A nonprofit founded by Stacey Abrams, a Georgia Democrat, admitted on Wednesday that it had violated state law by concealing the fact that it had campaigned for her during her 2018 run for governor.
At the time of that campaign, the group was led by Raphael Warnock, who was later elected to the Senate as a Democrat from Georgia.
At a meeting of the state’s ethics commission, the nonprofit New Georgia Project conceded that it had paid for fliers and door-to-door canvassers telling voters to support Ms. Abrams and other Democrats.
Under federal law, tax-exempt charities like this one are forbidden to campaign for candidates, but this case was about a violation of state law.
The nonprofit conceded that, because of its campaign work for Ms. Abrams, it should have registered with the state as a political committee, but it did not. A related nonprofit, the New Georgia Project Action Fund, admitted the same.
As a result, the two nonprofits agreed to pay a $300,000 penalty. David Emadi, the executive director of the commission, said it was the largest fine in its 38-year history….
A spokesman for Ms. Abrams said in a statement that “Stacey hasn’t been involved in the organization’s work since she departed in 2017.” Mr. Warnock’s Senate staff issued a statement saying that, while he was the leader of the New Georgia Project in 2018, “compliance decisions were not a part of that work.”…
Category Archives: tax law and election law
“Trump Is Running His Transition Team on Secret Money”
President-elect Donald J. Trump is keeping secret the names of the donors who are funding his transition effort, a break from tradition that could make it impossible to see what interest groups, businesses or wealthy people are helping launch his second term.
Mr. Trump has so far declined to sign an agreement with the Biden administration that imposes strict limits on that fund-raising in exchange for up to $7.2 million in federal funds earmarked for the transition. By dodging the agreement, Mr. Trump can raise unlimited amounts of money from unknown donors to pay for the staff, travel and office space involved in preparing to take over the government.
Mr. Trump is the first president-elect to sidestep the restrictions, provoking alarm among ethics experts.
Those seeking to curry favor with the incoming administration now have the opportunity to donate directly to the winning candidate without their names or potential conflicts ever entering the public sphere. And unlike with campaign contributions, foreign nationals are allowed to donate to the transition….
Mr. Trump’s transition team, formally known as Trump Vance 2025 Transition Inc., has revealed nothing about how much money it hopes to raise, who has contributed to the fund or how it is spending the money.
The current Trump transition, like its predecessors, is set up as a “dark money” nonprofit. Those groups typically do not have to disclose their donors, even to the Internal Revenue Service. But unlike Mr. Trump’s team this year, earlier transitions accepted financial support from the General Services Administration, which oversees much of the transition process. In exchange for that federal money, they agreed to conditions that other dark-money nonprofits do not have to follow, like capping individual contributions at $5,000 and disclosing the names of their donors.
When Barack Obama won the presidency in 2008, his transition raised $4.5 million while restricting donations to a maximum of $5,000, and pledging to refuse money from corporations, labor unions, political action committees, lobbyists and registered foreign agents. Nearly 60,000 people contributed, with an average donation of about $75….
“JD Vance Campaign Event With Christian Right Leaders May Have Violated Tax and Election Laws, Experts Say”
Republican vice-presidential nominee JD Vance’s appearance at a far-right Christian revival tour last month may have broken tax and election laws, experts say.
On Sept. 28, Vance held an official campaign event in Monroeville, Pennsylvania, in partnership with the Courage Tour, a series of swing-state rallies hosted by a pro-Trump Christian influencer that combine prayer, public speakers, tutorials on how to become a poll worker and get-out-the-vote programming.
Ziklag, a secretive organization of wealthy Christians, funds the Courage Tour, according to previously unreported documents obtained by ProPublica and Documented. A private donor video produced by Ziklag said the group intended to spend $700,000 in 2024 to mobilize Christian voters by funding “targeted rallies in swing states” led by Lance Wallnau, the pro-Trump influencer.
Even before the Vance event, ProPublica previously reported that tax experts believed Ziklag’s 2024 election-related efforts could be in violation of tax law. The Vance event, they said, raised even more red flags about whether a tax-exempt charity had improperly benefited the Trump-Vance campaign…
Four nonpartisan tax experts told ProPublica and Documented that a political campaign event hosted by one charitable group, which is in turn funded by another charitable group, could run afoul of the ban on direct or indirect campaign intervention by a charitable organization. They added that Wallnau’s attempt to carve out Vance’s appearance may not, in the eyes of the IRS, be sufficient to avoid creating tax-law problems.
“Here, the [Trump] campaign is getting the people in their seats, who have come to the c-3’s event,” Ellen Aprill, an expert on political activities by charitable groups and a retired law professor at Loyola Law School, wrote in an email. “I would say this is over the line into campaign intervention but that it is a close call — and that exempt organization lawyers generally advise clients NOT to get too close to the line!”
Roger Colinvaux, a professor at Catholic University’s Columbus School of Law, said that regulators consider whether a consumer would be able to distinguish the charitable event from the political activity. Does the public know these are clearly separate entities, or is it difficult to distinguish whether it’s a charity or a for-profit company that’s hosting a political event?
“If it looks like the (c)(3) is creating the audience, then that again is potentially an issue,” he said….
Marcus Owens, a tax lawyer at Loeb and Loeb and a former director of the IRS’ exempt organizations division, said there were past examples of the agency cracking down on religious associations for political activity similar in nature to Vance’s Courage Tour appearance….
Phil Hackney, a professor of law at the University of Pittsburgh who spent five years in the IRS’ Office of Chief Counsel, said the fundamental question with Vance’s Courage Tour event is whether the 501(c)(3) charity that hosted the event covered the cost of Vance’s appearance.
“If the (c)(3) bore the cost, they’re in trouble,” Hackney said. “If they didn’t, they should be fine.” The whole arrangement, he added, has “got its problems. It’s really dicey.”…
“National Religious Broadcasters Association Files Johnson Amendment Challenge”
The National Religious Broadcasters (NRB) association—a nonpartisan, international association of Christian communicators whose member organizations represent hundreds of millions of listeners, viewers, and readers—has joined with First Baptist Church Waskom (Waskom, Texas), Intercessors for America (Purcellville, Va.), and Sand Springs Church (Athens, Texas) to file a complaint challenging the Johnson Amendment’s restrictions on the First Amendment freedoms of nonprofit organizations, including churches. The case was filed in the United States District Court for the Eastern District of Texas in Tyler, Texas. Both churches are located in the Eastern District of Texas. View the full complaint here.
5th Edition of “The Connection: Strategies for Creating and Operating 501(c)(3)s, 501(c)(4)s, and Political Organizations”
Now available from the Alliance for Justice.
“A Guide to Election Year Activities of Section 501(c)(3) and 501(c)(4) Organizations”
Steven Sholk’s latest update.
“Group Takes on Charitable Political Speech Prohibition”
Tax Notes:
A nonprofit is seeking declaratory judgment from the Tax Court that charitable organizations shouldn’t be restricted from political speech.
The group filed a March 18 petition with the Tax Court, which was served March 19, seeking a declaratory judgment for approval of its application as a section 501(c)(3) organization in Students and Academics for Free Expression, Speech, and Political Action in Campus Education Inc. v. Commissioner.
The organization, which uses its acronym, SAFE SPACE, filed its petition 270 days after submitting a Form 1023, “Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,” making it eligible to do so...
SAFE SPACE was formed in 2023 by Ilya Shapiro, who serves as its president. Its mission is to educate students and the general public on the importance of freedom of thought and intellectual diversity on college campuses.
Update: The petition is here.
Final Version of My Paper, “Nonprofit Law as the Tool to Kill What Remains of Campaign Finance Law: Reluctant Lessons from Ellen Aprill,” Now Available
You can read it here, and the citation is 56 Loy. L.A. L. Rev. 1233 (2023).
Abstract:
This brief Essay was prepared for a festschrift honoring the work of Professor Ellen Aprill. I explain in the Essay how Professor Aprill’s deep knowledge of nonprofit and tax law and her relentless intellectual honesty leads her (and us) to an unhappy place: a world in which many of the remaining regulations of money in politics could well be struck down as unconstitutional or rendered wholly ineffective by a Supreme Court increasingly hostile to the goals of campaign finance law and extremely solicitous of religious freedom. Just as the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission used the First Amendment rights of nonprofit corporations to open up direct political spending by large, for-profit corporations, additional arguments about the rights of charitable institutions and other nonprofits will be used to push further judicial deregulation of the political process for all.
Professor Aprill in her most recent writings at the intersection of nonprofit law and election law reluctantly shows the way: a path toward getting churches, synagogues and other charitable institutions directly in the business of politics; a means of striking down or rendering ineffective what remains of our campaign disclosure laws; and a self-reinforcing bootstrapping that relies upon legislative and agency inertia coupled with judicially-created loopholes to argue for the ineffectiveness of the system as a whole, triggering its demise through constitutional litigation. It is a sad but expertly told story of regulatory collapse.
Federal District Court Denies Summary Judgment to IRS over Whether IRS Can Require Disclosure of Donor Information in Government Reports for 501(c)(3) Organizations
Looks like this is going to trial, and (as I’ve said, Americans for Prosperity Foundation v. Bonta will have lots of ramifications for disclosure rules). From the opinion:
In sum, the remaining question is whether the Disclosure Requirement is unconstitutional, and the Court will review the constitutionality of the Disclosure Requirement under exacting scrutiny. The parties’ briefing under the exacting
scrutiny raises a genuine issue of material fact. For example, Defendants argue and point to some evidence that the Disclosure Requirement is an important part
of the IRS’s enforcement and compliance procedures. Mot. 8-11 , ECF No. 43. On the other hand, Plaintiff raises several issues that undercut Defendants’ arguments. Resp. 5-13, ECF No. 49. Determining which side is ultimately more
persuasive will turn, at least in part, on witness credibility, which is an inappropriate consideration at summary judgment. Anderson, 477 U.S. at 255. Accordingly, both motions for summary judgment are DENIED.
“Response by Tax-Exempt Organization Scholars to Request for Information”
Ellen Aprill, Roger Colinvaux, Brian Galle, Philip Hackney, and Lloyd Mayer (the five who are among the most respected nonprofit tax law scholars in the nation) have posted this piece on SSRN. Here is the abstract:
A group of academics who study and write about tax-exempt organizations, including their politically related activities, has responded to an August 14, 2023 Request for Information (RFI) from the Ways and Means Committee regarding issues in connection with the advocacy activities of tax-exempt organizations. The submission describes aspects of current law and provides an appendix with a list of the authors’ relevant scholarly work. As a preliminary matter, the submission emphasizes the importance of the voice of tax-exempt organizations to a well-functioning civil society and democracy. The submission also notes that in no case do the laws applicable to tax-exempt organizations forbid all political activity, a term almost without boundaries if “political” means related to government.
Responding to concerns raised in the RFI, the submission makes several points. First, it is appropriate and lawful for section 501(c)(3) organizations to engage in nonpartisan voter education, registration, and get-out-the-vote activities. Second, Congress should lift the restriction that prevents the IRS from issuing guidance regarding the political activities of 501(c)(4) organizations. Third, Congress should take steps to tighten disclosure relating to foreign donors. Fourth, a new study of 501(c)(3) campaign activities is needed. Fifth and finally, affiliated relationships among tax-exempt organizations are standard practice for nonprofits that want to engage in different types and amounts of politically related activity.
“Trump Vows to Empower Political Pastors on Christian Nationalist Broadcast”
Rolling Stone cites the former President’s plans on the Johnson Amendment: “We never enforced it. We essentially ended it. I wasn’t able to finish it. But I’ll finish it this time.”
The Johnson Amendment prohibits 501(c)(3) nonprofits, contributions to which are tax-deductible, from participating in campaigns for or against candidates for public office.
“I.R.S. Official Is Said to Assert Political Meddling in Hunter Biden Inquiry”
As Justice Department officials weigh whether to indict Hunter Biden, the investigator overseeing the Internal Revenue Service’s portion of the case has come forward with allegations of political favoritism in the inquiry that stand to add to the already fraught circumstances facing the department.
Congressional leaders learned of the investigator’s allegations on Wednesday when a lawyer sent them a letter asking for whistle-blower protections for his client. The letter stated that the unnamed client, identified as an “I.R.S. criminal supervisory special agent who has been overseeing” an ongoing and sensitive case, had knowledge of an array of misconduct including political meddling, according to a copy of the letter obtained by The New York Times.
While the letter from the lawyer, Mark D. Lytle, did not name Hunter Biden, Senate and House Republicans put out statements specifying that it was referring to him. The disclosure fed claims by congressional Republicans that a Justice Department run by the president’s political appointees could not be trusted to make a decision about his son based on the facts and law.
The letter said the client had information that would contradict sworn testimony to Congress from a senior political appointee, an apparent reference to Attorney General Merrick B. Garland, who has offered assurances that the U.S. attorney in Delaware, David C. Weiss, who was appointed by President Donald J. Trump, would be free to run the investigation.
In response, Hunter Biden’s criminal defense lawyer, Christopher Clark, fired back on Thursday, claiming that the I.R.S. supervisor broke the law by disclosing confidential taxpayer information and called on the Justice Department to investigate the supervisor. Mr. Clark said that the only way it was known that the supervisor’s complaints could be linked to the Hunter Biden investigation would be if the supervisor or his lawyer disclosed it, either of which, he said, would have been improper.
“Fox Can Deduct $787 Million Defamation Settlement Over Vote Fraud Claims”
Paul Caron at TaxProf Blog.
“Nonprofits, campaign finance and more blows to democracy”
Lucy Bernholz blogs, responding to my draft paper, Nonprofit Law as the Tool to Kill What Remains of Campaign Finance Law: Reluctant Lessons from Ellen Aprill:
In a nutshell, Professor Hasen uses Professor Aprill’s work to show the intellectual and legal history that will likely use religious freedom to deregulate political donations. How? Via the deregulation of political activity in churches and houses of worship. There’s much more to it (read the paper) but that gets us started.
What does this mean for nonprofits? More politics. More money laundering. Less trust.
What does it mean for democracy? More blurring of boundaries between nonprofit and commercial corporations. More anonymous money in politics. Less trust. More plutocratic control.
It’s not a positive tale. But thanks to Professors Aprill and Hasen, we’ve been warned. So, what are we going to do about it?