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

[Ellen Aprill]

At the fall ABA Tax Section meeting, I gave a presentation on the
relationship between private inurement, private benefit and campaign
intervention for 501(c)(4) organizations in light of some recent private
letter rulings.  I attach the power point in case it might be of interest
to some members of the list.

  Ellen
-------
Ellen P. Aprill
John E. Anderson Professor of Tax Law
Loyola Law School
919 Albany Street
Los Angeles, CA 90015
213-736-1157


On Wed, Feb 6, 2013 at 8:39 AM, <bzall at aol.com> wrote:

> 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
> _____________________________________________________________
> U.S. Treasury Circular 230 Notice
>
> Any U.S. federal tax advice included in this communication (including
> any attachments) was not intended or written to be used, and cannot be
> used, for the purpose of (i) avoiding U.S. federal tax-related penalties
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> tax-related matter addressed herein.
> _____________________________________________________________
>
>
> -----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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