Tegucigalpa The front page of the times indicated that both George Soros and the Koch brothers, the Daddy Warbucks of the right and the left, were among a small handful asked to defend their gifts to advocacy 501c4 organizations and why they should be not be required to pay 35% gift taxes. After 30 years, the mouse seems to have finally roared.
I reached out for an expert in this area, Drummond Pike, the founder and former CEO of the Tides family of philanthropic organization to quickly pen an analysis of what this means and why it is important. Today in a special on-line offering on the Social Policy website (www.socialpolicy.org) and the Paladin Partners site (www.paladinpartners.org), Drummond offers the insight of what this really means, and in “Better than a Trifecta,” he makes the case that perhaps the corporations will be the only big winners.
Here’s Drummond’s cut on this critical issue affecting non-profits, politics, and a lot more inthis crucial season:
Better than a Trifecta!
Today’s NYT article about IRS interest in pursuing gift taxes on contributions from individuals to “advocacy” 501 c/4 organizations, such as Americans for Prosperity or Crossroads GPS, both decidedly conservative, completes the ascent of corporate interests to dominance in our political system. Written by Stephanie Strom, normally the ambulance chaser of journalists focused on nonprofits, this article reports on the surprising news that the IRS is finally considering enforcing a tax it declared in 1982 to apply to contributions from individuals to 501 c/4 advocacy groups like the NRA, NARAL, and the Sierra Club, organizations whose “primary purpose” cannot be electoral, but rather legislative and policy. Non-primary purpose activities CAN support or oppose candidates but must remain below 49% of total expenditures; under recent rulings, this has permitted large anonymous contributions for what are essentially independent expenditure campaigns for or against candidates.
The end result: contributions to this category of advocacy organizations, that can be made anonymously, may now (after 29 years of silence from the IRS) be subject to a 35% gift tax. The work around, however, is pretty simple: give to a 527 organizations that can do elections work but contributions to which are not subject to tax by statute. The rub, of course, is that contributions to 527’s are reportable. No more silent manipulation of the process.
But wait a minute…what about corporations? The hotly debated “Citizens United” decision issued last year by the Supreme Court reasoned that because the law had evolved to treat corporations as “persons” in certain ways, they were entitled to free speech, and under prior Court decisions, “speech” meant the ability to spend money in politics, including the ability to make anonymous contributions to 501 c/4’s.
But this is where it gets interesting. Corporations are treated as persons in only some ways. The tax system doesn’t treat corporations as people in other regards, so they aren’t subject to gift tax. Thus, the effect is that, now, untaxed anonymous political giving shall be the exclusive domain of corporations. Ta Da!!
That the Roberts Court is turning into the most activist Court in modern memory comes as no secret. But it is remarkable how quickly their well-chosen decisions are advancing the agenda of the free market, anti-government business interests. This is likely just the beginning – tilting the odds yet again in favor of corporate power and against individual rights and liberties. And looking into the near-term future, one has to like those odds for Republicans. The Tea Party folks are the wildcards, but somehow I’m not optimistic that they will unravel the unholy alliance between Big Business and the social conservatives. Meanwhile, get ready for one of the worst campaign seasons ever, fueled especially by anonymously given corporate contributions.