Shielding donors from IRS
July 29, 2013
A firestorm of protest rightly erupted over the IRS flagging conservative groups such as the tea party, which denounces government spending, detests Uncle Sam's debt and demands reduced taxes.
Such fiery rhetoric produces a smokescreen, clouding how some nonprofit "social welfare" organizations (501(c)(4) take advantage of murky tax loopholes and shroud big-time political donors.
Citizens expect the IRS to protect the United States from tax cheats. Do political groups like the tea party qualify for tax relief because they ardently support social welfare causes?
The tea party finds its identity in anti-government colonials such as Patrick Henry. He fought against the Constitution's ratification. Using eloquent pleas to preserve states' rights, Henry rejected the federal government's ability to tax citizens without first getting approval from local legislators.
Henry wanted to preserve the Articles of Confederation. Today's tea party rhetoric has overtones of this profound distrust in the federal government. Henry's lack of confidence in government led to disastrous consequences in colonial America. During the 1780s, Congress rarely voted on any taxes for the common welfare because it lacked such authority. Delegates had to get prior approval from state assemblies before a congressional vote.
Such a process moved slowly because state legislatures dragged their feet, waiting for late-arriving delegates to make a quorum. Once gathered, delegates rarely agreed on important tax legislation, which often didn't get to Congress. Seldom did legislators pass bills reducing debt or giving Congress the power to raise revenue.
The tea party reflects much of Henry's political agenda. Both lack concern for social welfare that effective government advances. Citizens are urged to care for themselves and reject Uncle Sam's responsibility for care for the disadvantaged.
Organizations qualifying as social welfare agencies may seek political goals while maintaining tax exempt status, as long as a political agenda isn't their prime activity.
Here's the IRS' challenge: 501(c)(4) groups shield donors from public scrutiny. A recent surge in campaign spending by nonprofit groups, fueled in part by the Supreme Court's 2010 Citizens United decision, has created new, complex oversight demands.
"So-called social-welfare groups have multiplied — annual applications for the designation have nearly doubled since 2009 — with many spending nearly 50 percent of their money on campaign advertising, almost daring the IRS to challenge their activities. Of the more than $1.2 billion spent by outside groups in the 2012 federal election cycle, at least $254 million came from 'social welfare' nonprofits" (Time Magazine, pg. 36-37, May 27, 2013).
Citizens have a right to know who funds politicians running for office. They also deserve protection from organizations that tip their hats to social welfare but push political agendas. Moreover, voters should have access, as a matter of public record, to contributors of 501(c)(4) groups.
When the Bible urges us to be our "brother's keeper," does it have the tea party in mind? Is this a social welfare group? Does it fulfill the biblical mandate to "not grow weary in well-doing … and not lose heart?" (Galatians 6:9).
In its lead editorial "Murky Mandate" (pg. 7, June 12, 2013), The Christian Century magazine questions why groups whose spine is political are able to circumvent taxes by camouflaging themselves as social welfare advocates.
"When an IRS office in Cincinnati issued its misguided directive on tea party groups, it was being flooded with new applications for 501(c)(4) status. The increase was in part the result of changes in the law allowing corporations and unions to give unlimited sums in elections. By giving their money to tax-exempt social welfare groups rather than to political action groups, these funders had a way both to spend without hindrance and to hide what they were doing."
Tax code revisions are needed, prohibiting politically charged organizations from qualifying as nonprofits, when their primary aim doesn't advance society's welfare. Transparency in donor records will right many secret wrongs.
The Rev. Jack R. Van Ens is a Presbyterian minister who heads the nonprofit, tax-exempt Creative Growth (www.thelivinghistory.com), which enhances Christian worship through storytelling and dramatic presentations aimed to make God's history come alive. Van Ens' book, "How Jefferson Made the Best of Bad Messes," is available in local bookstores for $7.95.