NBCCG is claiming tax-exempt status under federal tax law, specifically, Section 501(c)(4) which governs so-called “social welfare” groups. However, its recent February 13, 2015 event turned into a campaign event for its founder, Lawrence Wainstein. This and other NBCCG activities raise questions as to whether the group’s tax treatment is appropriate in light of its activities. This tax treatment is an issue, because NBCCG has previously used its exemption from campaign finance reporting requirements as an incentive for people to contribute to NBCCG. The question becomes: Is NBCCG falsely using the federal tax law to evade the campaign finance laws of New Jersey and the nation?
Wainstein’s endorsement of Governor Christie may be viewed in the context of NBCCG’s Donation Form which contains a disclaimer that implies an unspecified federal election activity:
“Contributions to the North Bergen Concerned Citizens Group, Inc. are not deductible as charitable contributions for federal income tax purposes, and do not count against an individual’s $115,500 biennial aggregate contribution limit under federal campaign finance law.” (Emphasis added.)
NBCCG appears to be a de facto political action committee violating the spirit and letter of federal tax law to promote its founder Wainstein’s political ambitions. Running for political office is permissible.
Deception of the Internal Revenue Service to get favorable tax treatment which is undeserved? That is quite another story.
Under federal tax law, a group which claims Section 501(c)(4) status may not have the primary purpose of political campaign intervention. The tax code defines a 501c4 organization as one “operated primarily for the purpose of bringing about civic betterments and social improvements.” Treasury Regulations §1.501(c)(4)-1(a)(2)(i). But federal regulations further state that “The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.” Treas. Reg. §1.501(c)(4)-1(a)(2)(ii).
NBCCG appears to do little or nothing but engage in political campaign activity or activities promoting one individual who appears to be using the organization to promote his individual political or commercial objectives.
Current law holds that Section 501(c)(4) “social welfare organizations” may engage in some political campaign intervention but it cannot be their primary purpose. In the past few years, the IRS has adopted a clearer standard. Now, groups wanting 501c4 status are required to represent that political campaign intervention would account for less than 40% of the organization’s total expenditures and total time, as follows:
“During each past tax year of the organization, during the current tax year, and during each future tax year in which the organization intends to rely on a determination letter issued under the optional expedited process, the organization has spent and anticipates that it will spend less than 40% of both the organization’s total expenditures and its total time (measured by employee and volunteer hours) on direct or indirect participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office (within the meaning of the regulations under Section 501(c)(4)).” IRS Letter 5228, Representation 2, at page 4.
This Letter 5228 goes on to list activities which it does not consider to be social welfare. They include:
• Any activity that benefits select individuals or organizations rather than the community as a whole;
• Direct or indirect participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office;
• Operating a social club for the benefit, pleasure, or recreation of the organization’s members; and
• Carrying on a business with the general public in a manner similar to organizations operated for profit.
IRS Letter 5228, page 4.
NBCCG is a New Jersey not-for-profit corporation incorporated in October 2012. Its federal taxpayer identification number is 46-1176358. According to information publicly available through the Internal Revenue Service (“IRS” or the “Service”), NBCCG has filed an electronic notice on IRS Form 990-N for its taxpayer year ending December 31, 2012. This electronic notice is filed by corporations which claim federal tax-exempt status. According to information provided on NBCCG’s Form 990-N for the year ending December 31, 2012, NBCCG’s mailing address is 1215 Kennedy Blvd., North Bergen, NJ 07047, its only listed principal officer is Lawrence Wainstein, who has reported a separate address of 333 49th St Apt 1, Union City, NJ 07087, and NBCCG’s gross receipts for the 2012 tax year were “not greater than $50,000.” NBCCG claims it is “organized” under Section 501(c)(4).
In hindsight it appears the 501c4 NBCCG may have been little more than a front for a candidate exploratory committee for Wainstein. If so, NBCCG should have chosen a different tax treatment. Instead, Wainstein’s NBCCG may have used its 501c4 tax status to get around federal and state campaign finance laws which limit contributions and require candidates or campaigns to disclose their contributors.
P.S. I am an attorney, based out of New York but I live in North Bergen. I am also a Republican but I am no fan of Chris Christie. (Full disclosure: I have never worked for any state or local government, no outside contracts, nothing.)