Newspapers and the Total Destruction of the Johnson Amendment

By Sam Brunson

Yesterday at the National Prayer Breakfast, Donald Trump promised to “get rid of and totally destroy the Johnson Amendment.”

In case you’re unfamiliar with the name “Johnson Amendment” (and I kind of hope you are—it’s a stupid name), that refers to the phrase in section 501(c)(3) that prohibits tax-exempt organizations from endorsing or opposing candidates for office. It was proposed by Senator Lyndon Johnson in 1954, and inserted into the tax code with little fanfare and no legislative history.

There’s a lot that can (and, in fact, has) been said about Trump’s proposal, which follows up on a campaign promise he made, apparently repeatedly. I wouldn’t doubt if we return to it a few times here at Surly. But I just wanted to point out one potential consequence: Continue reading “Newspapers and the Total Destruction of the Johnson Amendment”

The Art of the (Budget) Deal

By Daniel Hemel and David Herzig

Who Holds the Trump Card on Reconciliation?

Republicans on Capitol Hill are reportedly planning to use the filibuster-proof budget reconciliation process to repeal the Affordable Care Act and overhaul the tax code. Against that background, Sam Wice says that “the most powerful person in America” in 2017 will be Senate Parliamentarian Elizabeth MacDonough, the nonpartisan official who will “determine” how much of their agenda Republicans can pass through reconciliation. This, of course, is an exaggeration: like it or not, the most powerful person in America in 2017 will be Donald J. Trump, who will wield all the power of the imperial presidency. But Wice’s post helpfully directs our attention to the budget reconciliation process, the rules of which quite likely will determine whether the Republican leadership on Capitol Hill can repeal the ACA and reform the tax laws.

Yet while one should not underestimate the importance of reconciliation, one should also not overestimate the power of the Parliamentarian in the reconciliation process. As a formal matter, the Parliamentarian’s role is advisory; and as a practical matter, the Parliamentarian has little say over significant aspects of reconciliation. Other actors—most notably, Senate Budget Committee Chairman Mike Enzi (R-Wy.)—wield at least as much influence as the Parliamentarian. Most importantly, Enzi—not MacDonough—will determine whether the provisions in any reconciliation bill violate various rules against deficit-increasing legislation being passed via reconciliation. And unlike the Parliamentarian, the Budget Committee Chairman is very hard to fire.

Reconciliation measures can begin in either or both chambers. However, since the ultimate vote on the budget measure occurs in the Senate, we’ll focus on the Senate side of the reconciliation process for purposes of this discussion. On the House side, the Rules Committee Chair and the Budget Committee Chair will wield outsized influence as well. We expect Pete Sessions (R-Tex.) to stay on as House Rules Committee Chair; as for the House Budget Committee Chair, the race is on for a replacement to Tom Price, the Georgia Republican recently tapped as Trump’s Health and Human Services Secretary.

To understand why the Budget Committee Chair is as powerful as he is, a bit of background on reconciliation may be helpful. Continue reading “The Art of the (Budget) Deal”

Donald Trump —> Mandatory Tax Return Disclosure

So it looks like Trump wasn’t lying when he said he wouldn’t release his tax returns—it’s Election Day,[fn1] and we still haven’t seen them.[fn2]

As has been endlessly pointed out, every Republican nominee for president since Ronald Reagan has released his tax returns, and most nominees since the 1970s have. Trump, in refusing to release his returns, is flouting a long-standing norm.

The thing is, though, he’s run a campaign largely based on flouting norms. And it’s not like the norm was aging well, anyway. Sure, there were candidates with exemplary releases. But there were candidates—on both sides of the aisle (I’ve got my eye on you, Bernie Sanders!) who did less than the bare minimum, releasing only one or two years’ worth of returns, and only really releasing their 1040s. (Several months ago, I graded candidates’ tax return disclosures here.)  Continue reading “Donald Trump —> Mandatory Tax Return Disclosure”

On Trump and Tax Opinions

Every so often, Brunson and Herzig carve out a day to swap long-winded emails, then those emails are published on the Internet.

Sam-

trump-returnI am sure you have seen by now the NY Times story about Donald Trump’s purported tax positions from the 1990.  The NY Times has been following up on a story they originally published about a month ago reporting that Mr. Trump reportedly had a $990 million net operating loss (“NOL”).  After the story, there was rampant speculation about the loss.

If Mr. Trump used exclusively all of his money to buy properties or casinos or whatever and those assets were used in a trade or business and those assets went down in value, Mr. Trump would suffer a real economic loss.  This real economic loss would then generate a real tax loss.  At the time, most tax experts thought that Mr. Trump may have used some of his money but all used loans.  I think I was quoted as saying this was likely given his prior statements about being the king of debt. Continue reading “On Trump and Tax Opinions”

A $916 Million Loss? #TrumpLeaks

By Sam Brunson

trump-returnThe New York Times reported tonight that in 1995, Republican presidential candidate Donald Trump may have claimed a $916 loss, a loss substantial enough that it could have allowed him to avoid paying taxes for nearly two decades.

The push notification for the story showed up on my phone at 8:30 pm Central time on a Saturday, so I haven’t had time to really dig into it. I’m sure that, over the next few days, we’ll have something more substantive to say. But in the meantime, a couple thoughts:  Continue reading “A $916 Million Loss? #TrumpLeaks”

Debate Prep: The Candidates’ Estate Tax Plans

By David Herzig

With the first Presidential debate tonight, we are sure (or at least I hope) to hear about various tax plans.  I would expect that the estate tax would be a topic of conversation since there is such a sharp contrast between the candidates.  The current reporting spins that Donald Trump wants to eliminate the estate tax; while, Hillary Clinton wants to tax the rich through a two-prong increase on the estate tax.  I thought it would be useful in advance of the debate to discuss the candidates’ actual estate tax plans. (If there is a PA for Lester Holt looking for some last minute questions for the candidates – scroll to the bottom and steal away no attribution needed!)

Currently, there is an estate (or death) tax. Unfortunately for the fisc, the tax accounts for less than 1 percent of federal revenue.  (See, Tax Foundation). What is amazing is that at other points in time, the tax actually raised revenue and effected many estates.  The primary reason for the drop in revenues even though overall net worth has increased, is related to the exemption amount available for taxpayers.  In 1976, the exemption amount per estate was $60,000 while today it is $5.45 million.  (I tackle a lot of these issues in my upcoming University of Southern California Law Review article).

Continue reading “Debate Prep: The Candidates’ Estate Tax Plans”

Trump, Churches and Politics

Photo: Evan Vucci/AP

By David J. Herzig

One of the leads in today’s news cycle was the Flint Pastor, Rev. Faith Green Timmons of the Bethel United Methodist Church, interrupting Republican Presidential Candidate Donald Trump during a speech at her church.

According to the story, Rev. Timmons, intervened during Mr. Trump’s speech  when he started attacking Democratic Presidential Candidate Hillary Clinton stating, “Mr. Trump, I invited you here to thank us for what we’ve done in Flint, not give a political speech, …”. To which Mr. Trump responded, “OK. That’s good. Then I’m going back onto Flint, OK? Flint’s pain is a result of so many different failures, …”.

I headed to Twitter to state that Rev. Timmons was doing the right thing protecting her churches charitable exemption by halting the political speech.  Quick blackletter law: churches, like other public charities, are exempt from tax under section 501(c)(3). But like all exemptions there are certain limitations, including an absolute prohibition on supporting or opposing candidates for office.  In IRS Publication 1828, the IRS position is clear,  “churches and religious organizations, are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.”  (For a primer on the topic, my co-blogger Sam Brunson wrote for Surly here and for a full blown analysis see his work for University of Colorado’s law review here).  Churches can’t (although they often do) engage in political speech.  Maybe Rev. Timmons was attempting to protect the church’s exemption.

However, as Lloyd Mayer pointed out on Twitter, having a candidate appear at your church two months before the election might in itself be political speech regardless of the topic actually discussed.  This would be true unless the church gave the same amount of “air time” to the opponent.  Publication 1828 supports Professor Mayer’s view.  Statements made by the religious leader of the church at an official church function or through use of the church’s assets would be improper political campaign intervention.  Hosting only one candidate regardless of the topic would seem to be an endorsement of that candidate and thus improper political campaign intervention.

Continue reading “Trump, Churches and Politics”

Trump Pays $2,500 Excise Tax: Is that Enough?

By: Philip Hackney

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A couple of months ago, I wrote about the tax consequences of the Donald J. Trump Foundation paying $25,000 to the Pam Bondi campaign for attorney general in Florida in 2013. While most folks are focused on whether the payment was a bribe, I still see signs of a mismanaged charitable organization. I suggested that the political contribution could lead to the Foundation losing its exempt status and should require it to pay some excise taxes. I also said that there was enough questionable information for the IRS to open an audit of the Foundation. Well, last week, David Fahrenthold reported that Donald Trump recently paid $2,500 to the IRS as a tax for that impermissible political contribution made by the Foundation. This action leaves a lot of odd unanswered questions that I write about here.

Jeffrey McConney, the senior vice president and controller of the Foundation, told the Washington Post that Trump himself filed paperwork with the IRS alerting them to the improper political contribution from the Foundation, paid a 10% excise tax, and returned the $25,000. McConney states that the Foundation believes this should end the problem because the Foundation has done everything it has “been instructed to do”. While some have assumed that the IRS had communicated with the Foundation, it is not clear who did the instructing. Continue reading “Trump Pays $2,500 Excise Tax: Is that Enough?”

Child Care in the Presidential Campaign

CCA-IG-CostsCompared_v1bToday, Donald Trump laid out a series of economic proposals. Included, naturally, were a series of tax proposals, which I assume we’ll address on this blog as time goes on. For now, I want to focus on just one of his proposals: easing the cost of child care.

While the cost of child care varies, it has risen dramatically, nearly doubling over the last 25 years. And although the cost of child care varies from state to state—and even from city to city—the numbers can be eye-opening. In Illinois, the average annual cost of child care for an infant and a 4-year-old is more than $22,000. At the same time, the median income for a single parent is about $24,000, and the median household income for married parents is about $88,000.[fn1] That means that the cost of child care for two children represents 25 percent of the median Illinois married couple’s household income, and fully 94 percent of the median income of a single parent.

Clearly, using averages and medians doesn’t paint an accurate picture of any given family’s situation. But in no state would child care costs make up less than 30 percent of a minimum wage-earner’s income. That’s a pretty dire picture. Dire enough, in fact, that the cost of child care is keeping women out of the workforce. (And note that it’s not just women who can afford to stay out of the workforce because of a spouse’s or partner’s income: 34 percent of stay-at-home mothers live in poverty, as opposed to 12 percent of mothers in the workforce.) Continue reading “Child Care in the Presidential Campaign”

Examination of Allegations Against the Clinton Foundation

By: Philip Hackney

book-863418_1280Back in June I wrote disapprovingly of some actions of the Donald J. Trump Foundation. In that piece I promised to write about the Bill, Hillary & Chelsea Clinton Foundation too. Recently, Rep. Marsha Blackburn sent a letter that was scheduled to be sent to the FBI, the FTC, and the IRS. That letter makes a number of allegations about the misuse of the Clinton Foundation, and I figured these allegations would be a good place to analyze the performance of the Foundation that I had promised.

Blackburn alleges a number of things, but I am going to focus on her first allegation in this post because it is the only one that is a pure tax exemption question. She alleges that the Foundation is illegally operating outside the scope of its initial application for tax exemption to the IRS.  For reasons explained in the post below, I conclude there is very little involved in this claim and it is a misunderstanding of the law. There could be problems with the Foundation but this is not one of them.

UPDATE: I look at the remaining two Rep. Blackburn allegations here.

Continue reading “Examination of Allegations Against the Clinton Foundation”