Last Thursday I filed a complaint with the Internal Revenue Service (IRS) against Salem Health, the parent company of Salem Hospital. You can read all about it in "Salem Health hit with IRS complaint for $50,000 anti-payroll tax PAC donation."
Also, in a piece recently published by The Lund Report: "Salem Health Hit with IRS Complaint Over Political Gift Giving."
I've heard from a few people who question whether Salem Health really did anything wrong when this tax-exempt organization gave $50,000 to the Create Jobs PAC set up by the Salem Chamber of Commerce.
My answer is, only the IRS can decide this. But there is enough evidence pointing to a violation of IRS regulations to warrant an inquiry.
The situation is pretty simple. I laid out the basic facts in my first blog post.
The Create Jobs PAC is opposing Measure 24-388, which would institute a small payroll tax to pay for much needed improvements to Salem's Cherriots bus system. However, the Create Jobs PAC is not a "measure committee," which only takes positions on ballot measures.
It is a "miscellaneous committee."
Meaning, a Political Action Committee that can both support or oppose candidates running for public office, and support or oppose ballot measures. So donations to the Create Jobs PAC goes into a pool of money that can be used for several purposes -- including supporting individual political campaigns.
This seems to be an IRS no-no, as described in "Frequently Asked Questions About the Ban on Political Campaign Intervention by 501(c)(3) Organizations." However, a tax-exempt 501(c)(3) organization such as Salem Health can donate to a ballot measure committee -- which the Create Jobs PAC isn't.
11. May a section 501(c)(3) organization make a contribution to a political organization described in section 527 (such as a candidate committee, political party committee or political action committee (PAC))?
No, a section 501(c)(3) organization may not make a contribution to a political organization described in section 527 (such as a candidate committee, political party committee or political action committee (PAC)). Nor may such an organization establish and maintain a separate segregated fund under section 527.
12. May a section 501(c)(3) organization make a contribution to a ballot measure committee (committees supporting or opposing ballot initiatives or referenda)?
Yes, a section 501(c)(3) organization may make a contribution to a ballot measure committee (committees supporting or opposing ballot initiatives or referenda), but it must include such contributions in its lobbying calculations for purposes of determining whether a substantial part of its activities consist of attempting to influence legislation.
Now, the Secretary of State web site has detailed information on PACs registered in Oregon. When I clicked on the "History" link on the Create Jobs PAC page, I learned that this PAC has morphed over the years.
In 2006 it was called "Help the Chamber of Commerce Keep Salem Liveable." Originally it was a Measure PAC committee that supported three annexation measures being voted on. In 2009 it became a Miscellaneous PAC commitee that can support/oppose specific candidates or ballot measures.
Soon thereafter the name was changed to Create Jobs PAC. The current "Nature of Committee" statement is support measures and candidates who favor private sector job creation.
So Salem Health donated $50,000 to a PAC that supports individual political candidates.
Again, this seems to be prohibited, given the language in the #11 FAQ above. A tax-exempt 501(c)(3) organization may only make a contribution to a ballot measure committee -- which the Create Jobs PAC stopped being in 2009.
It is up to the IRS to decide how to handle my complaint. If it turns out that Salem Health did indeed violate IRS regulations, another FAQ shows that the penalty can be severe.
13. What happens if an organization engages in prohibited political campaign activity?
Violating this ban may result in denial or revocation of the organization’s tax-exempt status and the imposition of an excise tax on the amount of money spent on the activity.
Update: I just shared these thoughts with someone who emailed me about this issue. The analogy I came up with sure seems to apply here.