[EL] OFA: 501(c)(4) formed by recent campaign officials and candidate

[bzall at aol.com]

In regard to the last point Douglas Hess raises (and perhaps the others as well), it may be harder than people think to use a 501(c)(4) to do the "creative" political organizing that a party would otherwise do. With the permission of the author, I reprint a recent letter from Paul Streckfus' Exempt Organizations Tax Journal, www.eotaxjournal.com:


 if only because of the circumstances of its history and creation, Organizing for Action raises interesting questions that are not present in the case of the conservative section 501(c)(4) organizations to which it is so often compared. The American Campaign Academy case says that (i) the private benefit doctrine will prevent an organization from qualifying under section 501(c)(3) if its motive/purpose/intent/goal is to benefit a particular political party and (ii) the organization’s motive/purpose/intent/goal can be inferred from the prior active involvement with that political party of the individuals who created and controlled the organization. As a matter of logic, the rules must be the same for section 501(c)(4) organizations because, since 1996, section 501(c)(4) has expressly prohibited “inurement,” and even before the 1996 amendment, private benefit had been held to be inconsistent with section 501(c )(4) status.

The scope and effect of American Campaign Academy, a Tax Court opinion by a judge who appeared somewhat befuddled by the intricacies of tax-exempt organization practice and reality (as the Chief Judge of the Tax Court once pointed out to me: the average Tax Court judge sees one or two exempt organization cases in a decade), was the topic of substantial discussion, including in yesterday's First Tuesday Lunch Group (a meeting of election and tax lawyers). The bottom line of the discussion, per John Pomeranz and others, was the Gingrich ("we're ideological, not partisan") and Kemp (Empower America) cases (bipartisanship is sufficient -- "See? We have Joe Lieberman!") trump American Campaign Academy (aid to a particular party is prohibited private benefit), though, as in all such analyses, "facts and circumstances" control. 


So, although it is almost certain that the Service will not turn down OFA's application for recognition of its already-existing 501(c)(4) status (granted automatically by its formation in a state and only "recognized" by the IRS), there do exist substantial tax and legal questions about whether an organization can "do more creative political organizing" if it is directed in ways deemed to aid only one party. Those whose principals were and are in control of a campaign or party might be held to a higher standard if they immediately transition into a c4 structure. They would have to rely on the bipartisan or ideological defenses. 


Barnaby Zall 
Of Counsel 
Weinberg, Jacobs & Tolani, LLP 
10411 Motor City Drive, Suite 500
Bethesda, MD 20817
301-231-6943 (direct dial) 
bzall at aol.com 
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-----Original Message-----
From: Doug Hess <douglasrhess at gmail.com>
To: law-election <law-election at department-lists.uci.edu>
Sent: Wed, Feb 6, 2013 10:55 am
Subject: [EL]  OFA: A Shot Heard 'round the World?




I don't understand the objection to an organization (the new OFA) that promotes mobilization around community and national issues receiving donations. If the members don't like who funds the group, they won't fund it (i.e., donate or join it) either. 


I guess for appearances, Obama's involvement raises questions, but there are ways to limit that involvement in reality and in appearance. It will be interesting to see if he plans to help raise funds for it while in office. If it endorses, then things are trickier, I guess. But a 501(c)4 organization (I think that is what it is) can only inform members of its endorsement, right? And it would be odd for a sitting president to endorse many people in a primary fight in a systematic way (FDR learned that) and even odder that he would endorse members of the opposite party. So, what is the concern? That people may organize and a president encourage it?

On another topic: It is interesting to note that an extra-party organization is needed to do more creative political organizing in American politics. 


-Doug 
 
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