by | ARTICLES, ELECTIONS, FREEDOM, GOVERNMENT, OBAMA, TAXES
Last week, the Commissioner of Internal Revenue Service, John Koskinen, spoke to the National Press Club on a variety of matters. One of the items he discussed was the proposed regulation changes to 501c4s.
As I mentioned earlier, the citizen commentary on this matter was unprecedented. As such, the IRS concluded they could not review it all in a timely matter for this year. However, he did not say that the matter was closed — only delayed:
“Another recommendation by the IG was that the Treasury Department and the IRS should provide clearer guidance on how to assess the permissibility of 501(c)(4) social welfare organizations’ activities. So last November, Treasury and the IRS issued proposed regulations that are designed to clarify the extent to which a 501(c)(4) organization can engage in political activity without endangering its tax-exempt status.
While I was not involved in the issuance of this draft proposal, because it happened before I was confirmed as Commissioner, I believe it is extremely important to make this area of regulation as clear as possible. Not only does that help the IRS properly enforce the law, but clearer regulations will also give a better roadmap to applicants, and will help those that already have 501(c)(4) status properly administer their organizations without unnecessary fears of losing their tax-exempt status.
During the comment period, which ended in February, we received more than 150,000 comments. That’s a record for an IRS rulemaking comment period. In fact, if you take all the comments on all Treasury and IRS draft proposals over the last seven years and double that number, you come close to the number of comments we are now beginning to review and analyze. It’s going to take us a while to sort through all those comments, hold a public hearing, possibly repropose a draft regulation and get more public comments. This means that it is unlikely we will be able to complete this process before the end of the year.”
Therefore, the IRS will continue to ponder the matter and revisit it — likely during another important election cycle. It is imperative to keep an eye on this, as the changes are onerous and unnecessary for the operation of 501c4s to educate and advocate.
by | ARTICLES, ELECTIONS, OBAMA, POLITICS, TAXES
The IRS recently proposed major changes to the way not-for-profit 501c4 organizations operate, which would effectively and severely limit their ability to engage in advocacy. These are your social welfare organizations, for which advocacy for “the common good and general welfare” is their primary purpose. They differ from 501c3, which are your charitable organizations; 501c5s, your labor unions; and 501c6s, your trade organizations. The one thing all of these organizations do have in common is that they are all tax-exempt organizations.
501c4s are not tax-deductible precisely because they are not political organizations. They serve to educate by being issue-based. This is protected under free speech; so long as the 501c4 sticks to an issue and not advocate for a particular candidate, it is not considered political speech and therefore it cannot be curbed. They can talk about policies and positions, not people.
These social welfare groups can therefore participate in the political arena as long as they maintain education as their primary purpose. Some examples of 501c4s would be the National Rifle Association (NRA), American Association of Retired Persons (AARP), Americans for Tax Reform (ATR), and the Sierra Club. 501(c)4s have been around for nearly 100 years, and the regulations that currently govern them have been in place since 1959.
So why has the Obama administration and the IRS taken a sudden interest in clarifying the rules for social welfare organizations that have been in place for more than 50 years? And why only the social welfare organizations, not the unions or trade organizations?
It is well known that on issue-based advocacy, the Republicans have made much better use of 501c4s than the Democrats. So of course, the Democrats want to find a way to disrupt this. You can find a flood of recent articles documenting how this conservative group and that conservative group spent money on political ads, more than the liberal groups–as if that is somehow unfair. It’s perfectly fair and perfectly legal — except when the Democrats are on the losing/receiving end.
This situation is reminiscent of the attempt to implement the “Fairness Doctrine” for talk radio, pushing to give conservative and liberal talk radio shows “equal air time” — because the conservatives dominate that market as well.
The 2014 Democrats are vulnerable, and they know it. What better way to stifle the ability for conservatives to message (foremost on the fledgling Obamacare law) than by attacking the methodology? The Obama Administration is retaliating by using the IRS to propose changes to the way social welfare organizations function and introducing very specific and onerous rules. These rules that have not been necessary at all for the entirety of the time (nearly a century) 501c4s have been in existence — until suddenly now.
What the new policy does is make definitions of political activity, specifically creating a huge number of things to now be considered “political”. The regs “would explicitly define which kind of activities are political and fall outside of the social welfare category, forcing such groups to be more careful about how they spend their funds. Under the proposed regulation, “candidate-related political activities” would include running ads that mention candidates close to Election Day, preparing voter guides or holding voter registration drives”.
By defining such activities as “political” instead of advocacy, they would be opened to being limited or even banned — activities which serve to provide education for the common good, as they always have.
Critics of the way 501c4s operate, which allow their donors to remain protected, suggest that the 501c4s are somehow gaming the system — using phrases like “secret donors” and “secret activity” to inflame the public against 501c4s. But this is patently untrue.
Political donors are required to be disclosed under campaign finance, but since 501c4s are specifically not political organizations, the donor names do not need to be made public. Their anonymity is protected under the Right of Free Association. Those who are on the receiving end of 501c4 activities to educate the populace during the election cycle, however, are now pushing for this to change in order to reveal citizens identities.
Therefore turning a simple and known definition of a 501c4 into a new and incomprehensible one, has the effect of stifling speech. Even the mere presence of such a proposal has had detrimental repercussions.
The regulation triggered more public commentary– tens of thousands of responses — during the open comment timeframe that recently ended, than any other regulation in history. Because of the outcry, there is a strong likelihood that it the proposed changes will be rescinded. How it even was allowed to come to fruition is mind-boggling.
It is possible that the persons who drafted the legislation didn’t even care about its clarity or effects. Every day that the proposal is even out there is another day that these 501c4s either a) can’t get started or b) can’t engage in advocacy. Why? The possibility of these regulations becoming permanent rules has 501c4s worried about potential infractions. After the recent revelations about the IRS targeting last year, it is not unlikely to think that the IRS purposely crafted muddled regulations.
From the vantage point of the 2014 midterm elections, the effect of curbing or scaring the activity of 501c4s during this election cycle undoubtedly benefits the Democrats.
What organization would risk the potential for increased scrutiny and possible violation from the IRS, knowing that the IRS has been operating in an unjust and partisan matter? They wouldn’t of course. So the 501c4s are currently holding back.
The IRS continues to act in an incompetent manner. That they are targeting 501c4s, and not c5s and c6s, show that there is an inherent bias internally within the IRS. No one can look at the situation and not think that this wasn’t done to have an affect on the current political cycle. This is not how the IRS is supposed to function in our country.
by | ARTICLES, ELECTIONS, FREEDOM, OBAMA, POLITICS
Mat Staver from the Liberty Council put together a good overview of the proposed changes to Social Welfare Organizations (501c4s). Below is a partial list that attempts to define political activity, changing the language that has stood for more than 50 years.
“IRS Regulation-134417-13, “Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities,” is a proposed new regulation that is an outrageously brazen attempt by the IRS to silence the speech of 501(c)(4) organizations before the upcoming election. If implemented, the regulation would prohibit a 501(c)(4) from speaking to matters of public concern during the 2014 election cycle.
In part, the proposed regulation:
–Prohibits using words like “oppose,” “vote,” “support,” “defeat,” and “reject;”
–Prohibits mentioning, on its website or on any communication (email, letter, etc.) that would reach 500 people or more, the name of a candidate for office 30 days prior to a primary election and 60 days prior to a general election;
–Prohibits mentioning the name of a political party 30 days prior to a primary election and 60 days prior to a general election, if that party has a candidate running for office;
–Prohibits voter registration drives or conducting a nonpartisan “get-out-the-vote” drive;
–Prohibits creating or distributing voter guides outlining how incumbents voted on particular bills;
–Prohibits hosting candidates for office at any event, including debates and charitable fundraisers, 30 days prior to a primary election or 60 days prior to a general election, if the candidate is part of the event’s program;
–Prohibits distributing any materials prepared on behalf of a candidate for office;
–Restricts employees of such organizations from volunteering;
–Restricts the ability of officers and leaders of such organizations to make public statements regarding the nomination of judges;
–Creates a 90-day blackout period, in an election year, that restricts the speech of §501(c)(4) organizations;
–Declares political activity as contrary to the promotion of social welfare; and
–Protects labor unions and trade associations by not including them under the proposed regulations.
The proposed IRS regulation even restricts the ability of leaders within these organizations to speak publicly regarding legislative matters of public concern and to volunteer”
Tens of thousands of comments have been recorded during the IRS open comment session, which has now closed. While the 501c4s wait to hear the outcome, many have chosen not to be active right now, which is having an impact on the current 2014 election cycle..
by | ARTICLES, GOVERNMENT, OBAMA, POLITICS, TAXES
The Washington Times reports that the IRS will not be able to finish their investigation regarding the targeting of Tea Party and other groups, until far after the 2014 elections:
“John Koskinen, the man President Obama tapped to clean up the embattled agency, also said it will take years to respond to all of the document requests from Congress. He told Congress that even complying with a subpoena for emails from just a handful of key employees couldn’t be done before the end of this year because it takes time to have attorneys delete protected taxpayer information”.
It is quite convenient that there will be no resolution to the IRS scandal before the midterm elections, especially on top of the new proposed IRS regulations regarding 501(c)4s.
The IRS is an agency that needs to clean house from top to bottom.
by | ARTICLES, OBAMA, OBAMACARE, POLITICS, TAXES
So, the tax that was supposed to hit high income earners now also can affect children under certain conditions involving investment. Taxpayers — take note!
The Weekly Standard discusses a newly clarified component of the Obamacare 3.8% Investment Surcharge Tax:
“Last Friday, the IRS published a tip on its website entitled “Tax Rules for Children with Investment Income.” Included is this note regarding the Net Investment Tax [emphasis added]:
Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child’s modified adjusted gross income that is over a threshold amount”
by | OBAMA, OBAMACARE, POLITICS
This is pretty clever
by | ARTICLES, GOVERNMENT
The Wall Street Journal has run a couple of stories in recent months documenting the overreaching work of the FTC. In November, it ran a story describing how the FTC actually investigated whether The Music Teachers National Association was engaging in “anticompetitive practices”.
Because the non-profit, which had been in existence for years, did not have the financial resources to fight the investigation, the FTC laid out its conditions for continuation:
“It must, however, read a statement out loud at every future national MTNA event warning members against talking about prices or recruitment. It must send this statement to all 22,000 members and post it on its website. It must contact all of its 500-plus affiliates and get them to sign a compliance statement.
The association must also develop a sweeping antitrust compliance program that will require annual training of its state presidents on the potential crimes of robber-baron piano teachers. It must submit regular reports to the FTC and appoint an antitrust compliance officer.”
You can’t make this stuff up.
Then in January, the WSJ noted that the FTC won a victory over Apple with regard to the iPad.
The FTC maintains that the iPad apps did not clarify well enough that children could potentially access their parents money via a linked credit card on the iPad. So the FTC decided to go after Apple, the maker of the iPad.
A “class-action settlement didn’t require Apple to change its practices, while the FTC action requires the company to clearly disclose what consumers are authorizing when they enter their password. The FTC settlement also requires Apple to provide consumers with full refunds”.
So children were able to play games that their parents had chosen, and rack up money/debt through app purchases with a linked credit card that the parents had put on there — and that is the fault of Apple. Got it.
These recent FTC crusades are two prime examples of outrageous regulation and the stupidity of the FTC’s overwhelming overreach. If regulators have enough time to stick their noses in places that they don’t belong, or are just being meddlesome and counterproductive, then the Federal budgets for such regulation are clearly too large.
by | ARTICLES, TAX TIPS, TAXES
What is a phase out rule?
When a taxpayer nears an income limit to qualify for a tax credit, there is a gradual reduction of that tax credit. This is known as a phase out. Higher income earners need to be aware that phase outs will come into play as they file their taxes this year.
It is noted that “The last time we saw a phase-out rule for itemized deductions was back in 2009. Unfortunately, this phase-out provision has also been resurrected for 2013 and beyond.
As a result, you can potentially lose up to 80% of your 2013 write-offs for home mortgage interest, state and local income and property taxes, charitable contributions, and miscellaneous itemized deduction items (such as investment expenses and fees for tax advice and preparation).
Phase-out starts as the following AGI thresholds: $250,000 for singles, $300,000 for married joint-filing couples, $275,000 for heads of households, and $150,000 for married individuals who file separate returns.
More specifically, the total amount of your affected itemized deductions is reduced by 3% of the amount by which your AGI exceeds the threshold. However, the reduction cannot exceed 80% of the total affected deductions that you started off with.”
