Avoiding disclosure – End-run around new law

To avoid a new law that aims to force political groups to disclose their donors and spending, nonprofits are changing their tax status, the Washington Post reported Sept. 15.

The law, which took effect July 1, was designed to crack down on groups dubbed “527s” by their critics after a section of the Internal Revenue Code regulating political committees.

The law directed such “stealth PACs” to register with the Internal Revenue Service and, by Oct. 15, to disclose their contributors and spending.

But some groups are refashioning themselves under other tax code provisions that don’t require them to disclose their donors – and impose much looser reporting overall, the Post said.

Republican election lawyer Benjamin Ginsberg told the Post his firm’s 527 clients are switching their nonprofit status to avoid the new disclosure rules.

Leslie Phillips, a spokeswoman for Sen. Joseph Lieberman, the Democratic candidate for vice president and a sponsor of the legislation, told the Post that if the main purpose of nonprofit groups remains election activity, then switching tax status is “an abuse of the tax code and the public subsidy of tax exemption.”

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