IRS Rejects “Charitable” Status for Democratic Host Committee, Denying Corporations a Tax Write-off

Gavel resting on stack of money

The IRS Should Reject Charitable Status for Both Parties’ Host Committees

For the first time in recent memory, the Internal Revenue Service has rejected the Democratic convention host committee’s application for 501(c)(3) “charitable” status. This is a long overdue step, since corporations should not be getting a tax deduction for buying political access and influence at the party conventions.  

The Philadelphia Inquirer reports that the “IRS has turned down the long-running effort by the Democratic convention’s Philadelphia host committee to win a tax exemption. … a setback for efforts to raise the last of the $60 million needed to help pay for [next week’s] convention.”

For too long, the IRS has perpetuated the charade that host committees have “charitable” purposes, putting taxpayers in the position of subsidizing corporate political spending. Global companies and wealthy donors don’t give to the conventions for “charitable” reasons; they do so to buy influence with lawmakers.

As Campaign Legal Center documented in its recent report, Funding the Presidential Nominating Conventions: How a Trickle of Private Money Turned Into a Flood, over the years, the FEC has allowed the “host committees” to become a vehicle for corporate interests to pour tens of millions of dollars into both parties’ conventions – despite a longstanding ban on corporations spending any money in connection with the conventions.  

Host committees were initially envisioned as a way of allowing local leaders in the city hosting the convention to promote local commerce, using funds raised from local companies. But over time, at the request of both parties, the FEC allowed so many loopholes to develop that today, both parties are raising tens of millions from corporations around the country for their host committees, and using those funds to cover the majority of convention costs.

This year, the Democratic host committee had a fundraising goal of $60 million, largely from corporate sources, whereas the “official” convention committee, which is supposed to be responsible for all convention costs (and cannot accept corporate funds), has raised under $4.6 million. The Republican host committee has a $64 million fundraising goal and the official convention committee has raised just $7.4 million.  

Corporations donate to the convention host committees because they want to buy access and influence. For example, it is no coincidence that in 2004, as the pharmaceutical industry was fighting proposals to give U.S. patients access to cheaper drugs from Canada, drug companies were among the top donors to both parties’ conventions. Nor is it a coincidence that in 2008, as the global financial crisis was beginning to snowball, some of the biggest funders for both conventions were companies seeking federal bailouts, like AIG, Citigroup and Freddie Mac.                                                                    

What has made matters worse is that the IRS has consistently granted both parties’ host committees 501(c)(3) charitable status – despite the committees having obvious political purposes – allowing those corporate donors to take a charitable deduction for buying access and influence.  

It is not known why the IRS denied the Democratic host committee’s 501(c)(3) application this year, particularly since the agency granted 501(c)(3) status to the Republican host committee. But the IRS shouldn’t treat either party’s host committee as a “charity.”

If taxpayers are going to spend money on political conventions, it should be through a public financing program that limits the influence of large private contributions, not through charitable subsidies that facilitate corporate political influence.

Brendan directs CLC’s work before federal regulatory agencies, such as the Federal Election Commission (FEC).