Posts Tagged ‘IRS’

New Regulations to Shake Up Nonprofit Advocacy

Monday, December 9th, 2013 by Geoffrey Lyons

IT HAS BEEN over half a century since restrictions on tax-exempt 501(c)4 organizations – defined broadly as civic leagues and groups whose primary function is to “promote social welfare” – were spelled out in detail. It was then, in 1959, that the IRS modified “social welfare” to exclude “direct or indirect participation or intervention in political campaigns.”  Since modern (c)4’s must play by the rules lest they relinquish their tax free privileges, it seems on the face of it that they would avoid meddling in politics.

But everyone knows this isn’t the case. Crossroads GPS, the (c)4 arm of Karl Rove’s American Crossroads, is a case in point. The conservative advocacy group spent over $213,000 on federal elections last year. How, one might ask, is that permissible? Check the fine print: According to the IRS, “an organization that primarily engages in activities that promote social welfare will be considered under the current regulations to be operating exclusively for the promotion of social welfare.” It’s easy to engage “exclusively” in something when the meaning of the word is watered down beyond recognition. According to the Washington Post, tax lawyers have taken all of this to mean that (c)4’s can keep their tax status as long as they spend at least 51 percent of their resources on social welfare.

Now, nearly 55 years since the issue was last dealt with in depth, the IRS is proposing clearer boundaries for political activities that should not be considered social welfare. An outline released just two weeks ago proposing the rules changes is considered by most experts to be a significant first step, signalling what’s likely to result in drastic revisions to current practice. Still, some are skeptical about the potential outcome, claiming that so-called “dark money” will simply filter out of (c)4’s and into other 501(c)s, such as (c)6’s. Others, mostly on the right, call the proposal a political move, the latest in an “unfortunate pattern” that began with the IRS’s targeting of conservative grassroots advocacy groups.  Whichever one’s take on the matter, (c)4’s are inevitably in for the makeover of a lifetime.

LD-203 Reminder

Tuesday, July 16th, 2013 by Geoffrey Lyons

ON JULY 30TH, every federally registered lobbyist must file the semi-annual LD-203 report, which is ample reason to sign up for next week’s LD-203 Filing Boot Camp.  The webinar will be led by Foley & Lardner’s Cleta Mitchell, who in addition to training lobbyists is known for her crusades against the IRS.  Attendees earn a Certificate of Training upon completing the course, along with a deep knowledge of disclosure law and gift rules ready to be unleashed at the next cocktail party.

July 30 – LD-203

The semi-annual report is required of all lobbyists to certify ethics compliance and disclosure. “Form LD-203 is required to be filed semiannually by July 30th and January 30th (or next business day should either of those days fall on a weekend or holiday) covering the first and second calendar halves of the year. Registrants and active lobbyists (who are not terminated for all clients) must file separate reports which detail FECA contributions, honorary contributions, presidential library contributions, and payments for event costs.”  July 30th is a Tuesday.

IRS Definitions of Lobbying

Wednesday, April 6th, 2011 by Brittany

When Congress enacted the LDA in 1995, it included a provision that lobbying expenses can NOT be deducted by for-profit companies and/or individuals as “ordinary and necessary business expenses,” as that term is defined in the tax code. Not-for-profit organizations must also track their lobbying expenditures and disclose such expenses on their Form 990 tax returns for purposes of generating information related to the “proxy tax.” Because of the tax issues related to tracking and reporting lobbying expenditures, the Internal Revenue Code (“IRC”) has promulgated regulations and issued numerous pamphlets and circulars explaining the IRC definitions and interpretations of the tax code provisions related to lobbying expenditures.

The LDA allows companies, associations and nonprofit organizations to keep one set of books and records, rather than two. Therefore, each entity reporting lobbying expenditures (not income) is permitted to choose whether to track its lobbying activities and, hence, its expenditures in accordance with the IRC or the LDA. HLOGA made no changes to this aspect of the LDA.

The option of using the IRC definitions is not available to lobbying consultants, lobbying firms or individual lobbyists, because those individuals and entities report income under the LDA rather than expenditures. 

The LD-2 reporting form directs a filer reporting its lobbying expenditures to indicate which method it is using to calculate its lobbying activities and costs: 

  • Method A – The LDA definitions
  • Method B vigrx plus price –  Section 6033(b)(8) of the IRC – charitable organizations making the 501(h) election for lobbying activities
  • Method C –  Section 162(e) of the IRC – for profit entities, trade associations, labor unions and other not-for-profit entities

Key Points to Remember in Choosing a Reporting Method

There are several important principles to bear in mind regarding the choice of the IRC (rather than the LDA) method.

  • Whatever method is chosen, it must be used for all reports during the same calendar year.
  • Regardless of whether Method B or C is the chosen reporting method, the tracking and definitional issues are identical.

It is not permissible for a registrant making the IRC election for calculating its lobbying expenditures to change reporting methods during a reporting (calendar) year. Once the election is made regarding the definition for calculating and tracking lobbying expenditures for LDA reporting purposes, the election should be reflected on the first quarterly report filed in April and followed for the remainder of the calendar year.

  • Whatever method is chosen, it must be used consistently for all purposes.

The definitions of the method chosen must be used for all purposes related to LDA reporting. In other words, it is NOT permissible for a registrant to mix-and-match definitions from the IRC and the LDA when tracking, calculating and reporting lobbying expenditures.

 For more information or to purchase the Lobbying Compliance Handbook click here.