Wednesday, April 2, 2014

Tax Break for Lobbying Local Governments and Indian Tribes

Political contributions and lobbying expenses have not been deductible under the Internal Revenue Code since 1915.  This prohibition applies even if the expenses would otherwise be deductible business expenses, such as amounts spent by beer dealers to urge voters to vote against anti-liquor legislation that would have put the dealers out of business

In a remarkable feat of meta-lobbying, a very special exception provides that lobbying expenses are deductible for lobbying in local councils and similar governing bodies.  A similar body specifically includes an Indian tribal government. 

The Internal Revenue Code provides a helpful list of examples of deductible lobbying expenses, which include traveling expenses, cost of preparing testimony, and other business expenses for appearing before local council committees or sending communications to the committees or their individual members. The lobbying has to be for issues "of direct interest" to the taxpayer. 

Political contributions to local council members are not deductible, just like political contributions to all other types of politicians.  In addition, expenditures for "grass-roots lobbying" are never deductible.

The special local lobbying exception was created by the Revenue Reconciliation Act of 1993.  From 1962 to 1993, certain lobbying expenses were deductible for all levels of government, but limited to local government after 1993. 

President Bill Clinton explained that the lobbying deductions were cut back because “The deduction for lobbying expenses inappropriately subsidizes corporations and special interest groups for intervening in the legislative process.”  But he did not explain why the lobbying subsidy continues for local governments and Indian tribes

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