The U.S. Tax Court today issued an opinion finding that a private foundation and the foundation’s manager were liable for excise taxes under provisions of section 4945 for expenditures made to produce and broadcast radio messages that were found to be “attempts to influence legislation.”
The case is: Parks v. Commissioner, 145 T.C. No. 12 (November 17, 2015). Read the 109-page Tax Court opinion [PDF 357 KB]
A private foundation that was exempt from tax under section 501(c)(3) made expenditures during tax years 1997 through 2000, to produce and broadcast 30-second and 60-second radio messages that generally concerned ballot measures relating to Oregon’s criminal system and the state’s finances. The foundation’s manager approved the expenditures.
The IRS determined that these expenditures were “attempts to influence legislation” and were therefore taxable expenditures. Thus, the private foundation and its manager were assessed excises taxes under section 4945(a)(1) and (2), and because the taxable expenditures were not timely correct, they were also liable for excise taxes under section 4945(b)(1) and (2).
The Tax Court agreed with the IRS’s determination with respect to certain of the radio broadcasts at issue. The court looked to the regulations under section 4945 to find that a “communication” refers to a ballot measure if it either refers to the measure by name or, without naming the ballot measure, refers to it by a term widely used in connection with the measure or that describes the content or the effect of the measures.
The Tax Court further found that the application of section 4945 does not violate the First Amendment to the U.S. Constitution.
For more information, contact the Managing Director-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group:
D. Greg Goller | +1 (703) 286-8391 | firstname.lastname@example.org
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.