Friday, October 16, 2009

Are Wishard Referendum Contributors Violating Federal Tax Law?

Today, the political action committee, Citizens for Wishard, filed its pre election report detailing contributions and expenditures.

The report should be raising eyebrows not only with the Election Board but with the Internal Revenue Service.

I looked at the report expecting to see a long list of contributors. Instead what I saw were the names of three individuals who gave $50 or less. Then there was a contribution from the Greater Indianapolis Chamber of Commerce, whose leader Roland Dorson has never seen a tax increase he would not support, in the amount of $1,000.

Then there were the two contributions that should raise a red flag. IU Health, Inc. gave $750,000 while IU Medical Group Foundation, Inc. gave $300,000. As the pro-Wishard folks have considerable support in the medical community, one would think they would have more contributors appearing on the pro-Wishard PAC list than a grand total of six.

Here is what I think the pro-Wishard referendum folks are doing. According to their latest tax returns, both IU Health, Inc. and IU Medical Group Foundation, Inc. are 501(c)(3) organizations. Contributions to 501(c)(3) organizations are tax deductible. Political contributions, such as those given to support the Wishard referendum, are not tax deductible. I believe the pro-Wishard folks are telling folk, instead of contributing directly to the pro-Wishard PAC, to contribute to the aforementioned non-profit corporations. Then the money gets redirected from those non-profits to the Wishard PAC in large lump sums.

That "laundering" of political contributions through the 501(c)(3) organizations would allow the donor to take a tax deduction on a political contribution he or she otherwise could not take. Most likely the IRS would not take too kindly with such an effort to skirt tax laws. The likely effect of an IRS audit of these contributions would be that IU Health, Inc. and IU Medical Group would lose their 501(c)(3) status and the political contributors and Wishard PAC would be hit with a bill for unpaid taxes, interest and penalties.

This attempt to evade taxes would be in the same vein as Health and Hospital's nursing home Medicaid "scam," which allows it to get double the normal reimbursement from the federal government.

Another advantage of an arrangement Wishard has to funnel contributions through non-profits before going into the Wishard PAC coffers is that it allows the pro-Wishard folks to conceal the names of those financially supporting its efforts. That is something the Election Board should be very concerned about.

Because I will be asked the questions, my review of state law does not appear that corporations are limited in how much they can contribute on political questions on the ballot. My review of federal tax law does suggest that 501(c)(3) organizations are allowed some limited political activity when it comes to referendum questions. It is unclear, however, whether the large contributions made by these two non-profits would be withing the limited political activity allowed by 501(c)(3)s in referenda-type elections.

Regardless, given the efforts that have been made, it is certain that more than six contributors, including three individuals, would have offered to give to the Wishard cause by now. It seems very likely that the pro-Wishard folks are directing people to give money instead to the two 501(c)(3) organizations, for which the donor can take a tax deduction, before the money is redirected to the PAC. One has to wonder how long it will take before the IRS gets wind of this and decides to start doing some audits of those involved in this apparent scheme.


Downtown Indy said...

Sounds like THAT's how they are gathering the funds to pay for the referendum. Didn't Matt tell us WISHARD was paying for it out of their $150M piggy bank?

Paul K. Ogden said...

I think you are mixing up two things. First, you have the cost of putting on the referendum, paying election day workers, etc. The money raised by the Wishard PAC is for political purposes - to promote a "Yes" vote.

The other is political

Advance Indiana said...

Good questions, Paul. Nobody will do anything to them for breaking the law. That's why they do it. When the media is silent about one abuse of the law after another we've pointed during this debate, not to mention all of the lies and deceptions, what do they have to fear?

Downtown Indy said...

I was suggesting they could mix up the two monies. They haven't played straight with anything so far...

Carl E Moldthan said...

Donation to Taxpayers of Indianapolis PAC will be gratefully accepted. You may send your donation to:
Taxpayer of Indianapolis, PAC
PO Box 0021
Beech Grove, IN 46107

Any amount will be accepted.


Paul K. Ogden said...


Can't I funnel it through a nonprofit first so I can deduct if from my taxes?