HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Thursday, November 18, 2004

Tax-exempts and Political Activity.

On Friday, November 12, 2004, the IRS released a National Office Technical Advice Memorandum (TAM 2004-46-033) that addressed a payroll-deduction Politcal Action Committee arrangement established by a tax-exempt healthcare organization. According to the TAM, the entity "began an effort to make all . . . employees aware of their ability to participate in [the PAC] through payroll deduction.  During regularly scheduled meetings, department heads and the management . . . briefly discussed the Plan.  Managers were asked to develop a simple and efficient method of informing employees they had a right to participate . . . through payroll deduction. A video that featured [the Chairman of the Board of Trustees] explaining the impact of political input on the hospital industry was distributed to managers for use in communicating with employees.  Donation cards were made available to employees at the meetings and managers were encouraged to get a signed form from each employee, irrespective of the employee's decision to participate, in order to avoid duplicative efforts.  Employees were told that their participation in the Plan was strictly voluntary. The cards included an option to decline participation in the Plan."

The TAM concluded that the arrangement violates the political activity prohibition and triggers the § 4955 excise tax (10% tax on the amount of the political expenditures; and on the knowing agreement to make political expenditures, a 2-1/2% on the amount thereof).  A copy of this TAM is available on the AHLA website or the IRS website (PDF).

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