For all the hyperbole and thumping over the “scandal” ridden nature of the Obama administration — YAWN. We’d might want to remind ourselves that one of the definitions of “scandal” is “defamatory talk or malicious gossip.” Definition number four pretty much summarizes the current level of Talk Show speculation which passes for news on cable networks. YAWN
The current spate of GOP poutrages have neither the substance nor the significance to rise to the level of a good scandal. The IRS is being vilified for doing its job — albeit clumsily — of determining whether or not a 501(c)4 organization qualifies for tax exempt status as a social welfare oriented organization. The term “target” has been tossed about loosely, as if the organizations in question have been something to which aggression is directed or as if they were the object of attack, derision, scorn or abuse. A much better word for members of the D.C. Village Press to use might be “flagged,” as in “to mark for attention.
The blundering and maladroit shortcuts used by the Cincinnati office of the IRS to identify organizations which might not qualify under the terms of 501(c)4, do not, in themselves, constitute an act of aggression, nor do they comprise a torrent of attack, derision, scorn or abuse. Consider the general outlines of 501(c)4 qualifications:
Types of Organizations Exempt under Section 501(c)(4)
Internal Revenue Code section 501(c)(4) provides for the exemption of two very different types of organizations with their own distinct qualification requirements. They are:
* Social welfare organizations: Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, and
* Local associations of employees, the membership of which is limited to the employees of designated person(s) in a particular municipality, and the net earnings of which are devoted exclusively for the promotion of social welfare.
Homeowners associations and volunteer fire companies may be recognized as exempt as social welfare organizations if they meet the requirements for exemption. Organizations that engage in substantial lobbying activities sometimes also are classified as social welfare organizations.
The IRS provides some helpful examples for those seeking to know if their organizations might qualify for tax exempt status under the provisions of 501(c)4. Organizations which are primarily focused on political activities — campaigns, advertising for a candidate or party, etc. fall under the scope of 527s. Therefore, if I seek to file an application for 501(c)4 tax exempt status I’d probably not be expecting to qualify if my organization conducts political campaigns for, or in association with, a candidate or party for local, state, or national offices, or if it functions as a political action committee.
If there are gray shaded areas between the definitions of a social welfare organization and a political organization then the proper jurisdiction to craft appropriate language lies within the Congress of the United States. Going a step further, there aren’t that many things that ARE taxable for a 527. Most of the revenue come in the form of “exempt function income:”
“A contribution of money or other property; Membership dues, fees, or assessments from a member of the political organization; Proceeds from a political fundraising or entertainment event or from the sale of political campaign materials, which are not received in the ordinary course of any trade or business; or Proceeds from conducting bingo games that are defined in Code section 513(f)(2).” (emphasis added)
The big reason for the attraction to 501(c)4 status is that the donors need not be made public. Thus, those who are up in arms about the villainy at the IRS are in essence telling the rest of us that they are positively OUTRAGED that political organizations might have to reveal who is bankrolling their operations.
Now which problem goes beyond the Yawn Test? (1) That the Internal Revenue Service used inappropriate terms to flag 501(c)4 applications which “sounded” like they would more appropriately be 527s? or (2) That we have corporations and other sources of extreme wealth seeking to cover their tracks when they engage in political activity at the local, state, or federal levels?
Tell me that the Congress of these United States is taking a serious look at the opaque and nubilous realm of political campaign funding in this country and I’ll stop yawning and start “listening with both ears.” Until then, more unsubstantiated musing about the fumbling efforts of some IRS employees in Cincinnati, Ohio to differentiate between 501(c)4’s and 527s will merely serve to make me hit the snooze alarm button.