Paul L. Caron
Dean




Sunday, July 17, 2016

IRS Rejects 501(c)(3) Status For DNC Convention As Too Partisan, Causing Donors To Pull Out Due To Lost Deductions; DNC Devises Workaround To Funnel Contributions Through Philadelphia Convention Bureau

DNCFollowing up on my previous posts (here and here):  Philadelphia Inquirer:  Turned Down by the IRS, Philly's DNC Host Committee Goes for Plan B:

The IRS has turned down the long-running effort by the Democratic convention's Philadelphia host committee to win a tax exemption.

Word of the decision, a setback for efforts to raise the last of the $60 million needed to help pay for the July 25 to 28 convention, came Friday from its adviser, David L. Cohen.

When the decision came - and why - is less clear. Cohen would say only that the IRS "recently" turned down the application for tax-exempt status under section 501(c)3 of the tax code, which the committee had sought for more than a year.

Cohen, senior executive vice president of Comcast Corp., said the IRS viewed some of the committee's work as too much like political activity to win 501(c)3 status. He declined to release the IRS letter notifying the committee, focusing instead on efforts to appeal the decision.

"Right now the host committee is a c3 in waiting," Cohen said Friday. "We are continuing to pursue the c3 but we cannot afford to continue to wait."

The committee has come up with a Plan B that involves the Philadelphia Convention and Visitors Bureau Foundation.

Without the IRS exemption, individual donors cannot claim a tax deduction for their donations. Cohen said earlier Friday that two donors wanted their money back because they could not count on a deduction. He declined to reveal the donors or amounts. That was in keeping with the committee's insistence on keeping donor names and amounts private until after the convention, a stance that has drawn criticism from watchdog groups.

Although the committee is appealing the decision and could still get a tax exemption retroactive to its May 2015 application, Cohen said the two donors didn't want to take that risk. ...

To address the lack of 501(c)3 status, the committee signed an agreement with the Convention and Visitors Bureau Foundation, a 501(c)3 fund-raising arm of the bureau, to essentially trade donations for grants. Individual donors who want a tax deduction will be asked to donate to that foundation. The foundation in turn will issue grants to the host committee to help pay for events that fall under the foundation's mission of promoting the city. ...

The bureau's foundation "has awarded grants to support providing important nonpartisan, welcoming and hospitality functions and services for convention attendees and guests," Burke-Green said in an email. "It is these kinds of events that promote the capabilities of the City of Philadelphia as a top-tier convention destination, which aligns with the mission of the foundation."

Unlike Philadelphia's host committee, the Republican convention's host committee in Cleveland received its 501(c)3 designation from the IRS just 12 days after it applied. Cohen said he has looked at Cleveland's application and found it "almost identical" to Philadelphia's. ...

Marcus Owens, a Washington tax lawyer who ran the IRS tax-exempt organizations division for a decade, has said the agency mainly looks at how an applicant plans to spend its money. He said a political convention's host committee would have to show that funds would mostly be used for city infrastructure projects, such as filling potholes and fixing streetlights.

As far as the reasons for the rejection, Cohen said Friday, "It's fair to say that there is skepticism of the people in the IRS that this is for political activity."

He said the committee is hoping for a successful appeal, given that Cleveland and previous convention host committees have received 501(c)3 designations. If not, he said donors will still wind up getting a tax deduction by donating to the convention and visitors bureau foundation.

"We found a solution," he said.

https://taxprof.typepad.com/taxprof_blog/2016/07/irs-rejects-501c3-status-for-dnc-convention-as-too-partisan-causing-donors-to-pull-out-due-to-lost-d.html

Political News, Tax | Permalink

Comments

I can't imagine either group's application looking much different. I'd chalk this up to either (i) incompetence at the IRS or (ii) an effort to show favoritism to the RNC as a response to the IRS scandal from the prior election. Gotta love the response, though, just work around it for now using a Visitor's Bureau as a conduit.

Posted by: Smitty | Jul 18, 2016 12:13:32 PM

I agree that both are certainly political in nature and should be treated consistently.

Posted by: sw | Jul 18, 2016 6:16:41 AM

It does seem that under tax law the two conventions should be treated equally. On the other hand, I can't see why either, given how political it is, should get that (c) 3 exemption.

That said, given that political donations are often political payoffs, I don't get enthused about giving to either party being tax-deductable.

Posted by: Michael W. Perry | Jul 17, 2016 3:03:23 PM

Supporting the Democratic Party Convention is political? I can understand that supporting the Republican Party Convention is political, but it seems to me that the Democrats have become a religious group rather than a political party. As such it is ok that their convention be tax exempt. However, the principle of separation of church and state should keep its members out of government.

Posted by: Daniel | Jul 17, 2016 1:58:49 PM

The point of this is to get the headline and story out there. When they win the appeal, it will be when no one is paying attention. Of course, the Republicans will lose their appeal

Posted by: Brian | Jul 17, 2016 1:35:01 PM

Money laundering is s DNC stock in trade.

Posted by: gbear | Jul 17, 2016 11:44:04 AM