More On Legal & Compliancefrom The Advisor's Professional Library
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Six Republican members of the Senate Finance Committee sent a letter to IRS Commissioner Doug Shulman on Wednesday, demanding IRS records on the decision to enforce what they called a “rarely used” tax on contributions to 501(c)(4) nonprofit organizations that are used for political purposes.
Specifically, the Senators requested further information about communications the IRS has had with the White House and other executive branch agencies and how taxing such donations could "impact constitutionally protected First Amendment rights.”
Ranking member Orrin Hatch, R-Utah, and Sens. Jon Kyl, R-Ariz.; Pat Roberts R-Kan.; John Cornyn, R-Texas; John Thune, R-S.D.; and Richard Burr, R-N.C., signed the letter. The Internal Revenue Service operates under the authority of the Senate Finance Committee.
The Committee asked for a reply by May 31.
The letter noted that President Obama had scorned these organizations, “In spite of their legal status and administrative approval, President Obama and his White House staff have made it clear that they view these organizations with deep hostility. The President himself, in a heated political context, referred to certain 501(c)(4) organizations as ‘a threat to our democracy.’ ”
The Committee noted in the letter that “we have an obligation to see that the Internal Revenue Service (“IRS”) enforces the nation’s tax laws appropriately and consistently. This includes reviewing actions by the IRS to ensure that it enforces the law in a nonpartisan manner, and that enforcement policy is never influenced by political considerations.”
“We note, therefore, with particular interest the recent accounts from the IRS concerning enforcement actions against individuals who have made previous donations to 501(c)(4) tax exempt organizations,” the letter stated, citing a report in The New York Times on May 12.
Additional reporting by AdvisorOne revealed that two of the large 501(c)(4)s cited by the Times report, Crossroads GPS and Americans for Prosperity, state on their websites that donations are not deductible. (See, Is Bigger Tax Bite Coming for Big Donors to Outside Political Groups?)
OpenSecrets.org, a nonpartisan organization that tracks political money including donations to 501(c)(4) organizations, stated on its website that these (c)(4) organizations do not have to disclose who their donors are. Further, OpenSecrets.org showed that politically active (c)(4) nonprofits that support conservative candidates have received 10-times more in donations than those that support liberal candidates.
The Finance Committee’s letter requests the “names of any individuals at the IRS who contributed to the decision to enforce the gift tax against contributions to 501(c)(4) organizations, as well as the names of any other federal officials outside of the IRS that you had any discussions with regarding this decision.”
Further, the letter asks for, “Any correspondence (including phone logs, emails, written notes, or electronic documents) generated with respect to the decision to enforce the gift tax against contributions to 501(c)(4) organizations, including correspondence between IRS employees (including both career employees and political appointees), or between or among the IRS, the Department of the Treasury, the Office of the White House Counsel, the Office of the White House Press Secretary, the Office of White House Political Affairs, and the Executive Office of the President.”
The Committee also requested, “Any correspondence (including phone logs, emails, written notes, or electronic documents) generated with respect to the proposed executive order requiring disclosure of political contributions by potential government contractors, or enforcement actions against 501(c)(4) organizations by the Securities and Exchange Commission, the Federal Communications Commission, and the Federal Election Commission. Please include,” the letter states, “correspondence between IRS employees (including both career employees and political appointees), or between or among the IRS, the Department of the Treasury, the Securities and Exchange Commission, the Federal Communications Commission, the Federal Election Commission, the Office of the White House Counsel, the Office of the White House Press Secretary, the Office of White House Political Affairs, and the Executive Office of the President.”
Finally, the letter asked for “Any analysis generated, requested, or obtained by IRS regarding the First Amendment implications of applying the gift tax to 501(c)(4) contributions.”