Under the magnificently permissive regulations currently in effect, organizations formed and operated for political purposes have been enjoying the benefits of tax-exempt status under Internal Revenue Code section 501(c)(4). Notwithstanding the statutory requirement that the organizations operate "exclusively" for nonpolitical purposes, the Treasury decided that operating "primarily" for nonpolitical purposes means the same thing. That has given 501(c)(4) organizations carte blanche to devote 49.9% of their funds to the most blatantly political activities while remaining tax-exempt.
Now, the Treasury has proposed a new 501(c)(4) regulation to clarify the situation. Does the regulation address the "primarily" issue? No. The Treasury states only that it is "studying" that issue. Rather, the proposed regulation creates a specific set of definitions for what constitutes prohibited "candidate-related political activity." Regrettably, that definition excludes quite a lot of things any normal observer would consider candidate-related political activity. The result: an ill-intentioned 501(c)(4) organization can freely devote 49.9% of its funds to anything it wants, and can spend the other 50.1% on things most normal human beings would consider impermissible political activity.
Just to be clear: an organization that used to be limited to spending 49.9% of its money on evil will now be able to spend 100% of its money on evil. Nice job, Treasury.
I have a sense that the definitions in the regulations may be slanted in favor of the disguised-electioneering type of 501(c)(4) organization and against the actual public benefit type. I don't know enough about how those groups spend their money to have a credible opinion, but it is very interesting that a generally progressive-leaning group is objecting that the regulation could affect such nonpartisan activities as voter registration drives.
This is what the statute says an organization must be to qualify as a 501(c)(4) organization: "operated exclusively for the promotion of social
welfare." The regulation should be short and easy to write.
Saturday, November 30, 2013
Friday, November 22, 2013
Tax exemption for parsonage allowance held unconstitutional
Get ready for some entertainment. A U.S. District Court in Wisconsin has held, in Freedom From Religion Foundation, Inc. et al. v. Lew et al., that the tax exemption for parsonage allowances religious entities provide to their clergy is unconstitutional.
Parsonage benefits come in two flavors: actual housing provided to clergy and cash allowances for housing. The Freedom From Religion Foundation sued to have both types held taxable. They lost on the first, as the court found it to be comparable to housing "provided for the convenience of the employer," which is tax-free even for non-religious employees. That makes some sense: the parsonage allowance certainly has its historical roots in the days when a clergyman was expected to live on church premises in order to be accessible to the congregation.
On the cash allowance issue, however, the Freedom From Religion Foundation won. The court pointed out that the allowance was paid in cash and was no different from cash paid to any employee that the employee used to obtain housing. Furthermore, a clergyman who used it to buy a house would benefit both from appreciation of the house and from the federal tax deduction for home mortgage interest. Thus, the exemption was a clear and unconstitutional subsidy to religious organizations.
Commentary: it is difficult to imagine a clearer case of an unconstitutional subsidy to religion. Nevertheless it is surprising that the Freedom From Religion Foundation won. The courts, on average, are highly reluctant to disturb the prerogatives of mainstream religion. Usually when a court is faced with an obvious result that it doesn't like, it finds a procedural way out. The biggest surprise in the case, and the most likely ground for reversal, is that the court held that the plaintiffs had standing to sue.
The entertainment: this is exactly the type of decision that drives some television personalities wild. Furthermore, it is not purely a figment of their imagination: this is a genuine reduction in the advantages enjoyed by organized religion. Do not expect a moderate reaction.
Parsonage benefits come in two flavors: actual housing provided to clergy and cash allowances for housing. The Freedom From Religion Foundation sued to have both types held taxable. They lost on the first, as the court found it to be comparable to housing "provided for the convenience of the employer," which is tax-free even for non-religious employees. That makes some sense: the parsonage allowance certainly has its historical roots in the days when a clergyman was expected to live on church premises in order to be accessible to the congregation.
On the cash allowance issue, however, the Freedom From Religion Foundation won. The court pointed out that the allowance was paid in cash and was no different from cash paid to any employee that the employee used to obtain housing. Furthermore, a clergyman who used it to buy a house would benefit both from appreciation of the house and from the federal tax deduction for home mortgage interest. Thus, the exemption was a clear and unconstitutional subsidy to religious organizations.
Commentary: it is difficult to imagine a clearer case of an unconstitutional subsidy to religion. Nevertheless it is surprising that the Freedom From Religion Foundation won. The courts, on average, are highly reluctant to disturb the prerogatives of mainstream religion. Usually when a court is faced with an obvious result that it doesn't like, it finds a procedural way out. The biggest surprise in the case, and the most likely ground for reversal, is that the court held that the plaintiffs had standing to sue.
The entertainment: this is exactly the type of decision that drives some television personalities wild. Furthermore, it is not purely a figment of their imagination: this is a genuine reduction in the advantages enjoyed by organized religion. Do not expect a moderate reaction.
Saturday, November 9, 2013
Man bites dog: prosecutor punished (slightly) for misconduct
It is big news that in the case of In re Anderson, not only was the innocent defendant released after serving 25 years in prison but the prosecutor whose misconduct caused the conviction was punished. Not much of a punishment: 10 days in prison. Nevertheless, it's something.
Here is a link to an interesting article reminding us that if this type of misconduct is not the rule, it's not the exception either. Punishment for the prosecutor, however, is astonishing: one source states that this is the first time ever that a prosecutor has been punished for conduct leading to a wrongful conviction, and while I am not in a position to check that, I have certainly never heard of it before. The fact is that prosecutors can do pretty much anything they want without repercussion.
Furthermore, even prosecutors who do not themselves commit misconduct benefit from the misconduct of other prosecutors. A defense attorney, in evaluating a plea deal, must take into account the possibility that the prosecutor will cheat and get away with it: for example, a subtle threat to a defense witness might be enough to cause that witness to refuse to testify, dramatically altering the outcome of the case. Even if the prosecutor personally would not make that threat, (a) defense counsel cannot be sure of that and (b) the witness may realize that he had better refuse to testify even if the threat is unspoken. Thus, without ever personally doing anything wrong, the prosecutor derives an overwhelming negotiating advantage.
Is this a tax issue? Absolutely. In fact, it's more of an issue in a tax case than in a murder case such as Anderson. In a murder case there is often hard evidence, such as physical objects and DNA evidence, that can be used to prove innocence once they are found. That is, there is a legitimate possibility of demonstrating both innocence and prosecutorial conduct based on physical and perceptual evidence. Also, when such items are hidden, it is normally fairly clear: either the prosecution has shown an item of physical evidence to the defense or it has not. In a tax case, normally involving circumstantial evidence obtained under pressure from witnesses who are at risk for being named as coconspirators and therefore must act to protect the prosecution, there is no similar possibility.
Here is a link to an interesting article reminding us that if this type of misconduct is not the rule, it's not the exception either. Punishment for the prosecutor, however, is astonishing: one source states that this is the first time ever that a prosecutor has been punished for conduct leading to a wrongful conviction, and while I am not in a position to check that, I have certainly never heard of it before. The fact is that prosecutors can do pretty much anything they want without repercussion.
Furthermore, even prosecutors who do not themselves commit misconduct benefit from the misconduct of other prosecutors. A defense attorney, in evaluating a plea deal, must take into account the possibility that the prosecutor will cheat and get away with it: for example, a subtle threat to a defense witness might be enough to cause that witness to refuse to testify, dramatically altering the outcome of the case. Even if the prosecutor personally would not make that threat, (a) defense counsel cannot be sure of that and (b) the witness may realize that he had better refuse to testify even if the threat is unspoken. Thus, without ever personally doing anything wrong, the prosecutor derives an overwhelming negotiating advantage.
Is this a tax issue? Absolutely. In fact, it's more of an issue in a tax case than in a murder case such as Anderson. In a murder case there is often hard evidence, such as physical objects and DNA evidence, that can be used to prove innocence once they are found. That is, there is a legitimate possibility of demonstrating both innocence and prosecutorial conduct based on physical and perceptual evidence. Also, when such items are hidden, it is normally fairly clear: either the prosecution has shown an item of physical evidence to the defense or it has not. In a tax case, normally involving circumstantial evidence obtained under pressure from witnesses who are at risk for being named as coconspirators and therefore must act to protect the prosecution, there is no similar possibility.
Subscribe to:
Posts (Atom)