The moment I have been waiting for has arrived. For the past few months I have been scouring the internet looking for plays that deal directly with Mitt Romney by name. I knew they were coming and now I have found my first one. In a previous post titled “Citizens United vs Mrs. Farnsworth” I talked about the danger that the anti-corporate personhood movement poses for theater. In a nutshell, since theater companies tend to be corporations, if corporations have no Constitutional rights, neither do those theater companies. But there is another twist in this story of theater and the tax code. First off: a correction. I wrongly stated in my previous post that Citizens United is a 501(c)(3) non profit corporation. In fact it is a 501(c)(4) corporation, which means that donations to it are not tax deductible. 501(c)(4) status also means that the government cannot ban it from engaging in electioneering speech. Interestingly, this is not true of 501(c)(3) corporations, the typical tax status of arts organizations, the code could not be more clear about its ban on political activity for 501(c)(3)s.
Here is what the code says on the subject:
(3) Authorization of legislative or political activities. An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it:
(i) To devote more than an insubstantial part of its activities to attempting to influence legislation by propaganda or otherwise; or
(ii) Directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office.
And there it is: a 501(c)(3) corporation may not publish or distribute statements on behalf of or in opposition to any candidate for public office.
This brings us to Co-Op Theater East, a young theater company in New York City who on May 6th presented a reading of a new play by Phillip Kaplan called “Unborn Again”. The description of the play is as follows: “Mitt Romney befriends three fetuses and shows that he cares more about them, than anyone actually born”. That certainly sounds to me like a statement in opposition to a candidate for public office. And as I pointed out in my previous post, this is nothing new, 501(c)(3) theater companies do this all the time. But here is the next twist, Co-Op Theater East is not a 501(c)(3) corporation, rather they accept their donations through Fractured Atlas, a 501(c)(3) that acts as a clearing house for tax deductible donations, for a price of course.
So the complex legal question becomes this, can Fractured Atlas accept tax deductible donations, give that money to entities engaged in political statements on behalf of or in opposition to a political candidate and still be in compliance with the tax code?
The reason this all matters is that the charitable deductions in the tax code were written for very specific purposes, to support only those entities with, if not universally accepted, at least extremely broadly agreed upon social value. American Theater companies have every right to create political works that challenge or defend specific politicians, but not if they accept tax deductible donations. This should be an important advantage for those companies that choose to be unsubsidized, but since the IRS turns a blind eye to this blatant misuse of the tax code, that advantage does not exist. I applaud Co-Op Theater East for the work that they do, I haven't seen their shows, but they seem to have a good thing going, but that good thing is not a charity.