Seid’s donation is just a gigantic illustration of an undeniable trend. The tax line between philanthropy and partisan politics—never easy to define or enforce—is collapsing.
There are also loopholes that allow charities that receive tax-deductible contributions (or 501(c)(3)) to officially fund nonpartisan voter registration campaigns. Some of these charities send dollars to related 501(c)(4). These organizations are not allowed to collect tax-deductible donations, but they have more freedom to spend on politics, including political advertising.
As Craig Kennedy argues in a provocative series of articles on the Philanthropy Daily website, it’s time for a “broader discussion of how that boundary could become sharper and less penetrating.” I got
Former chairman of the Joyce Foundation of Chicago and the German Marshall Foundation of the United States, and an advisor to the Democratic mayor of Chicago in the 1990s, Kennedy is no stranger to nonprofits and politics. His suggestions for new rules and the strengthening of existing rules by the IRS won’t change the system, but it could improve it.
After Said’s massive gift was leaked to The Times, Democrats took note of the fact that the recipient was not legally required to disclose it, calling this the corrupt political ramifications of “dark money.” They called the Senate vote last week on a disclosure law that would allow 501(c)(4)s to publicly identify donors of $10,000 or more. In a 49-to-49 partisan vote, the Democrats were unable to defeat the Republican filibuster and effectively scrapped the bill.
Democrats accused Republicans of sabotaging on behalf of wealthy individuals and businesses. In fact, pro-democracy dark-money groups and big-dollar donors are getting pretty good at the game, too. They spent between $1.5 billion and $900 million for the Republican Party in 2020, according to The Times. T.Either way, there is always the risk that the Supreme Court will invalidate the Disclosure Act. Non-conservative organizations, especially the American Civil Liberties Union, oppose it as a threat to the privacy of donors that sometimes allows them to fund unpopular speech.
Kennedy proposes another policy doctrine. But if a donation is encouraged by avoiding capital gains tax or backed by a charitable deduction, we have every right to know the donor and the cause we are subsidizing. .
A logical move would be to ban money transfers from 501(c)(3) organizations that raise funds using tax credits to 501(c)(4) organizations that don’t have to disclose donors. . Kennedy harshly called this widespread practice “the philanthropic equivalent of transmutation, or perhaps money laundering.”
Another is to repeal current laws that allow donations of stock and other assets to 501(c)(4) without capital gains or gift taxes.
This is the rule that made Seid’s donation easier. In 2020, he sold his company’s shares to the Marble Freedom Trust, 501(c)(4) led by Leonard Leo. Marble Freedom Trust then sold its shares for $1.6 billion. It will be cashed in 2021, which is also a tax-free transaction as the trust is non-profit.
In short, the tax savings weren’t brought to Seid personally, but they greatly expanded the economic benefits to the recipient.
Under Kennedy’s rule, Thade had to first liquidate the property himself, pay $450 million in taxes (an estimate reported by The Wall Street Journal), and donate.
By the way, Kennedy’s reforms cost Patagonia’s left-leaning founder Yvon Chouinard $700 million in taxes, according to the Journal’s estimate, and his family paid when he sold 98 percent of the company. You have incurred $17.5 million in gift taxes. Focused on climate change, he put about $3 billion in 501(c)(4).
(Kennedy made his own disclosure, telling the Philanthropy Daily that one of his adult children works for a group chaired by Leo.)
By directly affecting tax law but not campaign finance law, Kennedy’s ideas forestalled constitutional problems. Naturally, they leave most of the system intact that allows wealthy people to make huge donations to their pet causes. But at least taxpayers won’t subsidize it anymore.