New Hampshire Watchdog

Shaheen twice asked IRS to crack down on political groups

Grant Bosse — Fri, 17 May 2013 13:13:09 +0000

(CONCORD, NH) Senator Jeanne Shaheen twice urged the Internal Revenue Service to investigate politically-active groups seeking tax-exempt status, even as the IRS was two years in an operation illegally targeting conservative organization.

The New Hampshire Democrat first joined six Senate colleagues in a February 16, 2012 letter to then-IRS Commissioner Douglas Shulman, urging him to investigate groups seeking tax-exemption under Section 501(c)(4) of the federal tax code. This provision allows “Social Welfare Organizations” to avoid federal taxes, but prohibits them from intervening in political campaigns. Shaheen and company pushed Shulman to crack down on 501(c)(4) organizations funding politically-themed ads.

U.S. Senator Jeanne Shaheen

We are aware that non-profit organizations have filed a petition for rulemaking with the IRS to revise existing regulations governing whether an organization that intervenes or participates in elections is entitled to obtain or maintain an exemption from taxation under 501(c)(4).

Shaheen’s letter was part of a broad protest within the Democratic Party of groups independent of the two major political parties launching attack ads during campaign season. But the U.S. Supreme Court has long protected the right to produce independent political speech. So long as these independent expenditures are not coordinated with candidates, campaigns, or parties, they are not subject to most campaign spending limits, and as long as they do not explicitly endorse the election or defeat of a candidate, they are not considering electioneering. Thus, the slew of “Call Your Congressman” ads that air alongside traditional campaign ads are considered educational or issue advocacy, and have long been allowed by non-profit organization.

Shaheen and her colleagues were pushing the IRS to change its interpretation of the tax code to consider independent issue advocacy as a direct campaign activity, which would have imperiled the tax-exempt status of not only new political organizations, but long-established non-profit groups that call people to action.

Shaheen insists that she wanted to close a loophole in the tax code through which political groups were avoiding taxes, and not single out conservative opponents for greater government scrutiny. And the February letter and press materials do not mention specific groups, or claim that conservatives were disproportionately seeking 501(c)(4) status.

Unknown at the time was that the IRS had been targeting conservative organizations, using profile words such as Tea Party, Patriot, and Constitution to select potential right-wing groups for closer inspection. The tax agency peppered conservative groups with questionnaires, inquired about the affiliation of group officers, and even pressed pro-life groups to pledge never to picket Planned Parenthood. So far, two IRS officials have resigned as the scandal widens and draws closer to the White House.

Shaheen renewed her call for greater IRS scrutiny of political groups a month later. Following up on a March 7, 2012 story by New York Times reporter Jonathan Weisman that contained unsubstantiated allegations that businesses were improperly deducting donations to 501(c)(4) political organizations.

For instance, individual donations to groups like American Crossroads are not tax deductible as charitable contributions, and most tax lawyers would say company donations should not be deducted either. But in some circumstances, companies could try to justify donations to political nonprofits as a “necessary” business expense, said Frances R. Hill, a tax law professor at the University of Miami.

Tax professionals suspect — but cannot prove — that some donors are tucking their contributions to the groups into their marketing or advertising budgets and deducting them from their taxes, she said.

The seven Senate Democrats, including Shaheen, sent a second letter to Shulman on March 12, 2012 referencing the Weisman article.

Third, 501(c)(4) organizations should be required to state forthrightly to potential donors what percentage of a donation, if any, may be taken as a business expense deduction. As the New York Times reported in its March 7tharticle, some of these organizations do not currently inform donors whether a contribution is tax deductible as a business expense at all.

This is a reference to American Crossroads, a conservative group co-founded by former Bush advisor Karl Rove. And while Shaheen does not mention right-wing groups by name, her House colleagues were less circumspect. On March 28, 2012, Vermont Congressman Peter Welch led a group of 32 House Democrats in a letter to Shulman. The press release accompanying the letter specifically targeted Rove’s group.

Welch and his colleagues are calling on the Internal Revenue Service (IRS) to investigate whether nonprofit 501(c)(4) organizations affiliated with Super PACs – such as Crossroads GPS, the Karl Rove-backed group spending millions of dollars in campaigns across the country – are in violation of federal law and IRS regulations.

As the known extent of the IRS’s illegal targeting of conservative groups widens, Shaheen insists that she never wanted the agency to go after groups critical of her party. She has since called for an audit of the IRS.

The House Ways and Means Committee convenes the first Congressional hearing on the scandal this morning, as Fox News reports that Sarah Hall Ingram, the IRS Commissioner who headed the Tax Exempt and Government Entities Division while it was targeting Tea Party groups, has since been named Director of the IRS Affordable Care Act division.

February 16, 2012 Letter from Democratic Senators to Shulman

March 7, 2012 New York Times article: Part 1 Part 2

March 12, 2012 Letter from Democratic Senators to Shulman

March 28, 2012 Letter from House Democrats to Shulman

Congressman John Tierney Shaken, not Stirred

Grant Bosse — Thu, 16 May 2013 16:26:35 +0000

Congressman John Tierney wants Q Branch to make America safer. The Massachusetts Democrat is turning to James Bond gadgets for his latest gun control proposal, according to The Hill.

“In the most recent James Bond film, Bond escapes death when his handgun, which is equipped with technology that recognizes him as its owner, becomes inoperable when it gets into the wrong hands,” Tierney’s office said in a statement introducing the bill. “This technology, however, isn’t just for the movies — it’s a reality.”

Tierney said his Personalized Handgun Safety Act, H.R. 2005, would help prevent accidental deaths, like the case in New Jersey last month when a six-year old accidentally shot and killed a four-year-old child.

Tierney isn’t speculating about a time in the near future where sci-fi gizmos will make handguns safer. He wants to mandate iffy and expensive ID scanners on all new guns within two years, and retrofit all old guns sold after three years. Maybe tomorrow, Tierney and his loony colleagues will introduce the Invisible Car Act of 2013. And we’re long overdue for federal regulations on exploding pens.

Auto Dealer Bailout cruising through NH House

Grant Bosse — Thu, 16 May 2013 16:08:26 +0000

Kevin Landrigan reports in the Nashua Telegraph that the Auto Dealer Bailout bill, which would let local auto dealers tear up their contracts with the factory, has easily cleared a House Committee and looks to pass the full House next week.

The 15-2 vote of the House Commerce Committee for this hotly contested bill (SB 126) was viewed as the last major hurdle to give dealers greater flexibility to run their own franchises.

The full House of Representatives is expected to endorse the bill next week, and auto dealers will ask the state Senate to concur on changes that this House panel has made.

The bill would not only allow auto dealers to simply ignore the contracts they’ve signed that give them exclusive right to sell major band automobiles within defined areas, but also define lawnmowers as motor vehicles in order to give those franchises the same power to void their contracts. This is a ridiculous extension of state control into the private marketplace, and it likely to pass because politicians like car dealers a lot more than car manufacturers in Detroit, Japan, Germany, and Korea.

Medicaid Study gets results

Grant Bosse — Tue, 14 May 2013 16:44:59 +0000

This morning, Kevin Landrigan reported in the Nashua Telegraph on the recent report on the Medicaid Enhancement Tax, Meet the MET.

The report of the Josiah Bartlett Center for Public Policy issued Monday clearly sided with State Senate budget writers in concluding Hassan and House budget writers were too optimistic in their future forecast for MET payments.

Last week, Senate Finance Committee Chairman Chuck Morse, R-Salem, charged the MET was the single, biggest split his spending plan will have from the House budget that he said overestimated MET by as much as $250 million.

The report lists past statements from New Hampshire Hospital Association President Steven Ahnen who has called the House MET forecast as “overly aggressive” and State Medicaid Director Katie Dunn who said these estimates need to be lowered.

The report also faults the state for a history of coupling the MET tax in with disproportionate share payments that are federal grants meant to compensate hospitals and the state for supplying free or below-market care.

The report further called on lawmakers to end the practice of using MET revenue and dedicating part of it in payments to human service providers.

“These two small steps won’t end the political and legal wrangling over the Medicaid Enhancement Tax,” the report concluded.

“But after over two decades of gimmickry, budget writers could finally deal with the MET as a transparent and legitimate part of New Hampshire’s tax code.”

The Senate Ways and Means Committee this morning adopted lower revenue estimates from the Medicaid Enhancement Tax, according to Norma Love’s Associated Press report.

In addition to the $75 million difference in base tax receipts, the Senate committee also estimates the state will get $107 million less from a hospital tax on net patient revenues and instead will take in about the same money. Hassan and the House assumed hospitals would pay more in taxes because some of the money would come back to them in state aid.

Josiah Bartlett Center releases MediScam study

Grant Bosse — Mon, 13 May 2013 15:35:11 +0000

NH grapples with the end of a 20-year old budget gimmick

The Josiah Bartlett Center for Public Policy, New Hampshire’s free-market think tank, today released a new study on the state’s twisted history under the Medicaid Program. Meet the MET: New Hampshire budget writers grapple with a brand new tax that’s been around for 20 years details the history of the Medicaid Enhancement Tax, how the current budget increased tax liability for New Hampshire hospitals, and how unrealistic revenue estimates could ruin Governor Maggie Hassan’s budget proposal.

“For the last two decades, the MET wasn’t a real tax, so budget writers didn’t pay close attention to how it worked,” said Grant Bosse, the study’s author. “By better understanding the mechanics of this complicated revenue stream, they can ensure that MET misunderstandings don’t blow a multimillion dollar hole in the state budget.”

Since 1992, New Hampshire has taxed hospitals under the MET, and then refunded the money in order to qualify for federal matching funds. The practice, known as MediScam, ended in the current budget, but left hospitals with a tax bill that they had been never really had to pay. MET revenues are at the center of the current budget fight, with House and Senate estimates off by nearly $200 million.

“Whether the Legislature keeps the MET in place, replaces it, or heaven forbid, brings back MediScam, it needs to base its decision on good information, and not the misperceptions that have surrounded this issue for years,” adds Josiah Bartlett Center President Charlie Arlinghaus. “Meet the MET should be required reading before voting on the state budget.”

“After over two decades of gimmickry, budget writers could finally deal with eh MET as a transparent and legitimate part of New Hampshire’s tax code,” the report concludes.

READ THE COMPLETE REPORT

Meet the MET- May 2013 by Grant Bosse

NH tax collectors target tips for business taxes

Grant Bosse — Wed, 08 May 2013 17:51:26 +0000

Bob Sanders reports in New Hampshire Business Review that the New Hampshire Department of Revenue Administration has decided that tips received by restaurant employees must now be included as wages in calculating the Business Enterprise Tax.

The New Hampshire Lodging and Restaurant Association says that it amounts to a new policy that could double the tax burden on restaurants and other businesses with tipped employees, particularly those that are struggling and don’t make a profit. But the DRA maintains that it has been the law since 1993 to apply the BET to all tips that amount to more than $20 a month, even if it was not uniformly observed.

“Our research suggested some taxpayers were paying on all reported tips, some only on a portion, and others not at all,” said Melinda Ellen Cyr, tax policy analyst with the agency. “Audit programs are to ensure compliance by all taxpayers to pay their fair share of tax.”

The BET taxes 0.75% on every dollar that New Hampshire businesses pay out in wages and expenses. All payments are fully credited against the Business Profit Tax, which businesses only pay if they earn a profit. So this increase won’t be mean anything other than added bookkeeping for restaurants making money, but could double the BET bill that struggling restaurants face for each tipped employee.

The New Hampshire Restaurant and Lodging Association claims that the Legislature specifically exempted tips from the BET in 1993, while the DRA argues that tips should always have been counted as wages. Sanders reports that the NHRLA is asking the Senate Ways and Means Committee to draft an amendment blocking the DRA’s new interpretation of the BET. Or they could ask the Governor to tell her Revenue Commissioner to stop raising taxes on New Hampshire businesses without legislative approval.

New Hampshire politics in the age of professional outrage

Grant Bosse — Mon, 06 May 2013 12:20:34 +0000

Much like the amplifiers used by Spinal Tap, political discourse in New Hampshire this year has been turned up to 11. And just as an over-modulated sound system will distort your music, it’s been pretty hard to hear any reasonable discussion of politics over the din of partisans being outraged at each other.

Anger is a useful emotion when appropriate. It’s also far too easy to manipulate by political hacks looking for short-term advantage. Anger makes for great copy, snappy headlines, and effective fund-raising emails. Last week, it seemed like the only tool that either party knew how to use.

Let’s start with the Outrage of the Week that was actually outrageous. Auburn Republican state Rep. Stella Tremblay previously questioned whether the federal government might have been involved in the Boston Marathon bombings. Sadly, such conspiracy theories now inevitably follow any act of violence savage enough to get national attention. Weak-minded fools reinforce each others’ delusions after falling down the online rabbit hole.

Then last week, Tremblay told crackpot radio host Pete Santilli’s that footage of bombing victim Jeff Bauman showed that he wasn’t in pain after losing both his legs, which somehow supported the false flag theory. Blaming the federal government for a terrorist attack is ridiculous. Alleging that a New Hampshire man who not only lost both legs in the bombing but also helped the police identify the suspects is part of the cover-up was too much.

Pretty much everyone has called on Tremblay to resign. She won’t, and there’s little that can be done until Auburn voters kick her out next November. House Republicans may expel her from their caucus. I suppose Speaker Terie Norelli could take away her off the House Children and Family Law Committee. But she hasn’t broken any laws and seems immune to common sense. Outrage seems like a sensible reaction.

Meanwhile, Senate Democrats tried to stir up some outrage last week by claiming that Senate Republicans refused to stand up to the federal internet sales tax legislation.

Manchester Democrat Donna Soucy wanted to introduce a nonbinding resolution thanking the state’s congressional delegation for opposing the internet sales tax. Not only was Soucy’s resolution past the Senate’s deadlines, but it also violated a recent rule preventing such do-nothing resolutions from being drafted. The Senate voted against suspending its own rules for Soucy’s vanity project.

Clearly, the new rule hasn’t stopped every piece of time-wasting fluff from making it to the Senate floor. Just last week they voted to name the white potato as New Hampshire’s Official State Vegetable. But it has cut down on the glorified press releases gumming up the works at the State House.

The New Hampshire Democratic Party jumped all over the Senate’s sensible rejection of a meaningless resolution, declaring that the GOP was somehow soft on the internet sales tax. Soucy wasted the Senate’s time so that her party could generate a controversy out of nothing. I’m all for political theater. I once ran for Congress in a nonexistent district. But this bit of feigned outrage was laughably transparent.

The New Hampshire Republican Party got into the outrage act last week too, accusing Organizing for Action, a group supporting President Obama, of politicizing the marathon bombings because a sign at a recent rally said “More shot in one day, than marathoned.” The party called on Democratic office holders to denounce such offensive tactics. The third-party denunciation is the preferred tactic of the professionally offended when the people you want to attack weren’t the people saying something stupid.

Meanwhile, the main target of the professionally offended left was U.S. Sen. Kelly Ayotte. Think Progress, Granite State Progress and the state Democratic Party tried desperately all week to turn a series of Ayotte town hall meetings into a referendum on guns.

A small cadre of out-of-state gun-control advocates joined an even smaller group of New Hampshire liberals to protest Ayotte’s three town halls. These professional protesters are known as Astroturf, as opposed to grassroots political volunteers. I call them Hactivists. They’re the muckrakers of the YouTube generation.

The hactivists were outnumbered by Granite Staters who gave Ayotte standing ovations at all three events. And that drove the hactivists over the edge. They pretended to be outraged.

Though the town hall format is a way for elected officials to interact with their constituents, the gun-control groups brought up relatives of victims killed at Sandy Hook Elementary School. Erica Lafferty’s mother died that day in Newtown, Conn. Ayotte took her question in Warren and provided a reasoned, respectful answer on why she opposed the Manchin-Toomey bill and instead supported an alternative that focused on mental health and enforcement of existing gun laws.

Afterward, Lafferty tried to manufacture national outrage, claiming that Ayotte has tried “to justify my mother’s murder and the murder of five other educators and the murders of 6- and 7-year-olds.” Lafferty’s statement is dishonest and manipulative. She is using her grief as a political tool, and it should not go unchallenged for fear of giving offense.

The rest behaved even worse, shouting over other people’s questions, lying about Ayotte’s answers, and falsely claiming to have been assaulted by Senate staff.

The hactivists wanted to get people angry. Their immature behavior and dishonest claims succeeded.

Grant Bosse is editor of New Hampshire Watchdog, an independent news site dedicated to New Hampshire public policy.

Departing Baucus fights Internet Sales Tax

Grant Bosse — Mon, 29 Apr 2013 12:18:57 +0000

Reflecting on the legacy of collage Sen. Max Baucus in today’s Boston Globe, former Sen. John Sununu outlines how Baucus is protecting the Senate’s tradition and process in the debate over the Internet Sales Tax.

Montana’s motto is “Big Sky.” Politically, the state is big red, voting for the Republican in each of the past five presidential elections. So no one was surprised to see Baucus buck his party on gun control votes in early April. More unusual, however, was the criticism he leveled at Democratic Leader Harry Reid recently for bypassing the Finance Committee and sending an online sales tax bill straight to the Senate floor.

Reid has been notorious for circumventing Senate committees, and Baucus seems to have had enough. In a bipartisan letter, Baucus pointed out that the bill in question erodes the rights of states wishing to opt out of the tax scheme, while subjecting businesses to the auditing and enforcement regimes of hundreds of state and local taxing jurisdictions across the country.

Using tactics usually reserved for more partisan confrontations, Reid refused to move the legislation through committee hearings and markup, and denied a vote on the amendment allowing states to opt out of the tax scheme. “This bill is not ready for debate on the Senate floor,” observed Baucus. And he’s right.

Internet sales tax protects Amazon from the next Amazon

Grant Bosse — Mon, 29 Apr 2013 12:04:43 +0000

After 15 years trying to take a bite out of the internet, state tax collectors took a huge step closer this week. The U.S. Senate voted to advance legislation allowing states to force online retailers to collect sales taxes for them.

The 1992 U.S. Supreme Court decision Quill Corp. v North Dakota prevented states from drafting out-of-state businesses as tax agents unless they had a significant physical presence in that state. The internet sales tax bill, dubbed the Marketplace Fairness Act by some staffer who’d read Orwell, would force retailers to collect taxes based on the buyer’s address, even if the seller was in a state with no sales tax.

At issue isn’t the sales tax itself, but the little understood use tax. Massachusetts assesses the use tax on residents who buy cars in tax-free New Hampshire but register them in the Bay State. The law actually requires Massachusetts residents to keep track of everything they buy in New Hampshire that would be taxed if bought in Massachusetts. Few do so.

Tellingly, the use tax doesn’t apply to purchases made in states with a sales tax. It is a punishment imposed on consumers fleeing high taxes and an attempt by politicians to reduce tax competition with their more frugal neighbors.

Elected officials do not react to tax collection arguments in the predictable partisan ways we expect on other tax debates. Former Republican governor Craig Benson wanted to tinker with the New Hampshire business profits tax to get out-of-state businesses to pay more. Former Democratic governor John Lynch raised taxes and fees more than 100 times but valiantly fought off Massachusetts’s attempt to get New Hampshire stores to collect and pay its use tax for them. The U.S. Senate fight over the internet sales tax had Republicans and Democrats on both sides.

New Hampshire Sen. Kelly Ayotte, a Republican, has been leading the fight on the Senate floor to kill the internet sales tax bill. Sen Jeanne Shaheen, a Democrat, has been quieter in her opposition. Last week she objected to the Senate fast-tracking the legislation and offered a series of amendments to improve it, including an exemption for states like New Hampshire that don’t have any sales tax.

Of course, we would have a broad-based sales tax if Jeanne Shaheen had gotten her way as governor, but that’s so last decade.

Shaheen also missed the first vote on the Marketplace Fairness Act on Monday, blaming a delayed flight. But she joined Ayotte in opposing cloture on the bill Thursday evening. I’m sure my Democratic friends will protest Shaheen’s filibustering obstructionism any day now.

The Marketplace Fairness Act would force online retailers with annual sales of over $1 million to collect sales tax for each customer based on where the product is delivered. It would also push states to streamline their tax codes.

There is nothing preventing states from taxing online sales originating in their state, but most don’t. That might encourage companies to seek friendlier states. States would much rather punish their citizens for buying from out of state, raising money and currying favor with local retailers.

That’s exactly the point. I don’t want to pay sales tax on stuff I buy online from sales tax states. If they start charging me, I can search for vendors in tax-free states like New Hampshire. Such a policy would draw sharper distinctions between low-tax and high-tax jurisdictions. Basing taxes on the seller’s location would force politicians to face the consequences of their tax policies, rather than exporting those costs to out of state businesses.

Some of those businesses are eager to face those higher costs. Online giant Amazon.com is pushing for the internet sales tax. It can track state and local tax codes and automatically charge the current tax rate based on the delivery ZIP code. But smaller companies looking to challenge Amazon’s hegemony would have a hard time complying. Higher taxes and complicated bureaucracy isn’t a threat to Amazon, but it might keep the next threat to Amazon from starting up.

At National Review, Kevin Williamson writes about the distinction between being for big business and being for free enterprise. Big business loves big government. It’s smaller, nimbler businesses they fear. Forcing a cumbersome sales tax bureaucracy on their would-be rivals puts them at a huge competitive advantage.

Taxing online sales wouldn’t cost New Hampshire residents much in the short term. We don’t have a sales tax, so we wouldn’t have to pay it. But it would erode our ability to attract online retailers, at least those that hope to grow to a million in annual sales. Ayotte and Shaheen are going to lose this fight in the Senate. Here’s hoping the House kills the internet sales tax.

Grant Bosse is editor of New Hampshire Watchdog, an independent news site dedicated to New Hampshire public policy.

Portsmouth Herald wants state to pick sides in car battle

Grant Bosse — Fri, 26 Apr 2013 14:57:27 +0000

The Portsmouth Herald family of newspapers runs a editorial this morning at Seacoast Online urging support for SB 126, an expansion of the Auto Dealers Bill of Rights that would let local car dealers ignore parts of their contracts with auto manufacturers. What’s striking this editorial is not the usual complaints that the contracts are unduly onerous, but the notion that state government should provide preferential treatment for one class of business simply because we like them more than their business partners.

Whether it is sponsorship of local sports teams, educational programs, social service programs or many other nonprofit groups that make our communities better, stronger and healthier, the auto dealers have been there for us.

In many of our communities auto dealers are also major employers and among the largest taxpayers; funding our schools, public safety, public works, libraries and recreation programs. They also buy local, spend local and support local businesses whenever they are not prevented from doing so by manufacturers.

Now, the auto dealers are asking us for help, and their request seems reasonable and in the best interests of our communities and the state.