The Business League… of Shadows (gasp)!
Corporations get a tax break for lobbying local governments. What the fuck?
Imagine spending $5,000 to get your city council to pass an ordinance that provides you with $50,000 in funding to remodel your house. Feels a little slimy, right? Now, imagine that you get to deduct that $5,000 on your tax returns to reduce your taxable income. Pretty fucked up, right? Fear not because an average citizen such as yourself can do no such thing.
Buttttttt, that’s just what IRC 162(e)(2) allows corporations who lobby local governments to do (think cities, school boards, and counties; state and federal government is not included). Burger King can spend a whopping (<--see what we did there?) amount of money to suppress a city’s minimum wage, and then deduct that sum as a business expense to reduce its taxable income. A real estate magnate can trump (<--see what we did there?) a city’s desire for affordable housing by spending their inheritance to lobby local government against it, and then use the money spent to reduce their tax burden.
This isn’t their wheelhouse and looks bad, so they don’t do it much. Just playing. Of course they do!
Often though, they outsource it to chambers of commerce and business leagues that are exempt from taxation under IRC 501(c)(6) of the tax code. Their contributions are still deductible if used to lobby local governments, and they can 1) create a degree of separation from the lobbying process and 2) the appearance that they are spending money on lobbying not to increase their profits but rather to support the local economy.
This post isn’t just about pointing out one more advantage the wealthy have worked into our democracy and economy. It’s to tell you what we’re doing about it. Ideally, we’d be working to eliminate this tax break altogether. That requires ridding government of the errandboys of the wealthy first though.
So for now, we’re checking their work to verify that they’re cheating legally, and exposing them when they’re not. Enter the Aurora Economic Development Council (the “AEDC”).
The AEDC receives about $700k a year from government sources. It’s annual revenues are just under $2 million, so they’re about 30% funded by the public. Its board is comprised of members of numerous local governments at the county and city level. It was established as an IRC 501(c)(6) business league to “promote job creation in Aurora”. Their view of how to do that almost always coincides with policies and subsidies that channel money, including taxpayer money, to big business owners while opposing measures that increases wages for workers.
Whatever though, right? That’s all legal cheating that we’ve become numb to. Well, we used the Colorado Open Records Act (CORA) and other sources to investigate their operations and it looks like they went from the grey area into the dark.
Despite paying half of its 6 employees over $150,000 a year (or about 10% of its annual revenue each) and its CEO around $300,000 a year on average, the AEDC doesn't seem to have stayed on the right side of the law.
Per its own documents, the AEDC has proudly and substantially lobbied the state and federal government in addition to local governments. That’s all legal. But, and this is a huge but, it has to report it and someone has to pay taxes on those funds. Per its own documents, probably not proudly, the AEDC hasn’t reported or paid taxes on that money.
To us, it looks like they owe well over $2 million in taxes. We went ahead and let the IRS know about that.
Now, that won’t get rid of the federal legislation allowing businesses to get a tax break to lobby local governments. But, it will put these organizations on notice that someone is watching and trying to keep them within their already too wide lane.
Executive Director, SDC