RALEIGH — Rep. Mark Brody announced Sunday that he will file a bill to prompt the IRS to look into whether the NCAA and ACC violated their tax-exempt status last year over House Bill 2.
Both the NCAA and ACC were among a host of businesses and organizations that vowed to boycott North Carolina over House Bill 2. The NCAA moved seven championships for this academic year to other states in September and the ACC later said it would move its 10 championships from North Carolina.
By doing so, both organizations have committed “financial extortion,” according to Brody, and prompted his decision to file the bill. He announced the decision in a Facebook post on Sunday.
The representative said that both the NCAA and ACC both jeopardized their tax-exempt status according to IRS rules.
“As far as the bill itself with the tax-exempt status is the only way that we can fight the economic extortion that goes along with the move by the ACC and the NCAA to force us into — force us being the General Assembly — into passing social legislation that has literally nothing to do with their core mission of their organizations,” Brody said. “And that’s what it is, is we believe — or I believe and my sponsors believe — that they stepped out of bounds and out of the scope of what they’re allowed as a tax-exempt organization by not only lobbying for something that’s not anywhere near their core principles and values, but that they’re trying to usurp the proper function of the General Assembly, which is to protect privacy and safety rights of the citizens. They have no business being in there, but yet they’re pushing this social legislation and backing it up with extortion.
“As far as the timetable goes on how we want to move it, that’s the next step, to — once it gets read in, we’ll get our committee assignment and from there we’ll move on,” Brody continued. “But we’re hoping the public will get more involved in this issue and kind of drive it all.”
His bill would push the state to ask the IRS to investigate.
“Number one, you’ve got to put in perspective, this bill allows the General Assembly to file a formal complaint with the IRS,” he said. “The IRS will then make the determination to do the investigation and make the determination. It’s not like a lawsuit where you have to present your case or anything, this is where we present our case in the form of a complaint form and the IRS takes it from there.”
The IRS doesn’t have a definite metric of how much lobbying is “too much.”
“In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying),” the IRS states on its website. “A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.”
“An organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation,” the IRS adds. “Organizations may, however, involve themselves in issues of public policy without the activity being considered as lobbying. For example, organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an educational manner without jeopardizing their tax-exempt status.”
“What the IRS uses is ‘substantial,’” Brody said of the law. “They use the word ‘substantial’ and what they say is that you can’t do a substantial part of your organization is lobbying or political activity. For example, if the North Carolina General Assembly says, ‘We’re going to stop funding university athletics,’ well, that would be an appropriate place for the NCAA and their conferences to send somebody here and lobby for, ‘I think that’s a bad idea,” okay? ‘That’s a bad idea.’ But if we also, we’re looking at the word ‘substantial’ meaning, it’s a substantial variation or deviation from their core mission. If you’re a non-profit organization, you have to state your core mission, and you can vary a little bit but if the IRS won’t enforce a substantial variation of their core mission, then what’s the use of limiting the non-profits? I mean, a nonprofit could do anything, even get involved with politics, if you want to vary from your core mission.”
The word “substantial” may be vague.
“The IRS needs to define that, and we’re prompting them, we’re saying, ‘We bring this case before you to define what that means,’” Brody said.
Asked if he believes a ruling in his favor could set a precedent, he said he does.
“I think if the IRS rules it did violate their nonprofit status, I think it would set precedents for every non-profit organization,” he said.
Brody said he anticipates “a lot of support” if the media helps publicize the bill.
“I think the majority of North Carolinians will support this, but I don’t know — a lot of it will be relying on the media to get the message out, to get an accurate message,” he said.
Congressman Richard Hudson, R-Concord, who formerly represented Anson County, voiced a similar belief to Brody’s in a statement issued via email Sept. 14, 2016.
“This is political theatre by the NCAA and ACC,” Hudson said at the time. “If these multi-million dollar, tax-exempt organizations were interested in social change and not making a political statement, they would proceed with their marquee events in North Carolina and enact any transgender bathroom policy they wanted. This blatant political move — less than two months before the election — brings into question their tax exempt status. This is an avenue we intend to explore.”
Late Monday afternoon, Brody said he intended to file the bill that day but was having a delay with a primary sponsor. The bill was not listed on the North Carolina General Assembly’s website among House bills filed that day.
Reach reporter Imari Scarbrough at 704-994-5471 and follow her on Twitter @ImariScarbrough.