IRS Must Define Political Activity

From the WashingtonPost.com:

The Aug. 22 article "Ruling sets up IRS as overseer of groups' gifts to campaigns" portrayed the ineffectiveness of the Internal Revenue Service enforcing disclosure on political spending. While the problem stems in part from an agency operating on "tax time," a fundamental reason the IRS cannot meaningfully enforce rules on nonprofit groups' political activity is its failure to give clear rules defining what is considered "political”.

For decades, the agency has relied on a "know it when we see it" approach, otherwise called the "facts and circumstances" test. In contrast to clear, practical rules that define lobbying for nonprofits, groups interested in political advocacy have little guidance and must guess how regulators will characterize their messages. It is this regulatory failure that allows Americans for Job Security to claim that its ads are issue advocacy and not electoral activity.

In the wake of the Citizens United Supreme Court decision, the IRS needs to step up and take on the hard task of providing guidance that defines political activity. Nonprofit organizations struggling to comply with vague rules and the public deserve no less.

The 10 Richest Presidents

Forbes put together a great story on the 10 wealthiest Presidents of the United States. To see what Presidential faces grace the list, check out a segment of the story below or watch this slideshow on Forbes.com.

Don't believe all that born-in-a-log-cabin hype. Only four United States presidents actually started out that way, Abraham Lincoln being the most famous. By the time the other three, Franklin Pierce, James Buchanan and James A. Garfield, entered the nation's highest office, they shared one trait with its other 40 occupants: All had achieved a certain measure of financial prosperity.

Despite two centuries of campaign rhetoric touting identification with the common man, the simple fact is that no truly poor individual ever has become president of the United States.

Can anyone grow up to be president? If history is a judge, one just cannot become President unless they first amass sufficient financial wherewithal to withstand often income-less political races. (If Sarah Palin runs for president she'll need that $10 million Forbes estimates she has earned in book advances and speaking fees over the past year.)

Like citizens themselves, some presidents have been richer than others as they exercised their weighty responsibilities. Who were the flushest?

For our money, George Washington wins hands down. In the largely tax-free environment that characterized colonial America, he was considered one of its richest residents, a product of his shrewd business sense, a marriage to a wealthy widow and several inheritances. He benefited from an older brother's marriage into a powerful family, while early work as a surveyor helped give him a keen understanding of land.

John Mccain: I Would Never Tax Snooki's Tanning Bed

From CNN.com:

During the ten minute sneak peek of “Jersey Shore” season two, we see the effects the Obama administration has had on our dear friend Snooki’s lifestyle: the girl has been reduced to getting her faux glow with a spray tan.

Among the many revelations Schnickers made within those few minutes – she’s found love with an “amazing gorilla juicehead”; she gets crazy when handed "a bottle of freaking SoCo" – one of them was political.

“I don’t go tanning anymore, because Obama put a 10 percent tax on tanning,” Snooks said after her juicehead sprayed her face with one last coat of self-tanner, just to be on the safe side.

“I feel like he did that intentionally for us. McCain would never put a 10 percent tax on tanning. Because he’s pale and he would probably want to be tan," the pint-sized fist-pumper explained.

McCain confirmed Snooki's assertions in a tweet.

The Arizona Senator wrote, “@Sn00ki, u r right, I would never tax your tanning bed! Pres Obama’s tax/spend policy is quite The Situation but I do recommend wearing sunscreen!" To which Snooks responded: "Haha Yes!"

Federal Pay Ahead of Private Industry

As this article on USA Today.com explains, Federal employees earn higher wages than comparable workers in the private sector in more than eight out of 10 occupations. I have included a section of their article below, but you can checkout the full text – including a comparison chart – at USA Today.com.

Accountants, nurses, chemists, surveyors, cooks, clerks and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector.

Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available.

These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.

Federal pay has become a hot political issue in recent months because of concerns over the federal budget deficit and recession-battered wages in the private sector.

Schwarzenegger's Office Blames $79,000 Tax Lien on 'Paperwork'

From MercuryNews.com:

Gov. Arnold Schwarzenegger was having a feel-good Thanksgiving week, passing out turkeys in East Los Angeles and giving thanks for "the blessings of freedom and democracy."

But then came the heartburn.

A gossip Web site Friday morning revealed that the IRS filed a federal tax lien against the governor last spring seeking $79,000 — a discovery Schwarzenegger's office blames on "a minor paperwork tracking discrepancy."

A copy of the tax lien, submitted in Los Angeles County, was first posted by TMZ.com. A search of public records databases shows the lien was filed May 11 and that it lists the governor's home address.

The governor's office at first questioned the authenticity of the document and insisted that Schwarzenegger had paid his taxes "in full and on time." Later, after officials spoke with the IRS, they explained there had been a snafu.

"The issue is completely unrelated to the payment of taxes," Schwarzenegger spokesman Aaron McLear said in a statement. "The matter will be resolved and the lien expunged without any penalty assessed upon the governor."

McLear — who said the governor learned of the matter only Friday — wouldn't comment further on the nature of the mix-up or on what kind of taxes the lien involved.

But an IRS primer on the collection process explains that the agency sends out several warnings to anyone who's been billed for overdue

Bio-fuel in the Health Care Bill?

Many of us in the tax industry are confused this morning, because of a $24 billion bio-fuel tax credit that was added to a health care bill making it’s way through Congress. The modification was made recently, but there already dozens of bloggers who have spoken out about this fishy addition to the health care reform bill. You can read coverage on this developing story from The New York Times here and here, or checkout a segment below.

A measure that could save the federal government $24 billion in bio-fuel tax credits over 10 years by restricting the eligibility of a controversial fuel was attached last night to health care reform legislation making its way to the House floor this week.

Language included in the manager's amendment would restrict the paper industry from claiming a lucrative incentive for use of a fuel known as "black liquor."

Rep. Chris Van Hollen (D-Md.), a member of the House Democratic leadership, introduced the measure as a stand-alone bill (H.R. 3985) this week that would formally restrict the paper industry from eligibility for the $1.01-per-gallon cellulosic bio-fuel tax credit included in the 2008 farm bill.

The estimated $24 billion in tax credit savings could be used to offset costs of the health care bill, Van Hollen said.

"In addition to supporting homegrown renewable energy, it is my hope that this legislation will be added to the manager's amendment for the House health care reform package making its way to the floor this week so that the savings generated by these improvements can help pay for health care for all Americans," Van Hollen said in a statement yesterday before the amendment was released.

A Sarah Palin Tax Problem?

From Talking Points Memo:

Back in September, it was reported that a dinner with former Alaskan governor Sarah Palin was being auctioned by charity on eBay with a minimum asking bid of $25,000.

That was sort of funny.

It was later reported that the winning bid was $63,500, from a woman in Alabama.

That was less funny, and less widely reported.

But the tax consequences were apparently not thought about, because she might have realized taxable income of $63,500 with nothing to show for it.

There is a sometimes-overlooked tax regulation that states that you don't realize income by providing services to a charity, but that you do realize income by providing a service to someone else who then pays the charity for that service. (Treas. Reg. 1.61-2(c).)

If Sarah Palin had charged someone $63,500 to have dinner with her, she would have $63,500 of income, and she could later donate that money to charity and claim a charitable deduction subject to the limits on charitable deductions (usually 50% or 30% of adjusted gross income). The point made by the regulation, and by various rulings issued by the Internal Revenue Service, is that Palin can't avoid that result by assigning the right to have a dinner with her to a charity and letting the charity collect the money. As the Supreme Court first ruled back in 1930, the law taxes incomes "to those who earned them." Lucas v. Earl, 281 U.S. 111, 114 (1930).

So Palin should report the $63,500 as income, and then claim a charitable deduction for the same amount. If the charity is a "public charity" described in IRC section 170(c)(1), and she has at least $63,500 of other income, with no other charitable deductions, it might be a "wash," because she will also be entitled to a charitable deduction of $63,500 for the money that was (after all) paid to charity. But if she doesn't have that much other income, or if she claims other charitable deductions, it's possible that her charitable deduction will be less than the income realized, and she will end up having to pay federal income tax on money she didn't actually receive.

Obama Adviser Says no Climate Change Law this Year

A little over a week ago I posted a blog entry discussing the tax implications of cap and trade reform, and now Obama’s top energy advisor (Carol Browner) has spoken out saying that changes to our current climate and trade laws are “not going to happen.”

Browner made the statement at a conference organized by The Atlantic magazine, just days after Senate Democrats introduced a major bill on climate change. In a video posted on the magazine's Web site, Browner was asked about the prospects of enacting climate legislation by the time negotiations on a global climate treaty begin in December in Copenhagen.

"Obviously, we'd like to be through the process, but that's not going to happen," Browner said. "I think we would all agree the likelihood you would have a bill signed by the president on comprehensive energy by the time we go early in December is not likely."

Senate Democrats unveiled a bill Wednesday that aims to cut greenhouse gasses by 20 percent by 2020. The House passed a bill in June that calls for a 17 percent emission cut by 2020.

The Senate bill includes an economy-wide cap-and-trade system that would require power plants, industrial facilities and refineries to cut carbon dioxide and other climate-changing pollution. While there would be an overall emission cap, polluters would be able to purchase emission allowances to limit reductions. The bill, however, does not lay out how emission allowances would be distributed, a contentious issue left for resolving later.

Climate change is competing with several other big issues for the attention of lawmakers. Among the issues: overhauling the nation's health care system and imposing new financial regulations on Wall Street.

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Al Sharpton’s Tax Case Heats Up

According to NY Post.com, thing are getting interesting in Rev. Al Sharpton’s tax case. The IRS began sending out numerous subpoenas to Sharpton’s top donors. Below is a snippet of the article.

“Anheuser-Busch, the brewer of Budweiser and Michelob, confirmed yesterday that it received a federal subpoena in connection to its charitable giving to Sharpton's National Action Network. ‘We have received a subpoena and are cooperating with the IRS,’ the company said in a statement.

Sharpton blasted the subpoena as a ‘fishing expedition’ and said his donors are proud of their financial support. The St. Louis-based corporation donated between $100,000 and $499,000 to NAN in 2007 alone, according to its Web site, but declined further comment about its relationship with Sharpton. A knowledgeable source said several other corporate donors received or would soon receive subpoenas.

Sharpton himself, his business entities and his nonprofit civil-advocacy group owe millions in back taxes, documents show. The IRS and the US Attorney's Office in Brooklyn have an ongoing probe into Sharpton's finances going back to his 2004 run for president and stewardship of NAN.

Last year, state Attorney General Andrew Cuomo began a probe of NAN because it failed to follow state financial-disclosure regulations for nonprofits. Cuomo's office has since turned over its NAN file to the US Attorney's Office. As of 2006, the most recent year that financial documents for the group are publicly available, it owed $1.9 million in payroll taxes and penalties.”