Tag Archives: IRS

White nationalists raise millions with tax-exempt charities

The federal government has allowed four groups at the forefront of the white nationalist movement to register as charities and raise more than $7.8 million in tax-deductible donations over the past decade, according to an Associated Press review.

Already emboldened by Donald Trump’s popularity, group leaders say they hope the president-elect’s victory helps them raise even more money and gives them a larger platform for spreading their ideology.

With benevolent-sounding names such as the National Policy Institute and New Century Foundation, the tax-exempt groups present themselves as educational organizations and use donors’ money to pay for websites, books and conferences to further their ideology.

The money also has personally compensated leaders of the four groups.

New Century Foundation head Jared Taylor said his group raises money for the benefit of the “white race,” a mission taxpayers are indirectly supporting with the group’s status as a 501C3 nonprofit. The IRS recognized it, the Charles Martel Society, the National Policy Institute and VDare Foundation as charities more than a decade ago.

Samuel Brunson, a tax law professor at Loyola University in Chicago, noted the nonprofit status gives these groups a veneer of legitimacy and respectability.

“It should make people uncomfortable that the government is subsidizing groups that espouse values that are incompatible with most Americans,” he said.

The IRS has tried to weed out nonprofit applicants that merely spread propaganda. In 1978, the agency refused to grant tax-exempt status to the National Alliance, a neo-Nazi group that published an anti-Semitic newsletter. And in 1994, a court upheld the denial of tax-exempt status for the Nationalist Movement, a Mississippi-based white nationalist group.

Some tax experts said the IRS is still feeling the sting from conservative critics over its 2013 concession that it unfairly gave extra scrutiny to tea party groups seeking tax exemptions.

“I don’t think they’re feeling very brave right now,” said Ellen Aprill, a tax law professor at Loyola Law School in Los Angeles.

IRS spokesman Michael Dobzinski said he can’t comment on individual nonprofits.

Louisiana State University law professor Philip Hackney, a former IRS attorney, said the agency receives tens of thousands of applications annually and doesn’t have the resources to scrutinize many of them.

“A lot of applications fly through,” Hackney said. “They’re looking for easy ways to sort things out and kind of give rubber stamps.”

New Century Foundation, a Virginia-based nonprofit, has raised more than $2 million since 2007 and operates the American Renaissance online magazine, which touts a philosophy that it’s “entirely normal” for whites to want to be a majority race.

Taylor, a Yale-educated, self-described “race realist,” said his group, founded in 1994, abides by all laws governing nonprofits.

“We certainly did not conceal our intentions,” Taylor said. “I think we are educational in precisely the terms that Congress defined.”

Taylor, whose tax filing says he received $65,000 in compensation in 2015, said he isn’t raising money to enrich himself or his group.

“We hold it in trust for the white race,” he said. “We take this seriously. This is not something we do for fun or profit. This is our duty to our people.”

In a 2012 article, University of Georgia business professor Alex Reed argued the IRS “can and must” revoke the New Century Foundation’s charitable status. Reed said the agency’s lax enforcement allowed other groups _ including ones he labeled as white nationalist, anti-gay, anti-immigrant or Holocaust deniers _ to qualify for tax breaks under the guise of operating educational organizations.

The Montana-based National Policy Institute is run by Richard Spencer, who popularized the term “alternative right” about a decade ago. The so-called alt-right is a fringe movement that has been described as a mix of racism, white nationalism and populism.

Spencer’s group raised $442,482 in tax-deductible contributions from 2007 through 2012. More recent fundraising figures for the group aren’t available in online tax returns, but Spencer said Trump’s candidacy already has boosted his group’s fundraising.

Spencer hosted a postelection conference in Washington that ended with audience members mimicking Nazi salutes after Spencer shouted, “Hail Trump, hail our people, hail victory!” Spencer has advocated for an “ethno-state” that would be a “safe space” for white people.

The Georgia-based Charles Martel Society was founded by wealthy publisher William H. Regnery II, who also founded the National Policy Institute.

The group raised $568,526 between 2007 and 2014 and publishes The Occidental Quarterly. In an article last December, the journal’s editor applauded Trump’s campaign as a “game changer” for white people who oppose immigration and multiculturalism but said they “have a long way to go to really change the public discussion of race, Western culture, and Jewish influence.”

The Connecticut-based VDare Foundation is led by Peter Brimelow, founder and editor of an anti-immigration website. Brimelow, who spoke at the National Policy Institute’s conference last month, founded his nonprofit in 1999 and raised nearly $4.8 million between 2007 and 2015.

Brimelow has denied that his website is white nationalist but acknowledged it publishes works by writers who fit that description “in the sense that they aim to defend the interests of American whites.”

Brimelow received $378,418 in compensation from his nonprofit in 2007, accounting for nearly three-quarters of its total expenses that year. Brimelow says his salary that year was $170,000 and the rest reimbursed him for travel, office supplies and other expenses.

From 2010 through 2015, VDare Foundation didn’t report any compensation directly paid to Brimelow. But, starting in 2010, the nonprofit began making annual payments of up to $368,500 to Brimelow’s Happy Penguins LLC for “leased employees.” Brimelow disclosed his ownership of that company on tax returns.

Chuck McLean, a senior research fellow for the nonprofit watchdog Guidestar, said the IRS could view those “independent contractor” payments to Happy Penguins LLC as improper self-dealing unless the nonprofit can show they were “fair-market value transactions.” Brimelow says he set up that company to “protect” and pay his employees and himself.

Brimelow’s group reported modest fundraising increases for each of the past three years. He is confident that trend would continue during Trump’s administration.

“We have every reason to believe that it will,” he wrote in an email.

 

Trump’s charity admits to flouting IRS rules for self-benefit

President-elect Donald Trump’s charity has admitted that it violated IRS regulations barring it from using its money or assets to benefit Trump, his family, his companies or substantial contributors to the foundation.

The admissions by the Donald J. Trump Foundation were made in a 2015 tax filing made public after a presidential election in which it was revealed that Trump has used the charity to settle lawsuits, make a $25,000 political contribution and purchase items such as a painting of himself that was displayed at one of his properties.

The filing’s release, first reported by The Washington Post, comes as the New York attorney general’s office investigates whether Trump personally benefited from the foundation’s spending.

The filing also shows Trump’s foundation accepted money from a Ukrainian businessman who also gave money to one of Trump’s favored targets on the campaign trail: The Clinton Foundation. The charity also donated to a conservative group that backed Trump during his candidacy.

The 2015 tax filing was posted on the nonprofit monitoring website GuideStar on Nov. 18 by someone using an email address from the foundation’s law firm, Morgan, Lewis & Bockius, said GuideStar spokeswoman Jackie Enterline Fekeci.

In the tax filing, the foundation acknowledged that it used money or assets in violation of the regulations not only during 2015, but in prior years. But the tax filing doesn’t provide details on the violations.

Questions about the violations sent via email to Trump’s transition team weren’t immediately answered.

Marcus S. Owens, a partner at the Washington law firm Loeb & Loeb and a former director of the IRS exempt organizations division, said the lack of detail in the tax filing makes it difficult to determine the extent of the charity’s violations.

“There’s no way to tell for sure whether the self-dealing is small and trivial or large and a pattern of ongoing deliberate misuse of the charity’s assets,” Owens said.

Generally, he said, self-dealing violations require the violator to pay an excise tax equal to 10 percent of the amount involved in the transactions. The violator also would have to repay the foundation for the full amount involved. Owens also noted that self-dealing is a violation of New York state law, where the charity is registered.

New York Attorney General Eric Schneiderman, a Democrat, launched an investigation into the charity after reporting by the Post drew attention to some of the foundation’s purchases, three of which are listed in the latest filing: two portraits of Trump and a football helmet autographed by former NFL quarterback Tim Tebow.

As the Post reported previously, Trump bid $12,000 for the football helmet, and his wife, Melania, bid $20,000 for one of the portraits. The other portrait, which Trump bid $10,000 for, has been hanging on a wall at his golf course in Doral, Florida, according to the Post.

Despite the high-dollar price tags, the foundation’s latest tax filing now values them at a combined $1,675. The tax filing does not specify if any of the items are related to the self-dealing violations.

The foundation has previously said it amended its tax filings after it gave an improper $25,000 check to a political committee supporting Florida Attorney General Pam Bondi in 2013.

Charities are barred from engaging in political activities, and the president-elect’s staff says the check he signed was mistakenly issued following a series of clerical errors. Earlier this year, the Trump Foundation paid a $2,500 fine to the IRS over the check.

The latest tax filing shows two Trump entities gave to his foundation, a break from recent years when the foundation’s donations came mostly from other donors.

The Trump Corporation gave about $566,000 to the foundation, and Trump Productions LLC, the company which produced The Apprentice and Celebrity Apprentice, gave $50,000 in 2015.

Another large contributor was the foundation of Victor Pinchuk, a Ukrainian billionaire who has advocated for closer relations between the European Union and Ukraine. The Victor Pinchuk Foundation gave $150,000 to the Trump Foundation in 2015. Pinchuk’s foundation has also given between $10 million and $25 million to the Clinton Foundation.

The Trump Foundation’s tax filing shows that it also gave at least $10,000 to Project Veritas, a Trump-backing nonprofit group led by conservative activist James O’Keefe.

During the presidential campaign, O’Keefe’s employees posed as would-be Democratic donors and volunteers during a months-long ruse that captured one Democratic operative seeming to boast about his connections to Hillary Clinton’s campaign and claiming he hired people to provoke Trump rally-goers.

The undercover sting prompted the Democratic Party and liberal groups to cut ties with at least two operatives.

Associated Press writers Julie Bykowicz and Jeff Horwitz contributed to this report.

 

  Not ‘really rich,’ Trump’s veep pick used campaign dollars to pay golf fees

Republican presidential candidate Donald Trump has bragged he could get a billion-dollar campaign loan simply by walking into a bank. But the personal finances of his new running mate, Indiana Gov. Mike Pence, are not much better than those of Gov. Scott Walker. In fact, Pence retired from politics for a decade after revelations that he’d dipped into campaign funds to pay his mortgage, his golf greens fees and his wife’s car payments.

Though independent appraisals of Trump’s net worth have concluded he’s worth less than the $10 billion he claims, Trump will soon be the wealthiest person to receive a major party’s nomination and has made his fortune a campaign issue.

“I’m really rich,” Trump declared last June in announcing his presidential run. In the months since, he has mocked Bernie Sanders for his small personal finance statement.

But Trump’s new running mate is probably doing less well than the Vermont socialist turned Democrat.

During his time in Congress, Pence carried four mortgages on his homes in Indiana and northern Virginia. When Pence left Congress in early 2013, he and his wife’s net worth, excluding the value of their Indiana home, was less than $300,000, according to calculations based on his federal financial disclosures. The average net worth for Pence’s fellow members of Congress at that time was more than $5 million.

Personal financial maneuvers nearly ended Pence’s political career before it even began.

In 1990, during an ultimately unsuccessful bid for Congress, Pence used campaign contributions to pay for personal expenses, including his mortgage, his wife’s car payment, a personal credit card, parking tickets, groceries and golf greens fees.

Federal Election Commission documents show that the Democratic Congressional Campaign Committee filed a complaint against Pence and three other candidates after newspapers flagged the self-payments.

At the time, Pence defended the expenses, saying he took a 30 percent pay cut to run for office. The year before he ran, Pence, a lawyer, reported earning more than $75,000 and held about $50,000 in stock.

“I’m not embarrassed that I need to make a living,” Pence told the Daily Journal of Franklin, Indiana, at the time in response to questions about his campaign expenses.

Pence’s campaign didn’t dispute paying the personal expenses but argued they were allowed under federal law.

The National Republican Congressional Committee also defended Pence’s campaign spending, saying it was necessary to make up for income lost while campaigning full-time.

On Friday, Trump campaign spokesman Jason Miller wrote in an email that the FEC’s general counsel’s office found Pence was “100 percent compliant with the law at the time.”

Miller referred to written recommendations to the commission signed by Lois G. Lerner, the FEC’s associate general counsel, who handled Pence’s case.

Lerner, who later moved to the Internal Revenue Service, came under intense scrutiny from congressional Republicans in recent years for her role in the IRS’ treatment of conservative groups’ tax-exempt status. Lerner, who has since retired, was held in contempt of Congress for refusing to testify before a House committee.

In Pence’s case, the FEC deadlocked 3–3 over whether his expenses violated federal campaign law. The commission did vote unanimously to have its general counsel study the personal use of campaign funds and determine whether the situation showed a need for additional regulations. Subsequent actions in the 1990s further specified what constituted an illegal personal expense.

Former FEC chairman Scott E. Thomas, a Democrat who now practices in the Washington office of law firm Blank Rome, was one of the three commissioners who voted to find Pence in violation of federal campaign law.

Thomas said Friday that the Pence case was one example of the type of behavior the commission worked to weed out.

“Donors expect their campaign contributions to be used for election purposes. They don’t just want to provide funds to some candidate so they can pay personal expenses,” Thomas said.

Lee Ann Elliott, a former Republican commissioner and commission chair, voted against sanctioning Pence, citing past commission decisions that gave campaigns “wide discretion” to spend their money.

Elliott said Friday that she didn’t remember Pence’s case but noted the commission handled several like it in the early 1990s, when regulations weren’t as specific on what qualified as banned personal expenses. By the time she left the commission in 2000, expenses like those Pence paid with campaign funds were specifically barred.

“They weren’t allowed, flat out,” she said.

Because Indiana releases little information about officeholders’ personal finances, Pence’s current fortunes will remain unclear until he files a new personal disclosure with the Federal Election Commission.

Though Pence and Trump came to politics with different financial fortunes, they do share one thing in common: Like Trump, Pence has never released his taxes.

Unlike Trump, however, Pence’s taxes are unlikely to contain much of interest. In the four years since becoming Indiana’s governor, Pence has received a state salary of just under $112,000 a year. His wife — a self-employed watercolor artist — recently sought and received permission from the state ethics commission to start a business out of the governor’s mansion, selling towel charms for $6.25 apiece.

As U.S. vice president, Pence would earn more than $230,000 per year.

 

Back to U.S. Supreme Court: Justices ‘Obamacare’ subsidies

The Supreme Court has agreed to hear a new challenge to President Barack Obama’s health care law — a case that threatens subsidies that help millions of low- and middle-income people afford their health insurance premiums.

The justices said they will review a federal appeals court ruling that upheld IRS regulations that allow health-insurance tax credits under the Affordable Care Act for consumers in all 50 states. Opponents argue that most of the subsidies are illegal.

The long-running political and legal campaign to overturn or limit the 2010 health overhaul will be making its second appearance at the Supreme Court. The justices upheld the heart of the law in a 5-4 decision in 2012 in which Chief Justice John Roberts provided the decisive vote.

The case probably will be argued the first week in March, with a decision expected by late June.

White House press secretary Josh Earnest promised a vigorous defense before the high court.

“This lawsuit reflects just another partisan attempt to undermine the Affordable Care Act and to strip millions of American families of tax credits that Congress intended for them to have,” Earnest said.

In the appeal accepted late last week, opponents of the subsidies argue that the court should resolve the issue soon because it involves billions of dollars in public money.

“The need for a quick and final resolution of this question is undeniable. This ‘subsidies-for-everyone’ rule affects nearly every person across the country, health insurance policyholders, workers and employers, taxpayers, and state and local governments,” said Sam Kazman, general counsel of the Competitive Enterprise Institute, which is paying for the legal challenges to the health care law.

The health care law provides taxpayer-subsidized private health insurance for people who don’t have access to coverage on the job. More than 7 million people are currently enrolled and most are getting help, which is keyed to household income and the cost of a benchmark plan.

The issue at the Supreme Court is whether the wording of the law limits insurance tax credits only to consumers who live in states that have set up their own insurance markets, known as exchanges.

Only 16 states have set up their own exchanges, the Obama administration said in court papers.

In the other 34 states, including Wisconsin, more than 4.5 million people are receiving subsidies to pay their insurance premiums. And the aid is considerable, covering an average of 76 percent of the premiums.

Customers now pay an average of $82 on total monthly premiums averaging $346. The federal subsidy of $264 a month makes up the difference.

What made the court’s intervention surprising was the lack of disagreement among federal appeals courts that typically is a requirement for Supreme Court review. Justice Ruth Bader Ginsburg cited the absence of conflicting rulings when the justices rejected gay marriage appeals last month.

But at least four justices, needed to grant review, apparently agreed with the challengers that the issue is important enough to decide now.

Supporters of the health care law were flabbergasted and accused the court of veering into politics. The news came a week ahead of the second open enrollment season for subsidized private health insurance under the law.

“All of the general guidelines that the court traditionally uses in determining whether it should schedule an appeal are totally absent in this case,” said Ron Pollack, executive director of Families USA, an advocacy group that supported Obama’s health overhaul from its inception. Pollack called the court’s action “an unusual political act.”

The legal challenge to the subsidies is “the most serious existential threat” facing the Affordable Care Act, said Pollack.

When the court upheld the law in 2012, it still made a major change by ruling that the law’s Medicaid expansion for low-income people was optional for states. So far 27 states and the District of Columbia have accepted it. This week’s Republican election success makes it unlikely that the remaining 23 states will move any time soon.

The subsidies issue is being fought in several courts. In July, the Richmond, Virginia-based appeals court upheld Internal Revenue Service regulations that allow health-insurance tax credits under the law for consumers in all 50 states.

On that same July day, a panel of appellate judges in the District of Columbia, sided with the challengers in striking down the IRS regulations. The Washington court held that under the law, financial aid can be provided only in states that have set up their own exchanges.

In October, the entire Washington appeals court voted to rehear the case and threw out the panel’s ruling, eliminating the so-called circuit split. The appeals argument has been scheduled for Dec. 17, but that case now recedes in importance with the Supreme Court’s decision to step in.

The case is King v. Burwell, 14-114.

Taxpayers subsidize billionaires’ political ads

That the billionaire Koch brothers are spending upwards of $1 million to launch an election-year advertising campaign in Wisconsin to sing the praises of Gov. Scott Walker’s policies comes as no surprise. What might not be readily apparent to casual observers is that taxpayers are subsidizing this electioneering.

Much of the pro-Walker advertising is sponsored by the Americans for Prosperity Foundation, an arm of the Koch brothers’ operation that is organized as a 501(c)(3) charitable organization. That structure means that donations that pay for its advocacy efforts are tax deductible. By blanketing the airwaves across Wisconsin with their pro-Walker messages, the Kochs are reducing their tax liability.
IRS rules governing 501(c)(3) tax-exempt status, which is meant for charitable and educational organizations to promote “social welfare,” prohibit such groups from using resources to participate or intervene in political campaigns.

On these grounds, the Democracy Campaign filed a complaint with the Internal Revenue Service in 2012 asking the IRS to investigate what appeared to be clear violations of the tax-exempt status of the Americans for Prosperity Foundation and two other 501(c)(3) “charities.” The IRS replied with a letter dated March 22, 2012, saying the agency “has an ongoing examination program to ensure that exempt organizations comply with the applicable provisions of the Internal Revenue Code. The information you submitted will be considered for this program.”

The letter went on to say, “We cannot disclose the status of any investigation.” That’s the last we heard.

Given that AFPF is doing more of the kind of advertising that prompted our 2012 complaint, one has to assume the IRS has blessed this activity. Evidently the IRS does not believe this kind of advertising serves any political purpose. Watch some of the ads and judge for yourself.

At the invitation of the IRS, we have followed up on our 2012 complaint with a letter calling the agency’s attention to the AFPF’s latest election-year advertising and requesting enforcement action. We await the taxman’s response.

Mike McCabe, executive director of the Wisconsin Democracy Campaign.

Report: IRS audits less than 1 percent of partnerships with over $100M in assets

The Internal Revenue Service audits fewer than 1 percent of large business partnerships, according to a recent government report.

That means some of Wall Street’s largest hedge funds and private equity firms are largely escaping close scrutiny by the IRS, said Sen. Carl Levin, D-Mich.

The Government Accountability Office says the number of large businesses organized as partnerships has more than tripled since 2002, yet hardly any get audited. In 2012, only 0.8 percent were subjected to field exams in which agents do a thorough review of books and records.

The GAO defines large partnerships as those with more than 100 partners and more than $100 million in assets.

“Auditing less than 1% of large partnership tax returns means the IRS is failing to audit the big money,” said Levin, who chairs the Senate subcommittee on investigations.

“It means over 99% of the hedge funds, private equity funds, master limited partnerships and publicly traded partnerships in this country, some of which earn tens of billions each year, are audit-free,” Levin said.

More than 80 percent of large partnerships are in the finance and insurance industries, the GAO report said.

The IRS said auditing partnership returns is a priority, but that budget cuts over the past four years have left the agency with the lowest number of enforcement personnel in years.

“Since Fiscal 2010, the IRS budget has been reduced by nearly $900 million,” the service said in a statement. “The IRS has about 10,000 fewer employees than in 2010, affecting our work across our taxpayer service and enforcement categories. Last year, we had 3,100 fewer people in our key enforcement positions than in 2010.”

Overall, the IRS audited fewer than 1 percent of returns by individuals last year, though the chances of getting audited increased with income, according to IRS statistics.

The GAO report says the audit rate for large partnerships has been low since at least 2007.

The IRS releases annual statistics on audits, including the number of partnerships returns that are examined. But the IRS doesn’t usually break down partnership returns by asset size.

Overall, more than 4.4 million partnerships filed tax returns in 2011, and 0.42 percent were audited, according to IRS statistics. That same year, the GAO says there were 2,226 large partnerships, and only 20 were audited. That’s about 0.9 percent.

“This is a real problem and serves as yet another example of why Congress needs to get serious about comprehensive, bipartisan tax reform,” said Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee. “This includes looking at the growth of large partnerships and working with the proper parties — including the IRS — to put in place a smart framework for auditing and governance.”

Tax Day trouble? LGBT Bar Association offers online help for same-sex couples

The National LGBT Bar Association, BNY Mellon and White & Case LLP have announced a first of its kind Online LGBT Tax Resource — at LGBTBar.org/tax — to help same-sex couples and their tax advisors navigate state tax laws.

The resource is a tool for both tax preparers and payers, providing a comprehensive, state-by-state list of reporting regulations for LGBT couples.

Tax law remains one of the most complex and nuanced issues impacting the LGBT community, especially in states where couples are not allowed to file married tax returns.

Following the U.S. Supreme Court’s decision invalidating the federal Defense of Marriage Act, married couples are now eligible to file married federal returns. In 33 states, however, those same couples cannot file joint state returns. In response, the Online LGBT Tax Resource was developed to ensure families are equipped with the most up-to-date tax information for their home state.

“The end of the federal Defense of Marriage Act was a giant step forward for couples, but state laws continue to legally discriminate against many families,” said D’Arcy Kemnitz, executive director of the LGBT Bar. “The Online LGBT Tax Resource unveiled today will ensure couples can maximize state tax laws, and the repeal of DOMA, as they navigate what is often a very confusing area for LGBT families. The Resource is designed to ensure they, and their tax preparers and attorneys, have reliable, trustworthy information.”

Among the information provided on the site, are key areas such as:

• A recap of states’ rules concerning same-sex marriage and the impact on state income tax in clear and concise language

• Individual state guidance for married same-sex taxpayers

• Information on litigation, and legislation, that could impact LGBT tax law; and

• Up-to-date information from states’ departments of revenue, and state constitutions.

“In states that don’t recognize same-sex marriage, same-sex couples and their tax preparers are struggling to make sense of how to apply the federal tax guidelines based on the ruling last year that the Defense of Marriage Act was unconstitutional,” said John Lillis, a tax partner with White & Case, who worked on the project pro bono. “This database is an important tool to help tax preparers and same-sex couples navigate the inconsistent rule that applies to state income tax laws.”

“Working collaboratively with the LGBT Bar Association, Pro Bono lawyers from BNY Mellon and White & Case have created an online resource to help same-sex couples reduce the complexity of tax laws. BNY Mellon’s pro bono team reflects our uncompromising commitment to diversity and inclusion as a core business issue,” said Deborah Kaye, managing director and senior managing counsel, BNY Mellon.

The Resource presents the many state-level regulations in easily understandable language. The site, which will be updated quarterly with any new developments impacting tax laws for LGBT couples, provides the only inclusive, accurate listing of filing regulations in all 50 states. 

Reform tax code

This issue of Wisconsin Gazette hits the streets as the nation prepares to mark one of its annual milestones: Federal income taxes must be filed by April 15.

If 2014 is similar to the past two years, that’s also around the date you’ll be allowed to keep some of the money you’ve earned this year. According to the Tax Foundation, every penny earned by the average U.S. citizen before April 13, 2013, went to some form of the myriad taxes we pay.

We don’t oppose the principle of taxation. It’s a necessary evil to maintain the infrastructure needed to support the host of functions that separate contemporary life from that of hunter-gatherers.

We don’t want to live in a nation where people have to change their own streetlights, inspect their own food and pool resources to fix neighborhood potholes. Nor do we want those services given to politically connected businesses that will try to squeeze the maximum profits out of life’s necessities without accountability, except to their corporate backers.

But today we are taxed in more ways than you might realize, from “fees” to sin taxes to tolls. The U.S. tax code, which guides the mother of all taxes, is grossly unfair and confusing. Its dysfunctional collection agency, the Internal Revenue Service, wields absolute power over all but the wealthiest, who can afford pricey lawyers and accountants.

Our problem with the current tax code includes both its complexity and unfairness.

If paying taxes is an absolute duty, then tax collection should be a transparent and user-friendly process. Calculating taxes should be quick and simple, not the convoluted, expensive ordeal it’s become. 

Taxation should also be fair. It’s not fair when profitable corporations get tax rebates instead of paying taxes. Or when people who earn their income from investments that profit off other people’s labor get off tax-free, meaning the laborers not only make them rich but also carry their tax burden. 

Perhaps people are willing to tolerate  this rotten deal because they believe someday they’ll live in the manor and reap the same benefits. Setting aside the unworthiness of such aspirations, that’s not likely to occur. Thirty years of rule by corporate oligarchs has stacked the odds against that dream. Looking at a graph of the nation’s growing income inequality will burst that bubble.

Middle-class workers, including upper middle-class professionals and executives who fancy themselves rich, pay more than those who are actually rich. Very few people make enough money to qualify for the elaborate schemes and loopholes that prompted hotel magnate Leona Helmsley to snap, “Only the little people pay taxes.” 

One particularly insidious perk of the ultra-wealthy is their ability to park their money in overseas tax shelters by establishing shell corporations. An estimated 21 trillion to 32 trillion American dollars sit safely in tax havens around the globe while pundits paid by the rich try to deflect attention to the pittance paid for food stamps. 

We believe it’s past time for simplifying the tax code and making it more equitable. If our leaders can’t find a way to make taxation fair and functional, then we should elect people who will.

What are chances of IRS audit? A look at the numbers

The Internal Revenue Service audited less than 1 percent of the income tax returns filed last year. But your odds of getting audited vary greatly, depending on income.

Individuals

146 million returns.

Audited: 1.4 million.

Audit rate: 0.96 percent.

Income under $200,000

141 million returns.

Audited: 1.2 million.

Audit rate: 0.88 percent.

Income $200,000 and above

5.3 million returns.

Audited: 172,000.

Audit rate: 3.3 percent.

Income $1 million and above

363,000 returns.

Audited: 39,000.

Audit rate: 11 percent.

Business returns

10 million returns.

Audited: 61,000

Audit rate: 0.61 percent.

Small corporations (assets under $10 million)

1.8 million returns

Audited: 17,600.

Audit rate: 0.95 percent.

Large corporations (assets over $10 million)

62,300 returns.

Audited: 9,900.

Audit rate: 16 percent.

IRS pushes to rein in tax-exempt political groups

The Obama administration is trying to rein in the use of tax-exempt groups for political campaigning.

The effort launched this week is an attempt to reduce the role of loosely regulated big-money political outfits like GOP political guru Karl Rove’s Crossroads GPS and the pro-Obama Priorities USA.

The Internal Revenue Service and the Treasury Department said they want to prohibit such groups from using “candidate-related political activity” like running ads, registering voters or distributing campaign literature as activities that qualify them to be tax-exempt “social welfare” organizations.

The agencies say there will be a lengthy comment period before any regulations will be finalized. That means groups like Crossroads and Priorities USA will be able to collect millions of dollars from anonymous donors ahead of next year’s campaign.

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Mark Mazur, treasury assistant secretary for tax policy. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

Organized under section 501(c)(4) of the tax code, such groups are able to raise millions of dollars to influence elections. But they can also be small-scale tea party groups, many of which say they were harassed by the IRS after seeking tax exempt status.

House Ways and Means Committee Chairman Dave Camp, R-Mich., was skeptical of the administration’s move.

“There continues to be an ongoing investigation, with many documents yet to be uncovered, into how the IRS systematically targeted and abused conservative-leaning groups,” he said. “This smacks of the administration trying to shut down potential critics.”

Administration allies say the proposed rules would clear up confusion over which organizations qualify for tax-exempt status.

“The IRS should have never been in the business of trying to determine if 501(c)(4) organizations were involved primarily in social welfare or political activity, and this confusion led to the overly intrusive measures by the IRS that stirred so much controversy,” said Rep. Chris Van Hollen, D-Md.

The 2010 Citizens United Supreme Court decision lifted the limits on donations by labor unions and companies to 501(c)(4) groups, allowing Crossroads, the largest of them, to raise large sums outside the limits that apply to candidates’ campaigns and traditional party committees.

“Enormous abuses have taken place under the current rules, which have allowed groups largely devoted to campaign activities to operate as nonprofit groups in order to keep secret the donors funding their campaign activities,” said Fred Wertheimer, president of Democracy 21, which advocates limits on money in politics.

Under current rules, social welfare organizations may conduct some political work as long as it’s not their main activity. The proposed new rules would block such things as running ads that “expressly advocate for a clearly identified political candidate or candidates of a political party” as fulfilling their tax-exempt mission. And ads that simply mention a politician to, for instance, urge him or her to vote a certain way couldn’t be run 60 days before a general election of 30 days before a primary.

The rules also would limit voter drives and voter registration efforts and distribution of literature.

The idea behind the new regulations is to simplify the rules of the road going forward, proponents say. The current rules are confusing and prone to abuse, critics say.

Treasury and the IRS don’t have a proposal yet about what proportion of a 501(c)(4) group’s activities must promote social welfare and are soliciting input. In other words, they don’t have a recommendation as to what percentage of a group’s time and money can be spent on politics.

Some of the outside groups that could be affected by the proposal, including Crossroads GPS and Priorities USA, did not have any initial reaction to the announcement. The groups are expected to weigh in on the rulemaking as it proceeds.

Any changes to the regulations likely would not affect the 2014 elections because of legal challenges but the rule changes could shape the next presidential election, said Kenneth Gross, a campaign finance attorney and former head of enforcement for the Federal Election Commission.

“Brightening what are now blurred lines – what is political activity – is not only useful but necessary to have some kind of clarity to a vehicle that has been used to the tune of millions and millions of dollars,” he said.

But Gross cautioned that “this is a long and winding road before anything is in ink.”