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May 16, 2013

So, What's With All These Tax-Exempt Entities Anyway?
A quick, Moron-friendly guide to the IRS mess and how Media Matters is gaming the system

This isn't going to be too technical, but first, a warning: I'm going to link to some IRS.gov pages. If your computer name is "TeaPartyRawks" or your domain is "ilurvespatriots.net", you might want to read this post on a disposable cell phone you bought with cash from a resident alien Chechen jihadist. There's not a chance that guy's being tracked.

So let's get on with this quick little primer that was prompted by Ace's spending a good bit of yesterday afternoon arguing with an idiot on Twitter about whether "Media Matters" was a 501(c)(3) or a 501(c)(4). As Ace made clear, the answer is, "it depends".


What it depends on is which "Media Matters" you're talking about. Media Matters for America ("MMFA" in Ace's tweet) - the parent organization - is a 501(c)(3). Its demon spawn offshoot Media Matters Action Network (MMAN) is a 501(c)(4).

"What difference, at this point, does it make," you ask in a shrill, exasperated voice?

Well, the MMAN 501(c)(4) is a tax-exempt social welfare organization, which, as the IRS helpfully notes, "may engage in some political activities, so long as that is not its primary activity." Now, if you think more than 50% of the activity MMAN engages in isn't political, you're not paying close attention. But there's at least room for debate that the activities they engage in could possibly just skirt the line enough for them to remain tax exempt.

And, importantly, while MMAN's business activities aren't subject to the corporate income tax, a donor does not get a tax deduction for donations made to MMAN.

MMFA, however, is exempt under Section 501(c)(3) (see this pdf of its Form 990 tax return). Here's the exemption criteria:

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

What don't you see on that list?

That's right, political activity. Because a 501(c)(3) generally can't engage in political activity (please try to stifle your laughter at this point). More from our friends at the IRS:

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.

On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention. (emphasis added)

So when Jan Crawford picks up on this activity by "Media Matters" ...


... does she mean "Media Matters" MMFA or "Media Matters" MMAN? Because MMFA clearly can't participate in such a partisan activity which indirectly supports Democrat political candidates, while MMAN conceivably can. Nice racket, eh?

But, you know, I'm not sure Media Matters, is even concerned with form over substance bullshit like this. Let's go back to that MMFA Form 990:

Part I, Question 1. Briefly describe the organization's mission or most significant activities: MEDIA MATTERS FOR AMERICA IS A WEB-BASED NOT-FOR-PROFIT PROGRESSIVE RESEARCH AND INFORMATION CENTER

Part III, Question 1. Briefly describe the organization's mission: DEDICATED TO COMPREHENSIVELY MONITORING, ANALYZING, AND CORRECTING CONSERVATIVE MISINFORMATION IN THE U.S. MEDIA.

Part III, Question 4. Describe the exempt purpose achievements for each of the organization's three largest program services by expenses. ...: MEDIA MATTERS FOR AMERICA WORKS TO NOTIFY ACTIVISTS , JOURNALISTS, PUNDITS AND THE GENERAL PUBLIC ABOUT INSTANCES OF MISINFORMATION, PROVIDING THEM WITH THE RESOURCES TO REBUT FALSE CLAIMS AND TAKE DIRECT ACTION AGAINST OFFENDING MEDIA INSTITUTIONS BY WHICH WE MEAN FOX NEWS CHANNEL AND RUSH LIMBAUGH. (emphasis added)

OK, I may have made a little of that last one up. But we all know that really is what they mean.

MMFA directly states in its 990 that it engages in prohibited partisan political activity, and those dedicated public servants at the IRS haven't lifted a finger to stop it. Surprising, huh?

Oh, and as you might have guessed, MMFA's well-heeled leftist donors get a nice, fat tax deduction for donations made to the 501(c)(3).

Related: The Nine Lies of Lois Lerner


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posted by Andy at 12:15 PM

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