Wednesday, November 20, 2013

NOM has a new tax problem

National Organization for Marriage
National Organization for Marriage ("NOM") and National Organization for Marriage Education Fund ("NOMed") are affiliated entities with common organization and control. In simple terms:
  • NOM is a 501(c)4 not-for-profit which means that they are tax-exempt but contributions are not tax deductible.
  • NOMed is a 501(c)3 which means that they are tax-exempt and contributions are tax deductible.
During calendar year 2012 approximately $4 million (over 80%) of NOMed's revenues were used on behalf of NOM.

This means that a scheme was developed that would allow NOM's largest donors to obtain tax deductions that they were otherwise not entitled to. Some of this is rather blatant. In addition to the $1.7 million loan that NOMed made to NOM, the amount in question ($4 million) is roughly the same amount that NOM's six largest donors contributed.

Some of the items reflect NOM's utter stupidity. For example, NOMed provided a company named ccAdvertising with $153 thousand. Yet NOMed's line item for advertising expense is only $20 thousand. Sure, there are other explanations but we are dealing with NOM. NOM's decision makers are not only arrogant but short on both business experience and intellect.

The Internal Revenue Service (with some help from me) should see this as a conduit and disallow the deductions — with potential interest and penalties. Don't get your hopes up. The Service has been less than thorough in non-profit oversight since the Bush presidency. Furthermore, with a lawsuit in progress the IRS knows that NOM will claim that an audit is retaliation. Moreover, these things are painfully slow.

One donor contributed at least $2,000,000 to NOMed. I wish that I knew who that was so that I could confront him or her. Doing so would be more valuable (and amusing) than any explanation I might receive.
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