In 2013, the Internal Revenue Service, already the least popular governmental agency in the country, became the target of intense investigations by members of Congress, both Democrats and Republicans, and the FBI, at the direction of Attorney General Eric Holder, after it was revealed that they had specifically and improperly scrutinized applications for tax-exempt status from organizations associated with the nascent Tea Party movement.
Although we now know that the IRS actually targeted significantly more progressive and liberal organizations than Tea Party groups, conservatives in Congress and Tea Party supporters successfully convinced many in the mainstream media and the public that they were the victims of a political witch hunt and conspiracy. One of the IRS’s biggest critics was Cecil Cavanaugh of the Tea Party of Louisiana. “When you use the IRS in this fashion, you’re basically limiting free speech and that’s not good for any of us,” he told WBRZ of Baton Rouge, noting that his organization had not been targeted.
There is a good reason that the Tea Party of Louisiana (or TPoL) was never subjected to scrutiny by the IRS: Even though they could have, they never applied for tax exempt status under Section 501 of the tax code, which may seem ironic for an organization that, literally, stands for “Taxed Enough Already.”
Instead, way back in 2009 and like several similar groups across Louisiana and the country, the Tea Party of Louisiana incorporated as a Limited Liability Company (or LLC). There are many advantages to incorporating as an LLC, but it’s unusual for political committees and organizations that would (or should) otherwise be considered tax-exempt to forgo that exemption.
Cavanaugh, it’s worth noting, is an accountant with a Masters in Business Administration, and no doubt, he fully understood the trade-off here: The TPoL, which doesn’t raise much money anyway, may be on the hook for taxes, but as an LLC, they could avoid the scrutiny and annual reporting requirements demanded by the IRS of a 501(c)(4).
And in Louisiana, as in many states, LLCs can be considered “tax-exempt,” which may be how TPoL is organized. “For a limited liability company to be tax-exempt or ‘non engaged in for profit,’ it must be organized for a governmentally licensed profession.” Gulf Coast Hous. P’ship, Inc. v. Bureau of Treasury of City of New Orleans, 2013-0556 (La. App. 4 Cir. 11/27/13), 129 So. 3d 817, 821 writ denied, 2013-3007 (La. 3/14/14), 134 So. 3d 1196.
In 2010, I asked Barry Hugghins about the organization’s status, and he said, “We are an LLC; we’re a non-profit, but contributions to our organization are not tax deductable (sic).”
Let me be clear: There is nothing illegal about the Tea Party of Louisiana being incorporated as an LLC. They are under no obligation to incorporate, instead, as a tax-exempt organization under Section 501; if they elect to pay more taxes than they’d otherwise need to as a 501(c)(4), no one is going to stand in their way. If they were granted status as a non-profit LLC, that’s fine too, though I question their “governmentally licensed profession.”
But for the purposes of Louisiana law, the Tea Party of Louisiana should qualify under the definition of a “political committee,” and, therefore, they should be obligated to comply with state laws on campaign finance and disclosure.
As of this writing, the Tea Party of Louisiana is not listed by the Louisiana Ethics Administration as a political committee, and according to the Louisiana Secretary of State, the organization is “not in good standing” for failure to file an annual report.
To be sure, I am not necessarily concerned with their failure to file an annual report; more than likely, it’s simply the result of overdue paperwork. However, I am concerned that the TPoL has failed to register as a political committee, and here’s why:
The Tea Party of Louisiana actively and purposefully attempts to influence elections and legislation. They endorse candidates. They regularly send out press releases. They lobby for and against bills in the legislature, though no one associated with their organization is registered as a lobbyist.
It is worth noting that other Tea Party groups in Louisiana have registered as political committees, including the Baton Rouge Tea Party and the Tea Party PAC, but, arguably, neither of these organizations are as influential or as well-known as the Tea Party of Louisiana.
Last month, the TPoL made national news after it embarrassingly mistook a satirical article about Common Core “turning kids gay” as fact. Quoting from Raw Story:
The Tea Party of Louisiana used a phony news story to back its claim that Common Core had turned “thousands of children across the nation” into homosexuals.
The conservative group cited the story, “Common Core turns first wave of students gay,” on the satirical news site Broken World News to express “shock and outrage” that Sen. David Vitter (R-LA) had criticized Louisiana Gov. Bobby Jindal’s decision to cancel Common Core standards testing and start over just before the school year began.
The Times-Picayune reported the TPoL’s statement as legitimate news, and it even drew a response from Vitter’s spokesman.
If you visit their website today, you’ll be greeted with a front-page endorsement of Lenar Whitney, a candidate for the Sixth Congressional District.
Their website also includes an advertisement promoting Ted Cruz for President and donation button for FreedomWorks, the national Tea Party organization founded by multi-billionaire David Koch. But more importantly, at the very top of its site, TPoL prominently solicits donations for itself.
So, how are they not a political committee? After all, they explicitly seek to influence campaigns and laws.
I recently asked TPoL spokesman Barry Hugghins. “We’ve collected no funds,” he wrote. “We’ve sold nothing, nor have we received any contributions. Nor (have we) spent any money on any candidate, or on anything else, in this election cycle.”
There are a few problems with Mr. Hugghins’s response: First, because the organization isn’t registered as a political committee, there is no easy way to determine whether he’s telling the truth about donations. But much more importantly, the TPoL has spent money in this election cycle (and election cycle isn’t actually the right metric; the calendar year is): They spend money on hosting, designing, and operating their website, which is the communications, campaign, and political relations arm of their entire enterprise.
I asked Mr. Hugghins about the website and communication expenses, and he completely avoided answering the question, suggesting that I would never be satisfied with any answer he provided me.
But even if you believe that the TPoL’s abysmal fundraising efforts should disqualify them from compliance with Louisiana’s Campaign Finance Disclosure Act, consider that the law includes (emphasis mine):
Any Candidate or political committee who solicits or receives any contribution or makes any expenditure in support of, or opposition to, a proposition or question submitted to the voters if the aggregate amount of contributions or expenditures equals or exceeds $200. (R.S. 18:1486)
Well, we know for a fact that the TPoL solicits contributions. From their website:
And as amateurish and awkward as their website may appear, we can also surmise that it cost more than $200 to put it all together and that it’s still costing them money, every month. It doesn’t matter if that money is being paid out of someone’s personal checking account or from the organization’s account; either way, it’s an expenditure or a donation.
“Political Committee” means two or more persons, other than a husband and wife, and any corporation organized for the primary purpose of supporting or opposing one or more candidates, political parties, propositions or recall efforts, which has financial activity in excess of $500 within a calendar year in the name of the committee. It also includes any corporation or group that accepts payments for personal services related to an election or campaign in excess of $500 during a calendar year unless it has been permitted or licensed to provide that type of service and has been regularly doing so in the area at least 90 days prior to the services being rendered.
Contributions or expenditures cannot be made by a corporation, labor organization, or trade, business, or professional association unless specifically authorized by either (1) a vote of the board of directors or executive board, or (2) any person whom the board has specifically empowered to authorize such contributions or expenditures, or (3) a vote of the membership of the labor organization. Cash contributions in any amount by a corporation, labor organization, or trade, business or professional organization are prohibited.
I find it very hard to believe that the Tea Party of Louisiana, which solicits $5,000 donations on its homepage, is bankrupt and doesn’t even spend more than $500 a year. But if it’s true, then they aren’t really “The Tea Party of Louisiana;” they’re just a small group of friends living in Baton Rouge with a clever name who have been able to wield incredible influence because the media is lazy and doesn’t do its homework.
Regardless, these disclosure laws, or what is left of them in the aftermath of Citizens United, are still important.
In a democracy, voters deserve to know who and what are attempting to influence our elections, change our laws, and exert their own power.