[EL] big IRS story - a note on taxes

[Sean Parnell]

I've seen a few references here and elsewhere to c4 groups being subsidized
by taxpayers or having some sort of privileged tax status, so I thought it
might be worth clearing up a point about U.S. tax code. Corporate taxes are
based on one fundamental premise - taxes are levied on profits earned by the
corporation. Because c4 groups are intentionally nonprofit corporations, and
thus have no profits on which taxes might be levied, it's not really
accurate to somehow suggest they are ducking taxes or receive some sort of
special tax exemption. You could, tomorrow, pass a law that says c4 groups
are subject to corporate income taxes in exactly the same way a for-profit
corporation is, and it would be meaningless - no profits = no tax liability.

 

There may be others, but to my knowledge there is only one industry in which
firms (incorporated or otherwise) are subject to a federal 'gross receipts
tax' wherein a percentage is levied against all revenues regardless of
profitability, and that is the medical device industry which (warning -
editorial content ahead) failed to 'volunteer' to 'contribute' to the
Affordable Care Act by cutting a deal with the Obama administration. 

 

So, the 'privileged' tax status of c4 groups (all nonprofits, for that
matter) really isn't all that privileged, other than c3 groups whose donors
can subtract donations from their own taxes. Setting aside all the tax
loopholes and preferences that Congress has carved out over the years, the
reason most corporations (for-profit and non-profit alike) don't pay
corporate income taxes is that they don't have profits available to be taxed
(there is something called unrelated business income for nonprofits that is
taxed, but that's a separate matter). 

 

Best,

 

 

Sean Parnell

President

Impact Policy Management, LLC

6411 Caleb Court

Alexandria, VA  22315

571-289-1374 (c)

sean at impactpolicymanagement.com

 

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