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Tax Software The Internal Revenue Service has restored the tax-exempt status of a charitable organization that helped pay for lectures by Newt Gingrich, the former House speaker, a step that some tax and election law experts say was highly unusual.

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Software Tax The I.R.S. reversal, according to these experts, opens a potentially large loophole in the new federal campaign-finance restrictions and allows more political activity by charitable groups.

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Every Landlord Tax Deduction The decision was sweet vindication to Howard H. Callaway Jr., 76, a prominent Georgia Republican who served in the House and was secretary of the Army under President Gerald R. Ford. Mr. Callaway, who counts among his longtime friends Defense Secretary Donald H. Rumsfeld and Vice President Dick Cheney, had battled the I.R.S. for nearly five years over the charity he had headed, the Abraham Lincoln Opportunity Foundation, now defunct.

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Tax Help The I.R.S. notified Mr. Callaway on April 4 that he had won his fight.

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Help Tax Mr. Callaway had climbed a hard path to win the reversal. The I.R.S. revoked the tax-exempt status of the Abraham Lincoln organization in December 1998 in the aftermath of the House Ethics Committee investigation of Mr. Gingrich. Mr. Callaway had been a patron of Mr. Gingrich, a fellow Georgian, during Mr. Gingrich's rise and fall as House speaker.

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Ernst Ernst Guide Guide Tax The ethics committee found that in the early 1990's the foundation paid some of the costs of broadcasting a series of civics lectures by Mr. Gingrich. The investigation determined that the cable-television broadcasts had been politically partisan. Mr. Callaway said the committee had ignored evidence that they were not.

Tax Return On its face, the I.R.S. reinstatement does not set a precedent or alter the rules that bar tax-exempt groups from raising money for partisan political activity. But some lawyers said the decision could have far broader significance because it could permit Republicans and Democrats to set up their own charitable groups to collect tax-deductible contributions for political purposes without limits on the size of donations or requirements to disclose contributors' identities.

Return Tax "It is a very bad decision," said Larry Noble, executive director of the Center for Responsive Politics, a campaign-finance watchdog group. "Just at a time when Congress was trying to crack down on soft-money loopholes, the I.R.S. is opening up loopholes by letting tax-exempt organizations undertake what was assumed to be improper political activity."

Guide Guide Master Master Tax But Steven T. Miller, director of tax-exempt organizations at the I.R.S., who signed the April letter to Mr. Callaway, said that the decision did not change existing restrictions on tax-exempt organizations. "A client would be ill served by any counsel who advised them that the service has changed in any way, shape or form its position on the prohibitions on charities intervening in politics," he said.

Tax Preparation Even so, several lawyers said deep uncertainty remained about how political fund-raising would change as a result of the I.R.S. decision. In part, legal experts said, there is confusion because I.R.S. officials, citing confidentiality restrictions, have not explained the basis for the decision.

Preparation Tax As a result, the lawyers said, the aggressive dynamics of campaign fund-raising could take hold. Candidates and political groups could use the decision to set up tax-exempt groups to test how much, or whether, the restrictions have really changed.

Employer Tax Guide Mr. Callaway said that he won his case because he had a just cause and had refused to give up. "I had a grievance and I had a right to have my grievance heard," Mr. Callaway said, describing the I.R.S. decision as "total and complete exoneration." After the decision, which was reported on extensively in Roll Call, the Capitol Hill newspaper, Mr. Callaway's friends called him a "tax hero."

Tax Services But some tax lawyers questioned what they said was an unusual decision. They said that it was rare for the tax service to reopen, reconsider and reverse any long-settled decision, like the one against Mr. Callaway.

Services Tax "The bedrock fact is that the I.R.S. doesn't do things like this," said Frances Hill, a tax lawyer and professor at the University of Miami law school who specializes in tax matters. "It's within the rules, but it indicates that the rules don't operate the same for everybody."

Master Tax Guide Before the tax agency decided in his favor, Mr. Callaway had lost two efforts to appeal the adverse I.R.S. action. He had taken his case to the United States Tax Court, a special federal court that decides tax disputes, and to the United States Court of Appeals for the 11th Circuit, in Atlanta, which refused to review the tax court's decision.

Tax Attorney The reversal was unusual in still another respect. It followed a review of Mr. Callaway's case by a little-known special unit within the I.R.S. called the Office of Independent Review.

Attorney Tax "I've been in practice in this area for 20 years and it would not have occurred to me that this avenue would be available to try to restore the tax-exempt position of a client of mine who had been revoked," said Gregory L. Colvin, a lawyer in San Francisco.

Guide Law Tax Under the law, tax-deductible contributions, like those given to organizations like the Abraham Lincoln group, cannot be used for noncharitable activities like partisan political projects. The ethics inquiry found that, in part, Mr. Gingrich's lectures were a means to develop and disseminate a political message at a time when Mr. Gingrich was trying to build a Republican majority in the House.

Tax Accountant Mr. Callaway said he had not asked Mr. Gingrich or any friends in the Bush administration to intercede on his behalf but had called Representative Mac Collins, Republican of Georgia, who is a member of the Ways and Means Committee, which operates as a Congressional watchdog of the I.R.S.

Accountant Tax "If that's political influence, that's political influence," Mr. Callaway said of his calls to his representative.

Circular Employer Tax Guide Mr. Callaway said that Mr. Collins had arranged a meeting for him with Representative Amo Houghton, Republican of New York.

Income Tax A spokesman for Mr. Houghton, chairman of the Ways and Means oversight subcommittee, said that Mr. Houghton had met with Mr. Callaway and Mr. Collins in October 2001. Mr. Houghton, the aide said, referred the matter to the staff of the subcommittee, which concluded that there was no reason for any action by the subcommittee.

Us Master Tax Guide Mr. Callaway said that Mr. Collins had telephoned Charles O. Rossotti, the commissioner of the I.R.S. until he stepped down in December after a five-year term. Mr. Rossotti said in a telephone interview that he would not discuss any matter regarding an individual taxpayer.

Property Tax Mr. Collins's exact role remains hazy. Mr. Collins did not respond to a request made to an aide for comment, and three subsequent phone calls to Mr. Collins's office over three weeks were not returned. I.R.S. officials said it was not unusual for lawmakers to ask the agency to review their constituents' tax problems.

Irs Tax Form Mr. Miller denied that any political pressure had been exerted on the tax agency and said the I.R.S. had stringent rules to insulate employees from political influence.

Form Irs Tax "I've never been involved in a case in which it's had an impact one way or another on the service's deliberations," Mr. Miller said.

Tax Guide For Trader Mr. Miller said the Callaway case was not the only matter considered by the independent review office, which was set up in 1999 to review contentious or complex cases. He said he agreed to take a fresh look, referring the Callaway case to Thomas D. Terry, senior technical adviser to the division commissioner, who conducted the analysis.

Online Tax In an interview, Mr. Terry said he could not discuss specifics but said the review process "is absolutely not influenced by any political activity whatsoever in any matter."

Guide Tax James M. Cole, a lawyer and the special counsel who conducted the Gingrich inquiry, said that there was no doubt that the Abraham Lincoln organization had violated its charter as a tax-exempt organization. Mr. Cole's inquiry found that tax-deductible contributions raised by the group were improperly turned over to Gopac, the political organization led by Mr. Gingrich. But Mr. Callaway long disputed that assertion.

Tax Deduction By David Johnston
New York Times - 6/8/2003

Topic: Campaign Finance Reform

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