Thursday, September 27, 2012
We previously blogged about the New York Attorney General Eric T. Schneiderman's inquiry into politically active Internal Revenue Code section 501(c)(4) tax-exempt organizations. Last week U.S. Senator Orrin Hatch (R-Utah) and U.S. Representative Dave Camp (R-Mich.), the Ranking Member of the Senate Finance Committee and the Chairman of the House Ways and Means Committee, respectively, called on AG Schneiderman to halt his investigations. They focused in particular on the reported attempts by the AG to obtain IRS filings directly from the targeted organizations, including the non-public schedule of significant donors, rather than through the IRS-admnistered process for states to obtain tax return information, and stated that "We emphasize strongly that willful unauthorized disclosure of returns or return information is a federal crime subject to fines and/or imprisonment."
This week the Hill reports that AG Schneiderman fired back, defending his right as a state attorney general to directly request tax information from charitable and other nonprofit groups, including federal information returns such as the Form 990. And according to a report in Politico, the AG's response provided that "“Each state has a fundamental interest in ensuring compliance with its tax laws and in regulating certain activities of nonprofits. The recent activities of some tax-exempt organizations and businesses have been matters of great concern to New Yorkers. While my office respects applicable federal requirements and restrictions, I will continue to perform my duties and enforce the laws of the State of New York.”
The bottom line is that it appears that a previously obscure issue - whether charities and other nonprofits required to provide copies of their Forms 990 to state officials under state law could withhold or redact the schedule of donors for those returns (Schedule B) so as not to have that information publicly disclosed by the state - is now front-and-center in the ongoing dispute over politically active 501(c)(4) organizations.