The IRS controversy isnít about taxes. Itís about disclosure.<quoted text>
...Seems to me, as a voter, any organization who uses the "special" IRS codes to hide the identities of their contributors should be checked out - and if "targeting" makes it more efficient - have at it.
By Dylan Matthews, Published: May 21, 2013
At some level, the scandal around the IRSís targeting of conservative 501(c)4 groups has nothing to do with taxes. That may sound weird Ė 501(c)4 is a section of the Internal Revenue Code, the entire 501(c) section exists to list groups that are exempt from some federal taxes, the IRS is the tax man, etc.
But thereís no universe in which the groups in question are going to pay taxes. Think about it. Letís say they instead register as 527 groups, enabling them to make unlimited independent expenditures. Those organizations donít have to pay taxes on contributions they receive either. Or maybe they want to be super-PACs (which are 527s, technically, for tax purposes), which can spend unlimited amounts to openly support candidates. They donít pay taxes on contributions either.
Whatís more, neither super-PACs nor other 527s have to tell their donors that they may be required to pay gift tax on some of their donations. 501(c)4s, on the other hand, have to make that disclosure according to the Congressional Research Service. Even if, for some crazy reason, they filed as a for-profit C corporations, theyíd have to spend less than they take in to be eligible for any taxes. And political groups generally like to spend whatever they can get their hands on.
So why are these groups so eager to keep their 501(c)4 status if it, if anything, puts them at a disadvantage tax-wise? Itís simple: disclosure. 501(c)4s can accept unlimited donations and donít have to tell a soul from whence they came. 527s, including super-PACs, have to file quarterly reports disclosing donors. Thatís why so many super-PACs have attached 501(c)4s, which can collect unlimited donations and then donate them in turn to the super-PAC,
...Making all charitable groups 501(c)3s could open them to that kind of scrutiny, particularly for any that deal with controversial topics, which could be far worse than anything thatís happened in the current scandal.
Or the groups could become 527s. But thatís not ideal either. Itís easy to imagine that, in a climate of intolerance, people would be afraid to donate money to civil rights groups if it was clear those donations would become public, and their neighbors would know. Or, more generally, people could be deterred from donating to causes they believe in but which are unpopular in their area.
...But thatís a values judgment about the importance of disclosure in a democracy, rather than a technical question of who pays what in taxes. Some of the last weekís headlines might have led you to believe that thereís some controversy over whether tea party groups should have to pay taxes. There isnít. No one thinks they should. The dispute is over whether they should have to disclose their donors, as a legal matter and as a moral one.