Salem Health hit with IRS complaint for $50,000 anti-payroll tax PAC donation

Hey, filing a complaint against Salem Health with the Internal Revenue Service isn't my favorite thing to do. But I was pleased to spend several hours this afternoon working on Form 13909, Tax-Exempt Organization Complaint (Referral) Form.

I did this after some other citizen activists laid the groundwork for the complaint.

They discovered that Salem Health, the parent company of Salem Hospital, seemed to violate IRS rules when $50,000 to defeat the mass transit payroll tax ballot measure was donated to the Salem Area Chamber of Commerce's Create Jobs PAC (political action committee).

The Create Jobs PAC was organized as a "miscellaneous committee" to support or oppose individual candidates running for public office, along with supporting or opposing ballot measures. It isn't a "measure committee" PAC, which can't get involved with political campaigns. 

Salem Health is a tax-exempt organization.

So it is prohibited from contributing to people running for public office. But the $50,000 Salem Health contributed to the Create Jobs PAC has been commingled with money that WILL go to Chamber of Commerce-backed political campaigns.

Hence, the IRS complaint was filed on behalf of the citizens of Salem, with the support of Salem Community Vision. I'm a member of the Salem Community Vision steering committee. We talked about this issue at our bi-monthly meeting yesterday and decided the IRS complaint should be submitted. 

Salem already has too much special interest money being used in attempts to buy elections.

In this case, Salem Health may have spent big bucks on trying to influence the mass transit payroll tax in a way that wasn't legal. So after we Salem Community Vision folks agreed it was important to file an IRS complaint, I said I'd do it.

Below is what I sent off to the IRS this afternoon.

Yeah, it's kind of geeky. But not all that difficult to understand. The $50,000 from Salem Health (Salem Hospital's parent organization) went into a pot of PAC money that can be used to support or oppose individual candidates running for public office.

This appears to be a no-no for tax-exempt organizations under IRS rules.

That's why Salem Community Vision felt a complaint was in order. I and the other SCV folks are committed to transparency and doing things in this town that boost the general public interest, rather than special interests. 

Read on if you're interested in perusing what probably is the first, and maybe only, Form 13909 complaint you'll come across in your life.

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EMAILED TO IRS:

Here is a completed Form 13909 containing a Tax-Exempt Organization Complaint against Salem Health.

Download Form 13909 Complaint

 

Salem Health contributed $50,000 to the Create Jobs PAC, a Miscellaneous PAC (Political Action Committee) set up by the Salem Area Chamber of Commerce. Here is the Statement of Organization for the Create Jobs PAC from the Oregon Secretary of State’s office. This confirms that the Create Jobs PAC is a Miscellaneous PAC that can make contributions to individual political candidates.

 

 

This Transaction Detail page from the Oregon Secretary of State’s ORESTAR reporting system shows a transaction date of 08/05/2015 for a $50,000 cash contribution from Salem Health to the Create Jobs PAC. Because it isn't super obvious, I’ll point out that the “Create Jobs PAC” name is on the right side above the “Help” symbol.

Download Salem Hospital PAC contribution

To provide some background on Salem Health’s wrongful $50,000 donation to the Create Jobs PAC, here are two stories about this issue. 

 

Download Salem Health Opens Wallet to Lead Fight Against Payroll Tax for Public Transit | The Lund Report

 

Download Salem Hospital contributes $50,000 to fight expanded bus service - News in Salem Oregon - Willamette

 

Salem Hospital and its parent organization, Salem Health, is opposed to a mass transit payroll tax ballot measure that is being voted on this November. A friend sent me this information about the legality of the $50,000 contribution to the Create Jobs PAC.

"Alma" of SOS [Secretary of State] Elections Division confirmed on October 8, 2015 that if Salem Health had donated the $50,000 to a “Measure Committee” that the funds could only be used for that measure. However, the donation was to the Create Jobs PAC which is a “Miscellaneous Committee” and can make contributions to individual candidates. The reporting of expenditures through the SOS office has no way of accounting for the commingling of funds between measure related expenditures and candidate expenditures.

Thus there is no way to track how much of the $50,000 will be used by the Create Jobs PAC to oppose the ballot measure, and how much of the $50,000 will be used to fund political candidate activities not allowed by the IRS for tax-exempt organizations such as Salem Health.

 

Here is a page from the Create Jobs PAC web site that says "Contributions of up to $50 per person ($100 per married couple filing jointly) are a direct credit as political contributions on Oregon State Income Tax filings.” This supports my contention that Salem Health has made a $50,000 political contribution — which isn’t allowed under IRS rules. 

 

Download Invest in the PAC

 

I am submitting this complaint because Salem Health’s $50,000 contribution to the Create Jobs PAC, a “Miscellaneous” PAC that is able to financially support both political candidates and ballot measures, is at odds with the IRS prohibition on tax-exempt organizations being involved with campaigns for elective public office. This is an excerpt from the attached document.

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity.  Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. 

Download The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations

 

This prohibition is echoed by the Oregon Secretary of State on p. 66 of the Campaign Finance Manual. I’ve boldfaced the distinctions between a “miscellaneous committee” PAC and a “measure committee” PAC. As already noted, Salem Health donated $50,000 to the Create Jobs PAC, a miscellaneous committee. This means that some or all of the $50,000 can be used by the Create Jobs PAC to support or oppose specific candidates for public office, which tax-exempt organizations such as Salem Health are prohibited from doing. 

Type of Political Action Committee

Identify the type of committee.

A “miscellaneous committee” is a committee that supports or opposes one or more of the following:

 specific candidate(s);

 entire ticket of a political party;

or

 candidate(s) and measure(s).

A “measure committee” is a committee that exclusively supports or opposes one or more measures that are certified to the ballot. A measure committee must not contribute money to candidates, miscellaneous committees, political parties, caucus committees, recall committees, or fund independent expenditures in support of or in opposition to candidates. If a measure committee wishes to make such expenditures, it must amend its Statement of Organization to become a miscellaneous committee.

A “political party committee” is a major or minor political party qualified under ORS Chapter 248 or a committee established by a major or minor party under party bylaws (e.g., county central committees). 

l look forward to learning the results of your review of this apparent failure of Salem Health to comply with IRS regulations governing tax-exempt organizations. 

 

Please note that I left unchecked the box which says “I am concerned that I might face retaliation or retribution if if my identity is disclosed.” I’m fine with being contacted about this complaint and having my name disclosed as the complainant. 

 

Brian Hines

Comments

[Jim Scheppke]

The Create Jobs PAC needs to return the $50,000 to Salem Health (sic) immediately. They never should have accepted a contribution to a "Miscellaneous Committee" to begin with. They should know the rules, and so should Salem Health (sic).

[Mary Gear]

Thank you for making this complaint. What the hospital did was immoral and unconscionable. Perhaps it's illegal, too. Thanks for holding them accountable in this way.

[Walker]

Just as important, there is nothing about fighting to keep Salem as a transit impoverished community that is consistent with SH's exempt purpose, which is provision of hospital services.

Thus, the contribution authorized by the board, which appears motivated by solely by the benefit to the extremely highly compensated board members, and not to further SH's exempt purpose.

Therefore, even if they had bothered with the legality of making the contribution to the right kind of committee, the real scandal (and perhaps avenue for IRS action) is that they are using money that is tax exempt to help wage a campaign against the public interest, in order to keep paying absurd bonuses to themselves.

[Brian Hines]

Walker, good points. I'm thinking of updating my complaint with the arguments you made in your comment.

It does seem wrong that Salem Health, which has tax-exempt status because it is providing a public service, health care, uses the profits (revenues over expenses) gained from that service in a way that not only doesn't benefit the public, but harms the public.

Namely, denying Salem's citizens improved bus service.

[Walker]

Yes, the allowance for an insubstantial amount of lobbying activity (and zero political activity) by nonprofits presumes that the boards would only be lobbying on matters closely related to e nonprofit mission ... Not just anything that some board members decide they oppose.

The law is that charities such as hospitals can spend ZERO to further the interests of individuals, such as board members in an incestuously close relationship with, say, the Chamber of Commerce.

This misuse of nonprofit funds by SH to help cronies wage a political campaign merits close scrutiny by the IRS and possibly a stiff sanction, especially when you get a gander at the size of the fat checks going to the top guys and gals at this "NINO" organization (nonprofit in name only). Anyone can go to Guidestar and pull down SH's 990 report, which documents the ginormous sums our "community leaders" award each other.

[Phil Krug]

cherriots donated $50,000 to the Salem Hospital Foundation for a Full Time Transportation Coordinator. http://cherriots.org/sites/default/files/PDF%2005-28-15%20E.1%20MINUTES%20BOD%2004-23-15_0.pdf

I am guessing the Salem Hospital Foundation directly related to Salem Health.

seems a bit ironic to me...

[Elaine]

Salem Hospital has ruthless collection practices. They intimidate the sick with mafia like tactics. I'm glad they are being called out on scandal, they get away with corruption way too frequently.