Political Charity Outside the Lines, Part 1

Here are the facts:

On August 29, 2011, Alliance for a Better Minnesota’s 501(c)(4) tax-exempt, social welfare non-profit filed its IRS Form 990 income tax return for calendar year 2010.

For 2010, Alliance’s 501(c)(4) showed total expenses (spending) of $472,598.  (See Form 990, Part 1, Line 18.)

On January 31, 2011, Alliance’s 527 state “Action Fund” filed its 2010 Year End Report.   The 527 reported spending money to support Mark Dayton and oppose Tom Emmer in their campaigns for governor of Minnesota.

The Alliance 527 Action Fund listed as a contribution from the Alliance 501(c)(4) a total of $266,705.62.  (See 2010 Report, Schedule A1-UA, pages 1 and 2).  The contribution included $60,000 in cash and $206,705.62 of in-kind contributions (including staff time and overhead, research and polling, production costs, and online ads).

If you divide $266,705.62 of political contributions by $472,598 in total non-profit spending, you get a percentage of 56.4.

Here is the problem:  under IRS regulations, a 501(c)(4) cannot be “primarily” engaged in political activities.  Primarily is defined as “for the most part.”[1]  More than half is “most.”

[1] See http://www.merriam-webster.com/dictionary/primarily.

Cross-posted and comments welcome at Bill Glahn.com