Friday, July 8, 2016

DNC Lacks 501(c)(3) Exemption for Convention, Putting Donors’ Charitable Deductions at Risk

The local Fund-Raising Committee for the Democratic National Convention (DNC) still has not received tax-exempt status from the IRS, and that could affect donors who want tax deductions.

The Philadelphia 2016 Host Committee, which is responsible for raising at least $60 million for the July 25 to 28 Convention at the Wells Fargo Center, has not received the designation under section 501(c)3 of the tax code. The committee is trying to close a funding gap of at least $4 million less than four weeks before the start of the Convention. It applied for tax-exempt charity status in May 2015.

"A year is extraordinary," said Marcus Owens, a Washington Tax lawyer who ran the IRS tax-exempt organizations division for a decade. He said the 501(c)3 application process typically takes three months. "That tells me the IRS has issues with it of some sort," Owens said. "Or the IRS is internally struggling with the political aura of the convention."

By contrast, Cleveland's Host Committee for the July 18 to 21 Republican Convention received 501(c)3 status in August 2014, soon after it applied.

In the event that the Host Committee were not to be recognized as exempt under section 501(c)(3), the Host Committee would need to take the necessary steps to convert into a 501(c)(6) organization.

A 501(c)6 organization is a tax-exempt designation for "business leagues." According to the IRS, donors to such organizations can claim tax deductions if their contributions are "ordi­nary and necessary in the conduct of the taxpayer’s business.

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