[EL] Pro Publica and Subsidies

Sun Aug 19 13:07:46 PDT 2012

This got mixed up on one of the Sunday morning news shows.  I think it was Bob Schieffer (Face the Nation) who had a representative of Pro Publica on his show. He made the comment that these groups get the same benefits as charities (and I think he said that contributions were deductible, but I could be wrong on that). The Pro Publica person did not correct him.

I suppose the tax break is that these groups don't have to treat contributions as taxable income, right? I'm not sure it would make sense in any case to treat voluntary contributions to expressive groups as taxable income. Contributions to PACs aren't treated as taxable income to the PACs, are they? Why not, if failure to tax (c)(4) entities on contributions is somehow a subsidy?

Mark S. Scarberry
Professor of Law
Pepperdine Univ. School of Law

From: law-election-bounces at department-lists.uci.edu [mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of Smith, Brad
Sent: Sunday, August 19, 2012 12:07 PM
To: law-election at uci.edu
Subject: [EL] Pro Publica and Subsidies

per Pro Publica:

"An investigation by ProPublica, drawing on documents filed with the Internal Revenue Service and the Federal Election Commission, offers the most detailed picture to date of how 501(c)(4) groups have used their tax status for purposes likely never intended.

Our examination shows that dozens of these groups do little or nothing to justify the subsidies they receive from taxpayers."

Whoa! What subsidies? None of these groups mentioned in the article get direct government subsidies (at least none are mentioned). And donors get no tax write-offs for giving to them, so the revenue they receive has already been taxed. In most states, the organizations pay sale taxes when they buy items, and property taxes on their property (and this is a question of state law).  And if they make political expenditures, they are subject to tax on any investment income. They pay tax on unrelated business income (though not on related business income, although it doesn't appear that any of these groups have any). As for taxes on profits, what would those be?

The main reason non-profits don't pay corporate income taxes is simply that it wouldn't make sense. It's not a subsidy.

Pro-Publica is probably mixing them up with 501(c)(3) organizations, for which donors get a tax deduction, which arguably is therefore  a "subsidy." But the (c)(3) organizations are prohibited from political activity.

Bradley A. Smith

Josiah H. Blackmore II/Shirley M. Nault

   Professor of Law

Capital University Law School

303 E. Broad St.

Columbus, OH 43215

614.236.6317

http://law.capital.edu/faculty/bios/bsmith.aspx

________________________________
From: law-election-bounces at department-lists.uci.edu<mailto:law-election-bounces at department-lists.uci.edu> [law-election-bounces at department-lists.uci.edu] on behalf of Rick Hasen [rhasen at law.uci.edu]
Sent: Sunday, August 19, 2012 2:29 PM
To: law-election at uci.edu<mailto:law-election at uci.edu>
Subject: [EL] ELB News and Commentary 8/19/12
Quote of the Week<http://electionlawblog.org/?p=38802>
Posted on August 19, 2012 11:25 am<http://electionlawblog.org/?p=38802> by Rick Hasen<http://electionlawblog.org/?author=3>

"I guess I really actually feel we shouldn't contort the voting process to accommodate the urban - read African-American - voter-turnout machine...Let's be fair and reasonable."

-Doug Preisse,<http://www.dispatch.com/content/stories/local/2012/08/19/fight-over-poll-hours-isnt-just-political.html> "chairman of the [Franklin] county Republican Party and elections board member who voted against weekend hours, in an email to The Dispatch. He called claims of unfairness by Ohio Democratic Chairman Chris Redfern and others 'bullshit. Quote me!'"

I argue for nonpartisan election administration in The Voting Wars<http://www.amazon.com/Voting-Wars-Florida-Election-Meltdown/dp/0300182031/ref=sr_1_cc_2?s=aps&ie=UTF8&qid=1329286945&sr=1-2-catcorr> and this is a nice illustration why.
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Posted in election administration<http://electionlawblog.org/?cat=18>, The Voting Wars<http://electionlawblog.org/?cat=60>, Voting Rights Act<http://electionlawblog.org/?cat=15> | Comments Off
Must-read ProPublica Report on 501c4 Election Spending<http://electionlawblog.org/?p=38799>
Posted on August 19, 2012 11:19 am<http://electionlawblog.org/?p=38799> by Rick Hasen<http://electionlawblog.org/?author=3>

ProPublica<http://www.propublica.org/article/how-nonprofits-spend-millions-on-elections-and-call-it-public-welfare>:

An investigation by ProPublica, drawing on documents filed with the Internal Revenue Service and the Federal Election Commission, offers the most detailed picture to date of how 501(c)(4) groups have used their tax status for purposes likely never intended.

Our examination shows that dozens of these groups do little or nothing to justify the subsidies they receive from taxpayers. Instead, they are pouring much of their resources, directly or indirectly, into political races at the local, state and federal level.

The 2010 election functioned, effectively, as a dry run, providing a blueprint for what social welfare groups are doing on a larger scale today. Records on what is happening in the 2012 campaign will not be available until well after the election.

For this story, ProPublica reviewed thousands of pages of filings for 106 nonprofits active during the 2010 election cycle, tracking what portion of their funds went into politics. We watched TV ads bought by these groups, looked at documents from other nonprofits that gave them money, and interviewed dozens of campaign finance experts and political strategists.

We found that some groups said they would not engage in politics when they applied for IRS recognition of their tax-exempt status. But later filings showed they spent millions on just such activities.

On the very day<http://www.propublica.org/documents/item/326775-1024-american-future-fund-part-1#document/p9/a64857> in 2008 that the American Future Fund<http://www.propublica.org/article/how-nonprofits-spend-millions-on-elections-and-call-it-public-welfare> mailed its application to the IRS, checking the box for "no" on whether it planned to participate in politics, it uploaded an ad<http://www.youtube.com/watch?v=2oEz3lzgDsI> to YouTube praising a Republican senator. The group reported more than $8 million<http://www.propublica.org/documents/item/331911-990-american-future-fund-2010#document/p13/a51700> in political spending in 2010.

We also found that social welfare groups used a range of tactics to underreport their political activities to the IRS, a critical measure in determining whether they are entitled to remain tax-exempt.

Many groups told the IRS they spent far less on politics than they reported to federal election officials. Some classified expenditures that clearly praised or criticized candidates for office as "lobbying," "education" or "issue advocacy" on their tax returns.

See also this interactive map<http://projects.propublica.org/dark-money/> and ProPublica's Kim Barker interviewed <http://www.cbsnews.com/8301-3460_162-57496037/non-profits-outspending-super-pacs/?tag=showDoorFlexGridRight;flexGridModule> on "Face the Nation" (CBS).
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Posted in campaign finance<http://electionlawblog.org/?cat=10>, tax law and election law<http://electionlawblog.org/?cat=22> | Comments Off
"Military voters as political pawns"<http://electionlawblog.org/?p=38795>
Posted on August 18, 2012 4:08 pm<http://electionlawblog.org/?p=38795> by Rick Hasen<http://electionlawblog.org/?author=3>

I have written this cover piece <http://www.utsandiego.com/news/2012/aug/19/tp-military-voters-as-political-pawns/> for the Sunday San Diego Union-Tribune opinion section. It begins:

It's the election season, and the battle for the presidency and control of Congress is being fought not just through voter registration drives, endless campaign ads, and stadium rallies, but also in courts across America. Litigation over election rules<http://electionlawblog.org/?p=17843> has become increasingly commonplace since the disputed 2000 election in Florida, which led to the United States Supreme Court choosing George W. Bush over Al Gore<http://www.law.cornell.edu/supct/html/00-949.ZPC.html/>. And as in 2000, the question of military voters and military ballots is back in the media and legal spotlight, with Republicans unfairly accusing Democrats of being anti-military.

A federal district court in Ohio<http://moritzlaw.osu.edu/electionlaw/litigation/ObamaForAmericaVHusted.php> will soon decide the Obama campaign's challenge to an unusual Ohio law. The law allows military voters and overseas voters, but no other voters, the right to cast an in-person ballot in the three days before Election Day. Democrats argue<http://moritzlaw.osu.edu/electionlaw/litigation/documents/PlaintiffsMemorandumofLawinFurtherSupportofPlaintiffsMotionforaPreliminaryInjunction.pdf> that this law is unconstitutional because it "requires election officials to turn most Ohio voters, including veterans, firefighters, police officers, nurses, small business owners and countless other citizens, away from open voting locations, while admitting military and nonmilitary overseas voters and their families who are physically present in Ohio and able to vote in person."

Another snippet:

The claim that Democrats were trying to undermine the military vote was especially ironic. The only significant federal election legislation to pass out of Congress since 2002 was the MOVE Act<http://www.justice.gov/opa/pr/2010/October/10-crt-1212.html>, a bill championed by Democrats<https://twitter.com/chuckschumer/statuses/126665590931857408> to extend military voting rights. Overseas military voter turnout is abysmal, and the MOVE Act was a small step in the right direction by requiring states to get ballots to military voters on time. Still, Republicans have repeatedly criticized<http://electionlawblog.org/?p=20643> the Obama Administration's Department of Justice for not implementing the MOVE Act aggressively enough against states which have sought waivers from its provisions.

Perhaps the Democrats are willing to fight about military ballots this time because of how they got burned in the Florida 2000 dispute. As I detail in my new book, "The Voting Wars,"<http://www.amazon.com/Voting-Wars-Florida-Election-Meltdown/dp/0300182031/>; during the recounts of the ballots lawyers for Gore had been fighting against the counting of overseas ballots which did not have a postmark showing a foreign mailing before Election Day. When Republicans got wind of this, they accused Democrats of being anti-military. Democrats asked vice-presidential candidate Joe Lieberman to put the controversy to rest, but he said on the NBC news program "Meet the Press" that military ballots received by county canvassing boards should be given the benefit of the doubt.
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Posted in absentee ballots<http://electionlawblog.org/?cat=53>, Bush v. Gore reflections<http://electionlawblog.org/?cat=5>, election administration<http://electionlawblog.org/?cat=18>, military voting<http://electionlawblog.org/?cat=48>, The Voting Wars<http://electionlawblog.org/?cat=60> | Comments Off
"Will the Real Bob Baker Please Stand Up?"<http://electionlawblog.org/?p=38792>
Posted on August 18, 2012 3:39 pm<http://electionlawblog.org/?p=38792> by Rick Hasen<http://electionlawblog.org/?author=3>

Interesting press release via email:

SAN CLEMENTE CITY COUNCILMEMBER BOB BAKER TAKES ISSUE WITH BALLOT POSITIONING SHENANIGANS

Incumbent Councilmember "Bob Baker 1" Says Sham Challenger "Bob Baker 0" Gamed the System To Gain an Unfair Advantage.

Robert "Bob" Baker  ("Bob Baker 1") is seeking reelection to the San Clemente City Council this November.  A second Robert "Bob" Baker ("Bob Baker 0") has appeared out of thin air to challenge his namesake, leading voters to ask "Will the real Bob Baker please stand up?"

The California Elections Code calls for similarly named candidates to use numerical distinctions to differentiate themselves for the voters.  City Clerk Joanne Baade is listing the Bob Baker who chose the lowest number to appear first among the two Bob Bakers on the ballot.  This is where the situation gets "curiouser and curiouser" like something out of Alice in Wonderland.

The incumbent Bob Baker, who was the first Baker to file his candidacy papers and to select a number, chose the number "1," reasonably concluding that he had secured the first, and thus lowest, number and would appear above the newcomer Bob Baker on the ballot.  The new Bob Baker, however, instead of logically choosing any number from 2 upward, was allowed to select "0."  The story should have ended there, with the Clerk rejecting the Johnny-Come-Lately Baker's selection and requiring him to choose number 2 or any other positive integer besides 1.

But no, instead, the Clerk issued a statement that "Robert 'Bob' Baker No. 0 will appear immediately before Robert 'Bob' Baker No. 1 on the ballot because zero is a lower number than one."  Really?

Political scientists have proven, and the California Supreme Court has acknowledged, a "primacy" effect in which the higher up a candidate's name appears on the ballot, the more likely that candidate is to gain extra votes (often in the amount of several percentage points) over and above those whose names appear lower on the list.  So ballot position matters, which is why the Secretary of State performs a "randomized alphabet drawing" for each election.

Bob Baker 1 expressed surprise at this development, stating "Someone can be 1st in line, but no one can be 0st in line, can they?"  "And do winners of races come in 1st place or 0th place?"  Baker 1 surmised that another candidate recruited Baker 0 to run in order to confuse the voters and dilute Baker 1's votes.  "San Clemente's voters are quite intelligent," said Councilman Baker, "and they will see through this charade and vote for the Bob Baker who doesn't play games with the electoral process but merely wants to continue serving the City as a member of the Council."  A voter, who did not want her identity revealed, said "Having served in the U.S. Navy for 7 years and as a commercial pilot for 30 years, Bob Baker 1 is a hero, whereas Bob Baker 0 is a "zero."

Election law expert Brad Hertz of the Sutton Law Firm, who teaches Election Law at Chapman University Law School and is former President of the California Political Attorneys Association, said "The City Clerk's actions make no sense, and Bob Baker 0 should not have been allowed to designate himself as such."  Hertz pointed to Elections Code section 13117, which states that "... all state measures ... shall be numbered in a continuous sequence, commencing with the number "1" and continuing in numerical sequence for a period of 10 years from the year of commencement.  At the completion of a 10-year cycle, the numbering sequence shall recommence with the number "1" at the next election...."  Hertz, who commonly litigates election law matters, and with whom Baker 1 has consulted, said "If common sense does not carry the day, then at least this analogous Elections Code section should guide the City Clerk to realize that "1," not "0," is the first and lowest number in the context of ballot position."

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Posted in campaigns<http://electionlawblog.org/?cat=59>, chicanery<http://electionlawblog.org/?cat=12> | Comments Off
"Donor against marriage amendment will remain unnamed"<http://electionlawblog.org/?p=38789>
Posted on August 18, 2012 3:35 pm<http://electionlawblog.org/?p=38789> by Rick Hasen<http://electionlawblog.org/?author=3>

Star-Tribune<http://www.startribune.com/politics/statelocal/166613126.html>: "The state campaign finance board decided Friday that a marriage amendment contributor who works for a Catholic organization can remain anonymous out of fear that disclosure of his donation to a group opposing the measure could cost him his job. A man known only as 'John Doe' had contributed $600 to Minnesotans United for All Families last year, but requested anonymity."
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Posted in campaign finance<http://electionlawblog.org/?cat=10> | Comments Off
"Extra voting hours? That'll be $406 an hour, please"<http://electionlawblog.org/?p=38786>
Posted on August 18, 2012 3:31 pm<http://electionlawblog.org/?p=38786> by Rick Hasen<http://electionlawblog.org/?author=3>

The Cincinnati Enquirer reports<http://news.cincinnati.com/apps/pbcs.dll/article?AID=/201208171945/NEWS0106/308170124>.
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Posted in absentee ballots<http://electionlawblog.org/?cat=53>, election administration<http://electionlawblog.org/?cat=18>, The Voting Wars<http://electionlawblog.org/?cat=60>, voting<http://electionlawblog.org/?cat=31> | Comments Off
"Reformers or Intimidators? Fee Demands Out of Line"<http://electionlawblog.org/?p=38783>
Posted on August 18, 2012 3:26 pm<http://electionlawblog.org/?p=38783> by Rick Hasen<http://electionlawblog.org/?author=3>

Tom Elias has this column<http://www.smmirror.com/articles/Opinion/Reformers-Or-Intimidators-Fee-Demand-Out-Of-Line/35273> in the Santa Monica Mirror.
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Posted in Uncategorized<http://electionlawblog.org/?cat=1> | Comments Off
"Will the Next Election Be Hacked? Online voting is on the rise, but experts see it as a nightmare for the integrity of the electoral process"<http://electionlawblog.org/?p=38778>
Posted on August 18, 2012 3:14 pm<http://electionlawblog.org/?p=38778> by Rick Hasen<http://electionlawblog.org/?author=3>

This article <http://electionlawblog.org/Will%20the%20Next%20Election%20Be%20Hacked?%20Online%20voting%20is%20on%20the%20rise,%20but%20experts%20see%20it%20as%20a%20nightmare%20for%20the%20integrity%20of%20the%20electoral%20process> in the Wall Street Journal begins, as Chapter 6 of The Voting Wars<http://www.amazon.com/Voting-Wars-Florida-Election-Meltdown/dp/0300182031/ref=sr_1_cc_2?s=aps&ie=UTF8&qid=1329286945&sr=1-2-catcorr> begins<http://www.amazon.com/Voting-Wars-Florida-Election-Meltdown/dp/0300182031/ref=sr_1_cc_2?s=aps&ie=UTF8&qid=1329286945&sr=1-2-catcorr>: with the Michigan Fight Song ("Hail to the Victors") playing through the D.C. Board of Elections Computers: Go Blue!

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Posted in The Voting Wars<http://electionlawblog.org/?cat=60>, voting technology<http://electionlawblog.org/?cat=40> | Comments Off
"Will the Voting Rules Affect Which Candidate Wins?"<http://electionlawblog.org/?p=38775>
Posted on August 18, 2012 3:08 pm<http://electionlawblog.org/?p=38775> by Rick Hasen<http://electionlawblog.org/?author=3>

Ned Foley blogs <http://moritzlaw.osu.edu/electionlaw/comments/index.php?ID=9589> on Florida v. U.S. and SEIU v. Husted.  His conclusion:

"The Ohio law of provisional voting, however, presents another story. That law, as interpreted by the state's supreme court, truly could disenfranchise enough valid voters to tip the balance of the presidential election. Therefore, for those concerned that the rules might determine the winner-and thus risk delegitimizing the result-the SIEU v. Husted challenge to Ohio's provisional voting rules should be high on the list of cases to track, together with Florida v. U.S."

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Posted in election administration<http://electionlawblog.org/?cat=18>, provisional ballots<http://electionlawblog.org/?cat=67>, The Voting Wars<http://electionlawblog.org/?cat=60>, voting<http://electionlawblog.org/?cat=31> | Comments Off

--

Rick Hasen

Chancellor's Professor of Law and Political Science

UC Irvine School of Law

401 E. Peltason Dr., Suite 1000

Irvine, CA 92697-8000

949.824.3072 - office

949.824.0495 - fax

rhasen at law.uci.edu<mailto:rhasen at law.uci.edu>

http://law.uci.edu/faculty/page1_r_hasen.html

http://electionlawblog.org

Now available: The Voting Wars: http://amzn.to/y22ZTv
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