Overturn "Citizens United"?

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Postby Jnyusa » Wed Jan 25, 2012 8:49 am

Aravar wrote:The Archbishop is what is called a corporation sole: <snip> How can you restrict the Archbishops freedom to act without also represneting the one and only member of that corporation, Rowan Williams?


Aravar, these corporate classifications exist for tax or titling purposes. When you have a corporate classification that exists exclusively for political purposes, and receives differential tax treatment for that reason, it is very easy to restrict the activity of that kind of corporation without affecting other kinds of corporations.

We do it with tax-deductible, tax-exempt corporations all the time. Their speech is quite stringently limited. No one has ever argued that this violates our First Amendement. The classification says that there is a difference between "charities" and "political organizations." If you want to be a charity then you can't lobby for legislation or campaign for candidates. If you want to do those things then you can't enjoy the tax advantages of a charity.

In the US at least, when an individual or group of individuals files for a corporate charter, they have to state the purpose of their corporate existence. That's a multiple choice question, not a fill-in-the-blank question. You have to choose what sort of legal entity you will be from a list of allowable entities. And there are all sorts of laws that apply to one kind of entity and not to others.

I actually think that a more conservative approach to this issue would serve us better than McCain-Feingold did. The public is asking: how should we reduce the influence of corporate money on elections? Instead we should be asking: what kind of fund should be established for candidates, given that nearly all our transactions take place through corporate entitles? Attack the problem from the receiving end, in other words, into what kind of entity does the money get poured, instead of attacking it from the donor end - what kind of donor is allowed to contribute.

If, for example, all campaign contributions had to go into a single corporate entity regulated by both IRS and FEC, while extraneous PACS were only allowed to speak to issues and not to candidates or to specific legislation (as the (c)(3) entitles are constrained) the problem of using limitless funding to smear candidates acting in the public good would disappear.

Just an idea. As I said, I really don't know the best way to craft an answer to this ruling.

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Postby Aravar » Wed Jan 25, 2012 9:31 am

Tookish_Traveler wrote:
Aravar wrote:
vison wrote:I just don't think a corporation is a natural person. I'm a natural person, but the papers in my safe deposit box are not.


It isn't a natural person, it's a legal person. It is, nevertheless, a person.




:shock:




Why the shock: it's the legal terminology which splits the two types of person. This is the point I keep reiterating: people are using a technical legal term in its colloquial sense and jumping to all sorts of conclusions.
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Postby Aravar » Wed Jan 25, 2012 9:35 am

Jnyusa wrote:I actually think that a more conservative approach to this issue would serve us better than McCain-Feingold did. The public is asking: how should we reduce the influence of corporate money on elections? Instead we should be asking: what kind of fund should be established for candidates, given that nearly all our transactions take place through corporate entitles? Attack the problem from the receiving end, in other words, into what kind of entity does the money get poured, instead of attacking it from the donor end - what kind of donor is allowed to contribute.



I think your problem is actually the First Amendment itself, because ti prevents the kind of pragmatic restricitons we have over here. Political advertising is doen by the parties with strict spending limits. Of course the print media have a slant too, but broadcast media is strictly controlled.
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Postby Jnyusa » Wed Jan 25, 2012 12:14 pm

You may be right, Aravar.

But we'll never get rid of it. We have to solve all problems within its boundaries.

Like our second amendment which also leads to insane conditions because the courts interpret it so broadly.
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Postby Frelga » Wed Jan 25, 2012 1:01 pm

As an intellectual exercise I find it difficult to frame a law which can curtail the Archbishop of Canterbury's right to free speech, being a corporation, without also limiting Rowan Williams'.

Does it depend on whether he's wearing a mitre or not?


No, it depends on whether he is paying for disseminating his speech with his personal funds or with the funds of his "corporation."
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Postby The Heretic » Wed Jan 25, 2012 6:30 pm

Cerin wrote:
Lord_M wrote:
Corporate taxes are high, and they need to pay healthcare costs for their employees.

Corporate taxes are low, when you examine what is actually paid, rather than the rates before loopholes and taxpayer funded subsidies. Many of the largest corporations pay no tax at all, and are in fact given million dollar tax refunds.

Why then do corporations move to Bermuda, Canada, Ireland, Switzerland (and other European countries)?
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Postby vison » Wed Jan 25, 2012 7:41 pm

The Heretic wrote:
Cerin wrote:
Lord_M wrote:
Corporate taxes are high, and they need to pay healthcare costs for their employees.

Corporate taxes are low, when you examine what is actually paid, rather than the rates before loopholes and taxpayer funded subsidies. Many of the largest corporations pay no tax at all, and are in fact given million dollar tax refunds.

Why then do corporations move to Bermuda, Canada, Ireland, Switzerland (and other European countries)?


Which corporations move? Ford? GM? Microsoft? Phillips Petroleum? Standard Oil? CitiBank?

Many corporations would prefer no tax to low tax, as well.

As for "having to pay healthcare costs", for the luvva pete. It's part of an employee's compensation. It's not a bloody present from the company.

It's crazy that American employers "have" to do it, though. People should be able to buy their own health insurance, just like Canadians do. :)
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Postby The Heretic » Wed Jan 25, 2012 7:56 pm

vison wrote:
The Heretic wrote:
Cerin wrote:
Lord_M wrote:
Corporate taxes are high, and they need to pay healthcare costs for their employees.

Corporate taxes are low, when you examine what is actually paid, rather than the rates before loopholes and taxpayer funded subsidies. Many of the largest corporations pay no tax at all, and are in fact given million dollar tax refunds.

Why then do corporations move to Bermuda, Canada, Ireland, Switzerland (and other European countries)?


Which corporations move? Ford? GM? Microsoft? Phillips Petroleum? Standard Oil? CitiBank?

Tyco, Cisco, Global Crossing, Seagate, Nabors, Nevada Geothermal etc.

Many corporations would prefer no tax to low tax, as well.

In the end, corporations don't pay taxes, they pass it on to consumers/customers.

So why do they move, since ccorporate taxes (per Cerin) are so low? (You said you listened to the SoTU last night, what was it Obama said about US taxes on business compared to other countries?)
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Postby vison » Wed Jan 25, 2012 8:18 pm

Corporations that move their head offices to avoid paying taxes have no loyalty for the nation that enabled them to exist and prosper in the first place. A nation is not a mine, its citizens are not ores, thrown on the slag heap when the gold is refined.

Of course corporations pass the costs of production onto the consumer - but what nice little bonus when the costs are cut but prices aren't?

The ordinary working person cannot move to a tax haven.

The perception of unfairness is what rankles, and rightly so. People know they are being used, and used contemptuously.

As for Mr. Obama's remarks, I didn't watch the whole speech. I saw the last bit. But comparing tax rates, nation to nation, is rather pointless since the rules vary so drastically.
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Postby The Heretic » Wed Jan 25, 2012 8:31 pm

vison wrote:Corporations that move their head offices to avoid paying taxes have no loyalty for the nation that enabled them to exist and prosper in the first place. A nation is not a mine, its citizens are not ores, thrown on the slag heap when the gold is refined.

Of course corporations pass the costs of production onto the consumer - but what nice little bonus when the costs are cut but prices aren't?

The ordinary working person cannot move to a tax haven.

The perception of unfairness is what rankles, and rightly so. People know they are being used, and used contemptuously.

As for Mr. Obama's remarks, I didn't watch the whole speech. I saw the last bit. But comparing tax rates, nation to nation, is rather pointless since the rules vary so drastically.

You are saying a lot of stuff, but are you actually answering my question?
Why then do corporations move to Bermuda, Canada, Ireland, Switzerland (and other European countries)?
If you answered more directly without the irrelevant portions, would it be 'because they pay less in taxes' in places like Canada, various European countries and Bermuda?
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Postby vison » Wed Jan 25, 2012 9:44 pm

The Heretic wrote:
vison wrote:Corporations that move their head offices to avoid paying taxes have no loyalty for the nation that enabled them to exist and prosper in the first place. A nation is not a mine, its citizens are not ores, thrown on the slag heap when the gold is refined.

Of course corporations pass the costs of production onto the consumer - but what nice little bonus when the costs are cut but prices aren't?

The ordinary working person cannot move to a tax haven.

The perception of unfairness is what rankles, and rightly so. People know they are being used, and used contemptuously.

As for Mr. Obama's remarks, I didn't watch the whole speech. I saw the last bit. But comparing tax rates, nation to nation, is rather pointless since the rules vary so drastically.

You are saying a lot of stuff, but are you actually answering my question?
Why then do corporations move to Bermuda, Canada, Ireland, Switzerland (and other European countries)?
If you answered more directly without the irrelevant portions, would it be 'because they pay less in taxes' in places like Canada, various European countries and Bermuda?


Um. I thought that was settled?

But, as I said before, comparing taxes country to country is not simple. Many American companies pay no taxes at all - those that move seldom do so simply to pay lower taxes. There are often other reasons.
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Postby portia » Thu Jan 26, 2012 6:58 pm

Aravar wrote:But as I tried to point out in my post above corporations are "masks" individuals, or groups of individuals wear.

As an intellectual exercise I find it difficult to frame a law which can curtail the Archbishop of Canterbury's right to free speech, being a corporation, without also limiting Rowan Williams'.

Does it depend on whether he's wearing a mitre or not?

Or to take another example, look at the Simpsons. Imagine billionaire Mr Burns want's to extend the nuclear plant, but Springfield Nature Inc, a long established corporation with assets of perhaps $100,000 wants to oppose it. The latter has more sway as a long-established communtiy organisation founded by Jebediah Springfield himself, than its current members would have on their own.

Mr Burns' free speech is protected by the constitution. Why limit the corporation's ability to speak out against a wealthy individual? That seems to be the reasoning behind the majority in Citizen's United, which notes that most US corporations are rather small.

Edit for typos


I do not see why you should have a problem with drafting a law that affects the Archbishop of Canterbury's speech (and the Archbishop of Los Angeles's speech and that of a number of others that are corporations sole).You just make it clear that when the person is speaking as an individual--they can and do-- the law does not take effect. Only when the person is speking as the corporation sole, is there an effect.

As to the Simpson;s example, no one would be restricting the speech rights of any shareholder in "Springfield Nature, Inc.' They could speak, give money, etc as individuals as much as the law allows individuals. They do not need, nor should not have,a way around the limits on individual spending merely because they are investors in a corporation. Mr. Burns also should not be able to double up on his contributions by using his corporation.
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Postby The Heretic » Thu Jan 26, 2012 7:08 pm

portia wrote:As to the Simpson;s example, no one would be restricting the speech rights of any shareholder in "Springfield Nature, Inc.' They could speak, give money, etc as individuals as much as the law allows individuals. They do not need, nor should not have,a way around the limits on individual spending merely because they are investors in a corporation. Mr. Burns also should not be able to double up on his contributions by using his corporation.
As I noted above it is still illegal to give corporate, union etc. money directly to a candidate or party. There is no doubling up. I can personally donate directly to a campaign/candidate/party (within whatever the limits are). I can also independently make an ad supporting a campaign. Mr. Burns could personally donate to a candidate/party/cvampaign. He and his (to make this more in context with CU) BoD could also use their corporation's funds to independently make an ad supporting a candidate.
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Postby Cerin » Thu Feb 16, 2012 8:51 pm

For those who believe Citizens United hasn't changed anything, here is a lengthy article that offers some statistics (excerpt):

The .0000063 Percent Election: How the Politics of the Super Rich Became American Politics

by: Ari Berman, TomDispatch | News Analysis

At a time when it’s become a cliché to say that Occupy Wall Street has changed the nation’s political conversation -- drawing long overdue attention to the struggles of the 99% -- electoral politics and the 2012 presidential election have become almost exclusively defined by the 1%. Or, to be more precise, the .0000063%. Those are the 196 individual donors who have provided nearly 80% of the money raised by super PACs in 2011 by giving $100,000 or more each.

These political action committees, spawned by the Supreme Court’s 5-4 Citizens United decision in January 2010, can raise unlimited amounts of money from individuals, corporations, or unions for the purpose of supporting or opposing a political candidate. In theory, super PACs are legally prohibited from coordinating directly with a candidate, though in practice they’re just a murkier extension of political campaigns, performing all the functions of a traditional campaign without any of the corresponding accountability.

If 2008 was the year of the small donor, when many political pundits (myself included) predicted that the fusion of grassroots organizing and cyber-activism would transform how campaigns were run, then 2012 is "the year of the big donor," when a candidate is only as good as the amount of money in his super PAC. “In this campaign, every candidate needs his own billionaires,” wrote Jane Mayer of The New Yorker.

“This really is the selling of America,” claims former presidential candidate and Democratic Party Chairman Howard Dean. “We’ve been sold out by five justices thanks to the Citizens United decision.” In truth, our democracy was sold to the highest bidder long ago, but in the 2012 election the explosion of super PACs has shifted the public’s focus to the staggering inequality in our political system, just as the Occupy movement shined a light on the gross inequity of the economy. The two, of course, go hand in hand.

“We’re going to beat money power with people power,” Newt Gingrich said after losing to Mitt Romney in Florida as January ended. The walking embodiment of the lobbying-industrial complex, Gingrich made that statement even though his candidacy is being propped up by a super PAC funded by two $5 million donations from Las Vegas casino magnate Sheldon Adelson. It might have been more amusing if the GOP presidential primary weren’t a case study of a contest long on money and short on participation.

The Wesleyan Media Project recently reported a 1600% increase in interest-group-sponsored TV ads in this cycle as compared to the 2008 primaries. Florida has proven the battle royal of the super PACs thus far. There, the pro-Romney super PAC, Restore Our Future, outspent the pro-Gingrich super PAC, Winning Our Future, five to one. In the last week of the campaign alone, Romney and his allies ran 13,000 TV ads in Florida, compared to only 200 for Gingrich. Ninety-two percent of the ads were negative in nature, with two-thirds attacking Gingrich, who, ironically enough, had been a fervent advocate of the Citizens United decision.

<snip>

Before Citizens United, the maximum amount one person could give to a candidate was $2,500; for a political action committee, $5,000; for a political party committee, $30,800. Now, the sky’s the limit for a super PAC, and even more disturbingly, any donor can give an unlimited contribution to a 501c4 -- outfits defined by the IRS as “civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare,” and to make matters worse, that contribution will remain eternally secret. In this way, American politics is descending further into the darkness, with 501c4s quickly gaining influence as “shadow super PACs.”

A recent analysis by the Washington Post found that, at a cost of $24 million, 40% of the TV ads in the presidential race so far came from these tax-exempt “social welfare” groups. The Karl Rove-founded American Crossroads, a leading conservative super PAC attacking Democratic candidates and the Obama administration, also runs a 501c4 called Crossroads GPS. It’s raised twice as much money as its sister group, all from donations whose sources will remain hidden from American voters. Serving as a secret slush fund for billionaires evidently now qualifies as social welfare.

<snip>

In a recent segment of his show, Stephen Colbert noted that half of the money ($67 million) raised by super PACs in 2011 had come from just 22 people. “That’s 7 one-millionths of 1 percent," or roughly .000000071%, Colbert said while spraying a fire extinguisher on his fuming calculator. “So Occupy Wall Street, you’re going to want to change those signs.”



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Postby portia » Fri Feb 17, 2012 10:56 am

The Heretic wrote:
portia wrote:As to the Simpson;s example, no one would be restricting the speech rights of any shareholder in "Springfield Nature, Inc.' They could speak, give money, etc as individuals as much as the law allows individuals. They do not need, nor should not have,a way around the limits on individual spending merely because they are investors in a corporation. Mr. Burns also should not be able to double up on his contributions by using his corporation.
As I noted above it is still illegal to give corporate, union etc. money directly to a candidate or party. There is no doubling up. I can personally donate directly to a campaign/candidate/party (within whatever the limits are). I can also independently make an ad supporting a campaign. Mr. Burns could personally donate to a candidate/party/cvampaign. He and his (to make this more in context with CU) BoD could also use their corporation's funds to independently make an ad supporting a candidate.


Of course it is doubling up because a corporate or union donor to a superpac can avoid the limits there would otherwise be and support the same candidate or oppose the same other candidate with unlimited funds.

But what really annoys me about the decision is that it flies on the face of history and good sense to give rights to organizations beyond those that are necessary to their functions and it claims that they should be treated like peoples.Since it is a 5-4 decisions, I hope a future court has a better sense of history and better sense, generally.
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Postby The Heretic » Fri Feb 17, 2012 4:55 pm

portia wrote:Of course it is doubling up because a corporate or union donor to a superpac can avoid the limits there would otherwise be and support the same candidate or oppose the same other candidate with unlimited funds.

Since, as I pointed out, I can and could donate directly to candidate J. Smith $2500 (or whatever the legal max is), and I can and could also independently make an ad supporting that candidate, is that also 'doubling up'?
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Postby portia » Sun Feb 19, 2012 10:10 am

The Heretic wrote:
portia wrote:Of course it is doubling up because a corporate or union donor to a superpac can avoid the limits there would otherwise be and support the same candidate or oppose the same other candidate with unlimited funds.

Since, as I pointed out, I can and could donate directly to candidate J. Smith $2500 (or whatever the legal max is), and I can and could also independently make an ad supporting that candidate, is that also 'doubling up'?


Yes. But to allow a human being to do that is, to me, consistent with free speech. To allow an artificial person to that is to expend that entity's rights beyond what makes sense.
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Postby The Heretic » Sun Feb 19, 2012 3:41 pm

portia wrote:
The Heretic wrote:
portia wrote:Of course it is doubling up because a corporate or union donor to a superpac can avoid the limits there would otherwise be and support the same candidate or oppose the same other candidate with unlimited funds.

Since, as I pointed out, I can and could donate directly to candidate J. Smith $2500 (or whatever the legal max is), and I can and could also independently make an ad supporting that candidate, is that also 'doubling up'?


Yes. But to allow a human being to do that is, to me, consistent with free speech. To allow an artificial person to that is to expend that entity's rights beyond what makes sense.

But I thought you were claiming that (what you say is 'doubling up') was bad because it allowed one to get around donation limits.
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Postby portia » Mon Feb 20, 2012 4:10 pm

Not entirely. Corporations have donation limits, and can now get around them. People can get around them, now, too. If they do it as individuals, not hiding what they are donating to, I'm not too upset (even though it is often not legal) but people can use the corporate form to donate a lot more than they could, otherwise, and to hide what they are doing and I do not approve of that as we are better off knowing who is donating to whom.

And, as I said before, I am unhappy with the distortion of what a corporation is and why it is allowed to do certain things and not others. I think there is a danger in that.
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Postby The Heretic » Mon Feb 20, 2012 4:59 pm

portia wrote:Not entirely.


Not entirely what? Your point first above was that an individual making a direct donation and then using his corporation to fund the making of an independent ad was somehow unjust due to mythical doubling up that an individual could not do. Except that I pointed out an individual could prior to and still can do both, in which case you say that is free speech.

Corporations have donation limits, and can now get around them. People can get around them, now, too.


What?
I think you need to re-read what I wrote above, because you make no sense here. Either that or explain these limits and how they now can get around them.

If they do it as individuals, not hiding what they are donating to, I'm not too upset (even though it is often not legal)

What is not legal?

but people can use the corporate form to donate a lot more than they could, otherwise,

How so?
and to hide what they are doing and I do not approve of that as we are better off knowing who is donating to whom.

Again, CU upheld the disclosure requirements.

And, as I said before, I am unhappy with the distortion of what a corporation is and why it is allowed to do certain things and not others. I think there is a danger in that.

Wopuld you then limit, for example, the New York Times (a corporation) (or substitute any media corporation) from the political advocacy it indulges in? Forbid it from spending any money on political advocacy?
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Postby Tookish_Traveler » Fri Mar 02, 2012 10:24 am

This is the sort of thing that happens when anybody can run an attack ad!!!


http://abcnews.go.com/blogs/politics/2012/03/dept-of-silliness-hank-the-cat-attack-ad/






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Postby RoseMorninStar » Fri Mar 09, 2012 8:12 pm

I'm not sure this is the right thread, but I thought it might be of interest. IRS May Make Political Groups Pay Dearly for Keeping Donors Secret -- And Out Them
WASHINGTON -- For years, the IRS has done little or nothing to check the rise of overtly political groups that claim a special tax-exempt status in order to funnel secret money into election-related advertising.

But in a sign that the agency may be waking from its slumber, the IRS has sent detailed questionnaires to several Tea Party organizations -- and possibly other political groups -- to determine if they truly qualify for the 501(c)(4) designation intended for groups whose exclusive purpose is to promote social welfare.

Should any group currently calling itself a 501(c)(4) have its designation denied or revoked, tax experts said the consequences could be severe, including fines of 35 percent or more of the money they raised in secret.

And the groups might have to make donors' names public.

Even loose talk about donor secrecy no longer being guaranteed could put a screaming halt to the extraordinary flow of money into these groups from deep-pocketed people and corporations that want to buy political ads without leaving fingerprints.

"If I thought it was important to remain anonymous for my business reasons or for my personal reasons, I wouldn't take any comfort in any assurances the organization has given me until now," said Karl Sandstrom, a former Federal Election Commission member who now works at the Washington office of law firm of Perkins Coie.

It’s not clear whether any of the major groups that identify themselves as C4s -- and are well on their way toward collecting and spending tens of millions of dollars in this election cycle -- have been the subject of IRS inquiries. The IRS won't say, and it’s apparently a sensitive topic with the groups. Representatives from Karl Rove-associated Crossroads GPS, Obama-backing Priorities USA, and several others didn't respond to requests for comment.

But, said Sandstrom: "It's hard to imagine that the IRS would take the time to make inquiries of small organizations if there are very large organizations -- spending vast sums of money compared to these much smaller organizations -- that are not receiving similar attention."

The tax code requires 501(c)(4) groups to be operated "exclusively" for social welfare purposes -- which does not include intervention in political campaigns. The IRS has allowed the groups to engage in political activity as long as it was not their primary purpose. But for many of these groups, it's hard to see what other purpose they could possibly have.

It's also hard to see why a political group would file under section 501(c)(4) instead of under Section 527 -- the part of the tax code explicitly designed for political groups including PACs and super PACs -- other than to hide its donors. Like the C4s, the 527 groups are allowed to raise unlimited funds and pay no taxes. They just have to disclose who donates money.

Reform groups have been pressuring the IRS to enforce its rules for months. In February, a group of Democratic senators sent a letter to the IRS, which stated: "It is contrary to the letter and spirit of the statute for political organizations formed primarily to advocate for a political candidate or to run attack ads against other candidates to take advantage of section 501(c)(4)."

Sen. Tom Udall (D-N.M.), one the letter’s signers, praised the IRS inquiry. "The term 'social welfare organization' is clearly being used loosely these days,” Udall said in a statement. “Voters deserve to know who's behind the attack ads they see on TV and we need a multi-pronged approach to get there -- a tightening of regulations, disclosure legislation from Congress, and ultimately, a constitutional amendment to reduce the influence of money in our elections."

Meanwhile, a conservative legal organization representing several Tea Party groups assailed what it says "appears to be a coordinated attempt by the Internal Revenue Service to intimidate and silence these organizations in this election year."

The Tea Party groups released IRS questionnaires that requested detailed information, including lists of people invited to speak at events, their credentials, and hard copies of all handouts.

"The problem here is the IRS has gone beyond legitimate inquiries and is demanding that these organizations answer questions that actually violate the First Amendment rights of our clients," Jay Sekulow, chief counsel of the evangelical interest group American Center for Law and Justice, said in a statement.

But Donald Tobin, a law professor at the Moritz College of Law at Ohio State University, said the information requested by the IRS is perfectly normal and appropriate. "The idea is to get the proper information from the organization so you can make the proper decision," he said.

An IRS spokesman declined to comment on specific cases, but said in a statement on Thursday that "when determining whether an organization is eligible for tax-exempt status, including 501(c)(4) social welfare organizations, all the facts and circumstances of that specific organization must be considered."

The statement described the agency's procedure:

In cases where an application for exemption under 501 (c)(4) present issues that require further development before a determination can be made, the IRS engages in a back and forth dialogue with the applicant. For example, if an application appears to indicate that the organization has engaged in political activities or may engage in political activities, the IRS will request additional information about those activities to determine whether they, in fact, constitute political activity. If so, the IRS will look at the rest of the organization’s activities to determine whether the primary activities are social welfare activities or whether they are non-exempt activities. In order to make this determination, the IRS must build an administrative record of the case. That record could include answers to questions, copies of documents, copies of web pages and any other relevant information.

Career civil servants make all decisions on exemption applications in a fair, impartial manner and do so without regard to political party affiliation or ideology.

No organization is being compelled to do anything, said Paul S. Ryan, a lawyer with the Campaign Legal Center, a group trying to reduce the influence of money in politics.

"The tax-exemption of nonprofit groups amounts to a subsidy of their operations," Ryan said. "If a group's going to show up at the IRS with its hand out, I think the federal government is fully within the bounds of not only permissible, but desirable activities to make sure that what amounts to a subsidy is in compliance with the law.

"I have no sympathy for those who are bending over backward to evade disclosure laws and complaining about the IRS simply doing its job and enforcing the laws on the books," Ryan said.

The only known previous action by the IRS came in July, when it denied C4 status to three units of Emerge America, a group that identifies and trains Democratic women to run for office.

The IRS opened an examination into whether five large donors had violated the law by not declaring their contributions to political 501(c)(4) groups as gifts. But the agency stopped its inquiry after six Republican members of the Senate Budget Committee accused the IRS of pursuing a Democratic political vendetta.

"The IRS was bullied by Congress and backed off immediately. It will be interesting to see if the IRS has any backbone this time," Ryan said.

Ofer Lion, a Los Angeles tax lawyer who represents tax-exempt organizations, said that even if the IRS proceeds, the agency "usually acts very slowly."

"They are now being looked to enforce these restrictions on political and lobbying activities at the pace of the campaign, which is something they're not used to and not built for," Lion said.

The IRS move will inevitably be attacked as political, but Lion said he sees no indication of politics. "I'm not sure that it's much more than what seems pretty plain, which is that these organizations look like political organizations," he said.
"Some of these organizations look like political parties. And a political party is not a 501(c)(4). This is just enforcing the laws on the books."

According to Sandstrom, if the IRS rejects or revokes a C4 classification, it's likely that the group would be forcibly reclassified as a 527 -- and would immediately be in violation of that section's reporting requirements.

That could result in a slap on the wrist or some sort of negotiated settlement. But technically, the statute establishes the penalty for nondisclosure as the maximum corporate tax rate (35 percent) times all the money that should have been disclosed, but wasn't.

“Failure to report involves a substantial penalty related to the activity you're supposed to report, both on the contribution side and on the expenditure side, so the effective tax is about two-thirds of all revenue,” Sandstrom said.
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