidizing political groups through the tax code.” Wrong. There is no such subsidy to 501(c)(4) groups, because they — unlike 501(c)(3)’s — can’t receive tax-deductible contributions, as the Supreme Court made clear in Regan v. Taxation with Representation (1983).
It is true that the 501(c)(4) ITSELF is not taxed, but then, not taxing it on gifts whose donors have already been taxed is not really a “subsidy,” but just avoiding double taxation (and the failure to tax a small Tea Party group on its own trifling income, such as its interest-bearing savings account, is not much of a “subsidy” either).
Moreover, 501(c)(4) groups are supposed to be somewhat political. Congress gave 501(c)(3) groups tax deductibility in donations, in exchange for limiting their lobbying and banning them from engaging in electioneering. It denied 501(c)(4) groups that benefit precisely because they engage in politics all the time, and are allowed under IRS rules to engage in electioneering as one of their multiple activities (albeit not the dominant one). The 501(c)(4) language does not ban electioneering, unlike the 501(c)(3) language, and political activity such as lobbying can indeed promote “social welfare.”
If a group is not highly political, or avoids electioneering, it would choose to be a 501(c)(3) instead, given how much more donations it could attract through tax-deductibility. Tea Party groups that applied for 501(c)(4) status were being honest and paying a price for it by giving up tax-deductibility of donations as a result.
The Supreme Court’s Taxation With Representation decision upheld restrictions on lobbying by 501(c)(3) groups (not (c)(4)’s), but concurring justices wrote to explain that they did so precisely because related 501(c)(4) groups could still engage in unrestricting lobbying and even some electioneering.
Fascinating. Whenever people talk about the Citizens United decision and how wrong it is, I think about editorial boards which shamelessly peddle partisan hackery.
No one can seriously defend the IRS behavior as merely thoughtless or careless. That these clowns would choose to do so is an embarrassment.
Thank you, NonProfit Lawyer for the concise comments. Much appreciated, as I was unaware of either the case, or the general distinctions between the two. Somehow, I suspect my ignorance on the issue is not unusual among the American public.
Walter, your letter is behind the Wapo paywall. Any chance you could reproduce it here?
Letters to the Editor
The IRS probes represented much more than simple incompetence
The editorial board understated the seriousness of the Internal Revenue Service scandal by claiming that it consisted merely of “the thoughtless way IRS employees went about determining which groups to examine,” a failing it attributed to “carelessness” and “incompetence ” [“ Unfairly targeting the IRS ,” editorial, June 20]. Even if the IRS blocked or delayed applications from right-leaning groups far more often than left-leaning ones, why get upset if the error was merely the result of a faulty selection formula?
But the problems go well beyond the IRS’s target selection.
As the Associated Press reported in 2012, the IRS demanded of local conservative civic groups “voluminous details about the groups’ postings on social networking sites like Twitter and Facebook, information on donors and key members’ relatives and copies of all literature they have distributed to their members” — demands going far beyond what had ordinarily been asked of 501(c)(4) groups.
Groups that might have a dozen or fewer active members were asked for transcripts of leaders’ speeches and radio appearances, printouts of all Facebook output, disclosure of every donor name matched to what their donations had been used for, and on and on. Even when groups tried to comply, they would find their applications stalled without a denial or explanation, making it difficult to challenge the agency in court.
Selecting certain political groups as targets for review was bad enough. The extraordinarily burdensome and intrusive demands placed on those groups are hard to explain within the editorial board’s preferred theory of mere inadvertence and bad luck.
Walter Olson, Washington
The writer is a senior fellow at the Cato Institute.
The WaPo has what seems to be a really poorly written paywall (if its intent is, in fact, to keep you fro viewing content). Should you click on the link with a command to open in private/incognito viewing mode, you don’t seem to be limited to the three articles a month they otherwise allow.
Inconvenient, yes – but it may be that they wrote their cookie poorly as a deliberate choice to allow interested potential readers to see more articles while they decide whether or no to buy a subscription, while preventing bots. Or, they may simply be internet illiterate.