Friday, May 27, 2011
One basic principle of the rule of law is that laws apply to everybody. If the sign says "No Parking," you're not supposed to park there even if you're a pal of the alderman. Another principle of the rule of law is that government can't make up new rules to help its cronies and hurt its adversaries except through due process, such as getting a legislature to pass a new law.
The Obamacare waiver process appears to violate that first rule. Two other recent Obama administration actions appear to violate the second. ... The other example is the IRS's attempt to levy a gift tax on donors to certain 501(c)(4) organizations that just happen to have spent money to elect Republicans.
A gift tax is normally assessed on transfers to children and other heirs that are designed to avoid estate taxes. It has been applied to political donations "rarely, if ever," according to New York Times reporter Stephanie Strom. "The timing of the agency's moves, as the 2012 election cycle gets under way," continues Strom, "is prompting some tax law and campaign finance experts to question whether the IRS could be sending a signal in an effort to curtail big donations."
- Forbes, Barack Obama: A Nixon, Not a Carter, by Ralph Benko
- Forbes, President Obama’s Abuse Of Power, by Charles Kadlec
Top Republican political strategist Karl Rove's method of secretly funneling unlimited contributions from big donors was so hugely successful in the 2010 campaign that Democrats are now trying to copy it. But his model may yet end up backfiring spectacularly.
In one scenario, groups like Rove's Crossroads Grassroots Political Strategies could find themselves subject to massive fines, ranging as high as 35 to 70% of the money they received in secret donations.
In another scenario, their deep-pocket donors could be hit by a 35% tax on their contributions.
Rove may well have found a way around the nation's federal election laws. But now the key question is whether the IRS is willing to be assertive. Because if it is, then just like with Al Capone, it could be the IRS that gets him.
In Crossroads GPS's solicitations for money, the group describes itself as a tax-exempt 501(c)(4) organization, and due to a controversial loophole in federal campaign finance rules, the names of donors to those organizations do not have to be disclosed publicly.
But contrary to popular belief, Rove's group has not formally attained 501(c)(4) status. The group's application, requesting the IRS to classify it as a "social welfare" group, is still pending.
And while the designation is typically not much more than a formality -- organizations routinely call themselves (c)(4) groups before they've been formally approved -- tax and campaign finance experts contacted by The Huffington Post said the IRS could well deny Crossroads GPS's application. ...
"Lots and lots of things that would not be considered 'express advocacy' by the FEC, the IRS would consider intervention in a political campaign," said Donald Tobin, a tax and campaign finance law expert at the Moritz College of Law. ... "There's a good chance the IRS will deny the (c)(4) application," said Lloyd Mayer, who teaches tax law at the University of Notre Dame. ... Mayer described what he considers a likely scenario: The IRS denies Rove's group its (c)(4) status, but ends up letting him off with just a slap on the wrist. ... "That would be the easy way out," he added. Another possibility is that the IRS could just decide to let the issue drag out indefinitely, Mayer said. As it is, the earliest opportunity for decisive action may not be for almost another year.
(Hat Tip: Francine Lipman.)