A conservative public-interest law firm has asked the Internal Revenue Service to make sure three large national labor unions comply with tax and disclosure laws in their planned spending of nearly $100 million to save Democrats in the 2010 congressional elections.
The Virginia-based Landmark Legal Foundation sent a letter on Tuesday to Lois G. Lerner, director of the IRS’ tax exempt organizations division, asking that the agency monitor “this unprecedented political activity.”
“Landmark requests that the IRS begin immediately a thorough examination of these labor unions’ political activities and that the IRS commence without delay the collection of all relevant information and data,” wrote Landmark President Mark Levin.
The American Federation of State, County and Municipal Employees (AFSCME) plans to spend in excess of $50 million during the 2010 campaign, and the Service Employees International Union (SEIU) expects to spend $44 million, according to an article in the Hill cited in the letter.
The AFL-CIO also intends to spend an undisclosed amount in the midterm elections, the Hill said, adding that most of the money will be disbursed by the unions to protect Democratic incumbents to ensure they keep control of Congress.
Earlier this year, the Supreme Court gave interest groups, unions and corporations the right to contribute money to issue advertising in political races - reigniting the battle over the influence of cash on the electoral process.
The 5-4 decision punched a hole in the complex web of federal campaign-finance laws and rules in finding that those groups should have the same rights to spend money on political ads as any person. Direct contributions by corporations and unions to individual candidates are still forbidden.
The ruling, issued in January, acknowledged that the court was overturning its own precedents, but Justice Anthony M. Kennedy, writing the majority opinion, said the “government may regulate corporate political speech through disclaimer and disclosure requirements, but it may not suppress that speech altogether.”
In response to Landmark’s letter to the IRS, AFSCME Public Affairs Associate Director Gregory King said, “We know what the Internal Revenue Code requires of us, and we are careful to follow those requirements.”
Josh Goldstein, a spokesman for the AFL-CIO, said, “We are in compliance with all rules and regulations and will continue to do so.”
SEIU spokeswoman Michelle Ringuette said the union takes “very seriously” its responsibility to the “nurses, janitors, security officers and other workers who voluntarily contribute to SEIU’s political program, and that means following all federal regulations to the letter of the law.”
An IRS spokesman said federal disclosure laws prevent the agency from commenting on any specific individual or entity.
“It is crucial that the IRS get its hands around this to ensure these groups are not commingling funds,” Mr. Levin said in an interview. “The public-sector unions are the most powerful entities in the nation.”
He pointed out in his letter that labor organizations generally are exempt from paying income taxes to the federal government except when they use their funds for political activity.
“To illustrate, when a labor organization receives a dollar in dues from one of its members and places that dollar in its general treasury, then it does not owe the IRS any tax,” he wrote. “However, if the labor organization then takes the dollar and uses it for political activity, then that dollar becomes taxable income, and the expenditure must be reported.”
Mr. Levin pointed out that the unions have separate funds for their political activities as required by law.
“However, as Landmark has demonstrated through various complaints in recent years, the extent to which these organizations appear to be blurring the line between legitimately exempt activity and taxable political activities is growing more and more troublesome,” he wrote.
His letter does not cite any specific violations by the unions, which are just starting to spend for the midterm elections.
The IRS’ Exempt Organizations Division is responsible for administering and enforcing the tax laws that apply to more than 1.8 million organizations recognized by the IRS as exempt from tax.