Monday, November 1, 2010

Nonprofits, Elections, Disclosure, the Gift Tax, the IRS, and More!

Here is a pre-election wrap-up of the many issues raised by the prominent involvement of nonprofits in the pending election:

Nonprofit Political Spending, Often with Donor Anonymity:  As numerous media outlets and other sources have reported, nonprofit groups - specifically section 501(c)(4) social welfare organizations, section 501(c)(5) labor unions, and section 501(c)(6) chambers of commerce and trade associations - have become the vehicle of choice for election-related communications when funders want to maintain they anonymity.  See, e.g., Big Money: Outside Groups Spending for Republicans (Wash. Post), Return of the Secret Donors (NY Times), and Election-Related Spending by Political Committees and Non-Profits Up 40% in 2010 (Campaign Finance Institute).

State Laws and Disclosure:  Tom Kelley previously blogged about the possibility that state laws may go where federal laws do not by requiring disclosure of donors to groups that fit within broad state law definitions of "political committees."  The pro-disclosure bent of the Supreme Court, evidenced by its 8-1 vote in Citizens United upholding certain existing federal disclosure requirements, suggests that such broad disclosure laws may survive constitutional challenge, although such a result is far from certain.  What is certain, however, is that challenges to those laws will be occupying the courts for years to come.

Gift TaxEllen Aprill (Loyola-L.A.) has written this memo for the Election Law Blog explaining how donations to section 501(c)(4) organizations to fund express advocacy or electioneering communications generally may avoid both the gift tax under federal tax law and public disclosure under federal election law.  Initial public attention to this issue arose in large part because of this Forbes blog posting.

Complaints Filed with IRS: A flurry of complaints have been sent to the IRS regarding alleged violations of federal tax laws relating to election-related activity by nonprofits.  These include not only complaints filed by Americans United for Separation of Church and State focusing on churches and other section 501(c)(3) religious organizations prohibited from supporting or opposing candidates (just look for press releases marked by the IRS logo), and Citizens for Responsibility and Ethics in Washington (CREW) against a section 501(c)(3) ministry that allegedly distributed a partisan voter guide (press release), but also by Demoracry 21 and the Campaign Legal Center against Crossroads GPS, a recently formed section 501(c)(4) organization associated with Karl Rove (press release).

Post-Election Plans:  The New York Times reports that high-profile conservative nonprofits are already looking forward to keeping up the pressure on surviving Democratic members of Congress with an eye to the 2012 elections, and Democrats are considering how they can respond.  Of interest to even nonprofits not directly involved with the current election, the Hudson Institute is hosting a forum on The 2010 Elections: What Do They Mean for Foundations and Nonprofits?" on November 9th in Washington, DC; participants include Garry Bass (OMB Watch), Patricia Read (Independent Sector), Sandra Swirski (Alliance for Charitable Reform), and Dean Zerbe (alliantgroup).

LHM

http://lawprofessors.typepad.com/nonprofit/2010/11/nonprofits-elections-disclosure-the-gift-tax-and-more.html

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