The IRS has completed its report on political activity by tax exempt groups, finding that about 75% of the groups it examined had engaged in some kind of prohibited political campaign activity. See this post on "Church Politics" on Prawfsblawg for more information about the report and the difficulties it will present for churches on both left and right in the upcoming 2006 election. Articles highlighting the report appeared in Saturday's New York Times, here, and the Washington Post, here.
Another issue related to tax-exempt organizations and charitable contributions has drawn attention over the last few days. As I noted in a blog post last December, the new Katrina charitable contribution provision seemed mainly a tax giveaway for the wealthy, in that it removed the cap on the amount that could be used as a deduction against income. T. Boone Pickens has now become a conspicuous example of the way the provision benefits the ultra-rich. See this New York Times story. Right before the end of the year, Pickens "gave" $165 million to a small charity that benefits the golf program at Oklahoma State. The money stayed in the golf charity's account for little more than an hour, after which it went right back into a fund managed by Mr. Pickens. As the Times article notes:
"To some, the question is whether a wealthy person should get a tax break now for money that has essentially not yet been put to charitable use. By giving the money before 2005 expired, Mr. Pickens was able to take advantage of a provision in Hurricane Katrina relief legislation that allowed him a deduction for a charitable gift equal to 100 percent of his adjusted gross income, double the normal limit of 50 percent. If he does not have that much income in 2005, he can carry the deduction into future years."
In other words, Pickens still controls the money and his fund still benefits from having the assets. In addition, Pickens gets the full benefit of the contribution, without any limitation based on a percentage of his gross income, under the temporary "Katrina" relief provision. A considerable tax subsidy, provided to someone that doesn't need it without even providing much immediate benefit to the charity. All in all, this is a predictable use of an ill-considered tax benefit that had very little to do with helping Katrina victims.
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