Wednesday, March 7, 2012

IRS To Investigate Political Groups

The Internal Revenue Service (IRS) is coming under fire from some conservative political groups for taking part in what they term a political witch hunt.

As the election season heats up, the IRS is taking a closer look at political nonprofits.  The New York Times reported that the agency has sent dozens of questionnaires to conservative Tea Party organizations in recent week in an attempt to determine their political leanings and activities.  Existing nonprofits like American Crossroads, on the Republican side, and Priorities USA, on the Democratic side, will also be pressed by the IRS to justify their tax-exempt status.

Although both sides will be questioned, some conservatives are crying foul on the IRS's questions.  Jay Sekulow, a conservative lawyer, is representing 16 Tea Party groups that are claiming the questions amount to harassment and a political witch hunt.  Conservatives point to a renewed effort by Democratic lawmakers to demand that these nonprofits and so-called Super Political Action Committees (PACs) disclose their donors and identify their major funders in political advertisements.

The issue the IRS has with these groups, designated as 501(c)(4)s (social welfare organizations) under the tax code, is they are concerned they are not living up to requirements.  Social welfare groups cannot engage solely in political activities.  In an e-mail to The New York Times, the IRS said they must be primarily engaged in the promotion of social welfare in order to keep their exempt status.  It's unclear how much political activity constitutes an excessive amount.

Another concern is whether donations to political nonprofits are tax deductible.  While an individual donation to a group like American Crossroads would not qualify as such, some companies could attempt to justify donations as a necessary business expense.  Tax experts believe that some donors are putting their donations into their marketing and advertising budgets and deducting them from their taxes.  This claim has not been proven, however.

You can read the full story in The New York Times.

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