President Donald Trump earlier this year called on the IRS to review the tax-exempt status of universities and colleges.
The president doesn’t like the political beliefs of many college teachers, so he thinks the universities at which they work should lose their standing as nonprofit institutions.
While Trump’s reasoning is unsound — federal law bars him from using the IRS for political purposes — he is correct that it’s time to review the tax-exempt status of many groups and institutions, including universities.
The scandal involving Liberty University and its former president Jerry Falwell illustrates just how bonkers U.S. law is regarding tax-exempt groups.
Falwell was forced out following a sex scandal. He reportedly received a departing gift of $10.5 million.
The sex scandal also brought to light financial arrangements between the nonprofit, tax-exempt, Christian university and NASCAR’s Hendrick Motorsports. According to Politico, the university reportedly pays Hendrick about $6 million a year for sponsorships.
And it was on Rick Hendrick’s yacht that Falwell appeared in racy photos with a woman who was not Mrs. Falwell.
Multi-million sponsorships, golden parachutes — it’s an awful lot of money for a tax-exempt, nonprofit organization.
But glitz and greed are increasingly part of the nonprofit world.
For example, a dozen or so public university presidents across the nation get paid more than $1 million a year, according to a report in the Chronicle of Higher Education.
And at many of those schools and lots of other nonprofit universities, basketball and football coaches get paid several times that.
But this isn’t just an issue with educational institutions. Many nonprofits abuse the rules. The president’s own Trump Foundation was forced to shut down for repeatedly violating tax laws.
Another example is Republican politician Roy Moore, who after being kicked out of office in Alabama, started the Foundation for Moral Law. The Washington Post found that a primary beneficiary of the charity was Moore himself, who "collected more than $1 million as president from 2007 to 2012."
The charity also employed Moore’s family members, the newspaper reported.
Increasingly, loopholes in tax laws also are exploited to further political campaigns.
That kind of scheme got started in the 1980s, when Bill and Hillary Clinton used the Democratic Leadership Council to advance their political careers. The nonprofit was obviously a political organization, but it claimed nonprofit status.
That claim was challenged by the IRS under President George W. Bush, but the Clintons won in court.
Similar political "nonprofits" followed. Then a Supreme Court decision in 2010 created a stampede of what are called "social welfare" groups that claim tax-exempt status.
As explained in a piece from the Sunlight Foundation: "In the wake of Citizens United, these tax-exempt ‘social welfare’ groups (also called 501(c)4s after the section of the tax law under which they are organized), have become an increasingly popular conduit for big campaign givers who want to remain anonymous."
The current system doesn’t just permit the perversion of laws regarding charities. It invites corruption.
Tax exemptions created for charities and nonprofits were not originally intended to be used to finance political activism, excessive salaries, profiteering, nepotism and gaudy self-promotion.
It’s time Congress added tighter restrictions. Much tighter restrictions.
Nonprofit entities and groups unwilling to comply with tighter rules would still be able to operate. They would just have to pay taxes, like the rest of us.
A native of Garden City, Julie Doll is a former journalist who has worked at newspapers across Kansas.