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barre seid
New Bill Would Prevent Billionaires From Donating to Dark Money Groups Tax-Free
"Billionaires attempting to influence politics from the shadows should not be rewarded with taxpayer subsidies," said Sen. Sheldon Whitehouse.
Feb 06, 2024
Legislation introduced Tuesday by a pair of Democratic lawmakers would close a loophole that lets billionaires donate assets to dark money organizations without paying any taxes.
The U.S. tax code allows write-offs when appreciated assets such as shares of stock are donated to a charity, but the tax break doesn't apply when the assets are given to political groups.
However, donations to 501(c)(4) organizations—which are allowed to engage in some political activity as long as it's not their primary purpose—are exempt from capital gains taxes, a loophole that Sen. Sheldon Whitehouse (D-R.I.) and Rep. Judy Chu (D-Calif.) are looking to shutter with their End Tax Breaks for Dark Money Act.
Whitehouse, a member of the Senate Judiciary Committee who has focused extensively on the corrupting effects of dark money, said the need for the bill was made clear by what ProPublica and The Leverdescribed as "the largest known donation to a political advocacy group in U.S. history."
The investigative outlets reported in 2022 that billionaire manufacturing magnate Barre Seid donated his 100% ownership stake in Tripp Lite, a maker of electrical equipment, to Marble Freedom Trust, a group controlled by Federalist Society co-chairman Leonard Leo.
The donation, completed in 2021, was worth $1.6 billion. According to ProPublica and The Lever, the structure of the gift allowed Seid to avoid up to $400 million in taxes.
"It's a clear sign of a broken tax code when a single donor can transfer assets worth $1.6 billion to a dark money political group without paying a penny in taxes," Whitehouse said in a statement Tuesday. "Billionaires attempting to influence politics from the shadows should not be rewarded with taxpayer subsidies."
"We cannot allow millionaires and billionaires to run roughshod over our democracy and then reward them for it with a tax break."
If passed, the End Tax Breaks for Dark Money Act would ensure that donations of appreciated assets to 501(c)(4) organizations are subjected to the same rules as gifts to political action committees (PACs) and parties.
"Thanks to the far-right Supreme Court, billionaires already have outsized influence to decide our nation's politics; through a loophole in the tax code, they can even secure massive public subsidies for lobbying and campaigning when they secretly donate their wealth to certain nonprofits instead of traditional political organizations," said Chu. "We can decrease the impact the wealthy have on our politics by applying capital gains taxes to donations of appreciated property to nonprofits that engage in lobbying and political activity—the same way they are already treated when made to traditional political organizations like PACs."
The new bill comes amid an election season that is already flooded with outside spending.
The watchdog OpenSecrets reported last month that super PACs and other groups "have already poured nearly $318 million into spending on presidential and congressional races as of January 14—more than six times as much as had been spent at this point in 2020."
Thanks to the Supreme Court's 2010 Citizens United ruling, super PACs can raise and spend unlimited sums on federal elections—often without being fully transparent about their donors.
Morris Pearl, chairman of the Patriotic Millionaires, said Tuesday that "there is no justifiable reason why wealthy people like me should be allowed to dominate our political system by donating an entire $1.6 billion company to a dark money political group."
"But perhaps more egregious is the $400 million tax break that comes from doing so," said Pearl. "It's a perfect example of how this provision in the tax code is used by the ultrawealthy to manipulate the levers of government while simultaneously dodging their obligation to pay taxes. We cannot allow millionaires and billionaires to run roughshod over our democracy and then reward them for it with a tax break."
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Right-Wing Dark Money Group Gets $1.6 Billion Donation From Tax-Dodging Business Mogul
One observer called the massive gift "an extraordinary manipulation of loopholes in tax and campaign finance law."
Aug 22, 2022
A right-wing dark money group controlled by Leonard Leo--a legal activist who has played an outsized role in packing the U.S. Supreme Court with conservative ideologues--was the beneficiary of a massive, possibly unprecedented donation of $1.6 billion from a shadowy electronics mogul with ties to the Koch network.
The enormous infusion of cash, first reported Monday by the New York Times, could bolster and embolden right-wing efforts to drag the U.S. judicial and political systems even further to the right for decades to come, imperiling the climate, what's left of abortion rights, the franchise, and other freedoms that have come under growing threat from the GOP and conservative judges.
"With this fortune, Leo can maintain and even grow his singular influence in near perpetuity."
According to the Times, the donation to the Marble Freedom Trust from former Tripp Lite CEO and longtime Republican benefactor Barre Seid is "among the largest--if not the largest--single contributions ever made to a politically focused nonprofit."
The Times reports how the gift, based entirely on funds generated by the sale of Tripp Lite, "was arranged through an unusual series of transactions that appear to have avoided tax liabilities" for both Seid and Leo's nonprofit.
Citing tax records and an unnamed source with knowledge of the matter, the Times explained that "rather than merely giving cash, Mr. Seid donated 100% of the shares of Tripp Lite to Mr. Leo's nonprofit group before the company was sold to an Irish conglomerate for $1.65 billion."
The Marble Freedom Trust "then received all of the proceeds from the sale" last year, the Times found.
"For perspective," the newspaper added, "the $1.6 billion that the Marble trust reaped from the sale is slightly more than the total of $1.5 billion spent in 2020 by 15 of the most politically active nonprofit organizations that generally align with Democrats."
Seid is a major but relatively low-profile donor to Republicans and right-wing causes, including to organizations that attack climate science. The Center for Media and Democracy (CMD) notes that Seid is "closely allied with the Koch network and funnels dark money through the same groups used by the Kochs, including Donors Trust and Donors Capital Fund."
Jane Mayer, the award-winninginvestigative journalist who has closely covered the Koch network for years, called the Times story on Seid's donation to Leo's group "huge."
\u201cHuge Scoop via \u2066@nytimes\u2069 https://t.co/9N6rWorEBl\u201d— Jane Mayer (@Jane Mayer) 1661172606
Brendan Fischer, deputy executive director of the money in politics watchdog project Documented, wrote in response to the Times reporting that Leo "now controls an astonishing $1.6 BILLION that he can use to reshape our political system."
"With this fortune," Fischer added, "Leo can maintain and even grow his singular influence in near perpetuity."
Leo has exerted much of his influence on U.S. politics through the Federalist Society, which has established a pipeline of far-right judges that have filled the benches of lower courts and the Supreme Court in recent years. Leo is currently co-chair of the Federalist Society's board of directors.
As he looks to spend his new group's huge windfall, Leo will benefit from recent Supreme Court decisions--including the infamous Citizens Unitedruling--that opened the floodgates to unlimited and secretive election spending from dark money groups just like the Marble Freedom Trust.
"After stacking the federal courts with conservative friends and allies, Leonard Leo has single-handedly amassed a $1.6 billion dark money slush fund that will dwarf Democratic spending for years to come," wrote Mark Joseph Stern, Slate's court reporter. "An extraordinary manipulation of loopholes in tax and campaign finance law."
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