Friday, July 27, 2012

More on Use of 501(c)(4)s in the Political Campaign Context - Disclosure Requirements, Need For Reform

As reported in The New York Times as well as other news sources (including the live blogging herein), the IRS announced in Congressional hearings on Wednesday that 50 political groups have obtained 501(c)(4) exemptions in 2010 and 2011.

In the Forth Worth Star-Telegram, an editorial entitled "IRS needs to strengthen tax code to uncover political nonprofits" criticizes the use of 501(c)(4)s for political campaign purposes, concluding:  "Tax-exempt status is intended to promote the public good, not enable wealthy and powerful donors of any political stripe to wield influence without public scrutiny."

In the BNA Daily Tax Report on Wednesday, an article addressed the disclosure requirement with respect to 501(c)(4) donors.  Although 501(c)(4)s are required to inform the IRS, but not the public, of the identity of donors, many organizations find ways around these full disclosure rules.  The organization can list the donor as "anonymous" if it doesn't know where the money originated from and "can't easily find out," or client trust accounts are used (i.e., donors make contributions through law firms that transmits the money to the organization, with only the law firm's name disclosed).  Cashier's checks and bank wire transfers are other means to keep donors anonymous and, thus, out of the IRS's purview.  Another potential area for reform?

NAM

 

http://lawprofessors.typepad.com/nonprofit/2012/07/more-on-use-of-501c4s-in-the-political-campaign-context-disclosure-requirements-need-for-reform.html

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