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* Today’s Sun-Times about how Congressman Dan Lipinski wants the Internal Revenue Service to investigate “a series of financial deals improperly [which] benefited the leaders of the Illinois Policy Institute” includes the best explanation I’ve seen so far about what’s being alleged…
“Federal law provides tax benefits that help nonprofits pursue their agendas, including ideological agendas,” Lipinski wrote to David Kautter, the acting commissioner of the IRS. “What it does not allow, however, is for an individual to use a non-profit organization to inure excessive benefits to himself. I fear that is exactly what Mr. Tillman has done.” […]
But experts in nonprofit tax laws told ProPublica Illinois and the Sun-Times that some of the transactions raised ethical and legal concerns. Among the list of potential red flags: a zero-interest, $49,400 loan from Think Freely Media, a nonprofit Tillman founded and served as board president, to Crowdskout, a for-profit data and marketing firm owned by a company he controlled.
That loan was essentially a gift, experts said.
“No loans are made on zero interest because you lose the inflation value. That means it’s a financial benefit to a for-profit business,” said Lloyd Hitoshi Mayer, a professor at the University of Notre Dame Law School. “Under federal tax law it’s called an excess-benefit transaction.”
Think Freely Media also made another $60,000 in loans to Crowdskout on which it collected interest. On other occasions, Think Freely Media gave grants to nonprofit organizations that hired Crowdskout or other companies in which Tillman had a stake.
Two things to remember: The conservative Lipinksi is in a primary battle against a liberal Democrat and Tillman denies all wrongdoing. Click here for his response.
posted by Rich Miller
Friday, Feb 16, 18 @ 9:29 am
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If Tillman did nothing wrong, then a simple IRS investigation is nothing to fear.
Comment by 360 Degree TurnAround Friday, Feb 16, 18 @ 9:33 am
===a simple IRS investigation is nothing to fear===
Have you ever been audited?
Comment by Anonymous Friday, Feb 16, 18 @ 9:39 am
Didn’t Democrats get enough voter backlash after the last time they improperly tried to use the IRS to silence ideological opponents?
This is disgusting. Lipinski is basically openly calling for corruption and misuse of official government power.
Comment by Political Animal Friday, Feb 16, 18 @ 9:44 am
The weakest argument in favor of police state overreach has always been, “If you’ve done nothing wrong, an investigation is nothing to fear…”
That’s not to say Tillman has done nothing wrong. It’s to say, that’s a garbage argument, as anyone who’s been subjected to a hostile government inquiry or even simple police automobile stop-and-search understands.
Comment by JB13 Friday, Feb 16, 18 @ 9:57 am
This is nothing more then Lipinski trying to make himself look good to primary voters. Does he seriously thinks the IRS will investigate a conservative group with a Republican controlled Presidency and Congress watching them? especially after that beating they took a couple of years back for doing the very thing he’s asking them to do now?
Comment by ItsMillerTime Friday, Feb 16, 18 @ 10:03 am
JB 13, you are absolutely right. I was a witness in an Internal Affairs investigation, and by the time they were done, I felt like I was a co-conspirator.
Comment by Anonymous Friday, Feb 16, 18 @ 10:18 am
The amount at issue, if there is an issue, is de minimis. So maybe he should’ve paid 1.5% interest on the loan? That’s like $750 a year. This is absurd and a waste of time. Just a way to get some free press in a contested race.
Comment by Seriously? Friday, Feb 16, 18 @ 10:19 am
Any loan, but especially an interest-free loan, from a non-profit you control to a for-profit you control stinks to high heaven.
Spin your grift silly, Tillman.
Comment by wordslinger Friday, Feb 16, 18 @ 11:03 am
Hahaha, glad to see the IPI folks drop by Capfax on a Friday to offer excuses as to why Tillman shouldn’t be investigated. So far we’re given a Sean Hannity talking point that was proven false, pearl-clutching over a “police state”, “republicans control congress and the White House so why bother making them mad?”, and “it’s only $750 per year, nbd!”
You guys all employees, or is this just some kind of weird performance art by one person with too much time on their hands?
Comment by Lester Holt’s Mustache Friday, Feb 16, 18 @ 11:10 am
Doesn’t seem partisan to me. Sen. Nybo (R) called for a IRS, FBI and Attorney General investigation.
Comment by GOP Extremist Friday, Feb 16, 18 @ 11:32 am
====The amount at issue, if there is an issue, is de minimis. So maybe he should’ve paid 1.5% interest on the loan? That’s like $750 a year. This is absurd and a waste of time. Just a way to get some free press in a contested race.
I’m always curious about this argument. So at what point is it worth investigating? A little bit of grift is okay, but at what point does it become enough grift to investigate?
Comment by ArchPundit Friday, Feb 16, 18 @ 11:46 am
==Doesn’t seem partisan to me. Sen. Nybo (R) called for a IRS, FBI and Attorney General investigation.==
It’s not about partisanship. Nybo is just as much of an ideological opponent as Lipinski. The two aren’t far from eachother on the ideological spectrum and both are equally far from IPI’s limited government and free market policy.
Comment by Political Animal Friday, Feb 16, 18 @ 11:57 am
–The amount at issue, if there is an issue, is de minimis.–
Whoa, somebody broke out the Latin. Classy. Case closed.
Uihlein should feel free now to take tax deductions on the money he gives Tillman to prop up his for-profit grifts.
Comment by wordslinger Friday, Feb 16, 18 @ 11:58 am
As one of the experts consulted regarding the behavior outlined in the Pro Publica article, I can say that the reporting presented to me raise very troubling issues regarding how these nonprofits have been operated. It doesn’t matter if a single transaction is “de minimis” - what matters is whether the organizations have violated provisions relating to 501(c)(3) status. If so, they should lose tax exemption. Tax exemption costs us all money; it is supposed to be reserved for organizations acting exclusively in the public good. If the organizations are not doing so, they should not be exempt. Period. When there are enough facts to indicate that a nonprofit is abusing its status, the IRS should conduct an audit. And these groups should be audited.
Comment by jdcolombo Friday, Feb 16, 18 @ 12:40 pm
“Didn’t the Democrats get enough voter backlash….”
Sounds partisan to me.
Comment by GOP Extremist Friday, Feb 16, 18 @ 12:52 pm
@GOP Extremist
You’re conflating two distinct events. The use of the IRS to punish political opponents was quite partisan. The calls for state abuse of power by Nybo and Lipinski are ideologically/politically motivated, but bi-partisan
Lipinski, as a Dem, should know better given recent history.
Comment by Political Animal Friday, Feb 16, 18 @ 1:24 pm
Pretty sure you don’t lose tax exempt status. There are some self-dealing taxes and penalties, and maybe if you don’t pay those you could, but losing the exemption isn’t automatic.
Comment by Anon Friday, Feb 16, 18 @ 2:16 pm
==This is nothing more then Lipinski trying to make himself look good to primary voters==
Absolutely. I’ve been watching him and he has pivoted to the left a bit. Women’s rights issues have been championed by him. A bit of Trump bashing. Bashing the IPI distances him from the right.
A few weeks ago, there was some momentum going towards his opponent in the primary. Then the Nazi candidate issue crowded the news for awhile.
Criticism was that he was out of touch with his constituents. Perhaps now he is trying to represent them better.
Comment by I live in Lipinski's District Friday, Feb 16, 18 @ 2:21 pm
Anon - at 2:16.
You never lose tax-exempt status “automatically.” Loss of exempt status requires an IRS audit and a conclusion that the entities in question have not met the requirements of Section 501(c)(3). Penalty taxes are one remedy for certain kinds of violations under IRC Section 4958, but the IRS retains the ability to revoke exemption under the regulations for that section. The remedy for a violation of the private benefit prohibition (which essentially requires that a charity not engage in a course of conduct that benefits private individuals or entities outside the charitable class) is, in fact, loss of exemption - period. There is no “intermediate sanction” for private benefit violations. Whether such violations have occurred is a matter to be determined by IRS audit. That’s why I said an audit should occur in this case - there are enough red flags that the IRS should investigate.
Comment by jdcolombo Friday, Feb 16, 18 @ 2:33 pm
Jdcolombo - thanks, but do you really think the IRS, with its limited resources these days, is going to audit for such a small transaction? And hasn’t it already been disclosed on the return? How else would the reporters have learned about it. If it’s been disclosed and passed muster, this is all nonsense.
Comment by Anon Friday, Feb 16, 18 @ 2:54 pm
Professor Colombo, thanks for your reasoned and informative comments. My 3 hours of Tax from 1977 just isn’t cutting it when I try to evaluate the issues here.
Comment by Arthur Andersen Friday, Feb 16, 18 @ 3:09 pm
==The use of the IRS to punish political opponents was quite partisan.==
BTW, this is totally false. https://www.motherjones.com/kevin-drum/2018/02/no-the-irs-did-not-target-conservatives-for-persecution/
Comment by LXB Friday, Feb 16, 18 @ 4:13 pm
Anon @ 2:45 p.m.
The interest-free loan was not the only questionable transaction uncovered by the reporters. There were a number listed in the article, including Tillman’s compensation level and transactions in which charitable grants were then used to hire for-profit companies controlled by Tillman. Do I know for certain that these transactions violated IRS rules? No. But multiple instances of charities funneling money to insiders is a cause for alarm.
As for disclosure, disclosing a transaction on a return might insulate you from a claim of tax fraud, but it does not mean the transaction itself is OK. That’s why the IRS has three years from the date of filing a return to initiate an audit. You can file a return, get a tax refund, and then find that you are under audit and be forced to return the refund (and more) if an actual audit finds problems. Filing a return is the beginning of the audit process, not the end of it.
Whether the IRS would dedicate audit resources to this is a legitimate question. The Republic Congress has consistently cut the IRS budget, resulting in fewer enforcement resources (e.g., auditing agents). The TEGE (Tax Exempt and Government Entities) division has been particularly decimated by retirements and lack of funding resources, partly do to the Lois Lerner “scandal” (which actually was the IRS trying to do its job in the face of multiple organizations created for obviously political purposes). So do I think that IPI and Tillman’s other groups WILL be audited? No. Do I think they should be? Absolutely.
Comment by jdcolombo Friday, Feb 16, 18 @ 4:42 pm
==The use of the IRS to punish political opponents was quite partisan.==
Strange that Attorney General Sessions hasn’t gone after them.
You watch a lot of TV, don’t you?
Did you know you could get a library card for free? It’s one of those progressive things Benjamin Franklin came up with to sap our precious bodily fluids.
Comment by wordslinger Friday, Feb 16, 18 @ 5:04 pm