Absolutely.  Section 113.2(c) of the Regs, for example:

"(c) May be transferred without limitation to any national, State, or local committee of any political party;"

Whatever speculation there may be about campaign funds, one thing is clear -- the advantages of being an incumbent extend more broadly to one's party, and nobody on the inside forgets where those checks come from.

 --Kevin

Posted at May 13, 2007 1:00 PM in response to Congress: Putting Their Money Where Their Mouth Isn't?

With respect to the rule described in comments above, regarding politicians being able to take their war chests for personal use so long as they pay taxes, I don't think that's correct.

Conversion of campaign funds to personal use is presently prohibited by 2 U.S.C. 439a(b) and 11 C.F.R. 113.2.  Interestingly, the latter regulation allowed for such conversion (though partially restricted) for funds held before the end of 1989, which might be what the comments here are based on.  I believe that allowence ended, however, for all member serving in the 103rd Congress and beyond.  See 11 CFR 113.2(e).

Interestingly, a loophole appears to exist in the use restrictions for campaign accounts.  2 U.S.C. 439a(a)(6) is a catch-all provision that allows use of the funds for "any other lawful purpose" other than the restrictions on conversion to personal use.  Also, section (a)(3) expressly allows for the funds to be transferred to 170(c) charitable organizations.

Although I've never done the research, I'd be interested in knowing how this catch-all provision has been used by candidates/officeholders and interpreted by the FEC in its advisory opinions. 

I'd also be curious to know how frequently candidates have established charitable foundations or other organizations -- particularly where they hold salaried positions within those organizations -- that receive campaign money.

--Kevin

Posted at May 13, 2007 11:45 AM in response to Congress: Putting Their Money Where Their Mouth Isn't?

PurpleState, disregard the estate tax for the moment.  I'm curious what you think of the step-up phase out included in Section 1022 (at $1.3 million).  I have the same dynastic concerns as you, but I see the value in the step-up for middle-income families.  What about a new phase-out that preserves the basis step-up but for a lower aggregate amount of assets?  Let's say something like $50,000 of basis step-up, with the remainder being subject to a carryover basis?

Posted at May 6, 2007 11:54 AM in response to The History and Future of the Estate Tax

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Posted at May 6, 2007 9:14 AM in response to The History and Future of the Estate Tax

I expected this response, and to some extent I agree with it.  But the same can be said about an enormous amount of tax policy.  The mortgage interest deduction, exemption for primary home sales, and other provisions are biased in favor of homeownership.  The student loan interest deduction is a bias in favor of student loans versus other loans.  And on, and on...

But for all the reasons I mentioned above, the basis step-up is something that I support.  Maybe I'll change my mind during the next administration, when my tax dollars are being spent (hopefully) by a better administration, but for now I'll stick to this opinion.

Posted at May 6, 2007 9:13 AM in response to The History and Future of the Estate Tax

I wasn't referring to the estate tax itself, but rather to the basis step-up under Section 1014 of the Tax Code.  The step-up generally applies to every decedent's transfer of property with untaxed accrued gains -- regardless of the income of the decedent or the recipient.  A decedent who doesn't even come close to qualifying for the estate tax might still (and often do) have assets that fall under the basis step-up rule of Section 1014.

For example, imagine that my father has assets that in the aggregate are valued at only $50,000.  One of those assets is shares of a stock that originally cost him $100.  Now imagine that he never sold that stock but instead has held it for many years while it appreciated in value so that today it is worth $10,000 FMV.  If he were to gift it to me tomorrow (while alive), when I eventually sold it I would be taxed on the $9,900 in capital gains that accrued while he held it.  That's because I take his carry-over basis in the stock. 

If, however, he died and the stock passed to me as his beneficiary, I would receive it (pursuant to Section 1014) under a stepped-up basis, which essentially means the $9,900 in accrued capital gains would be erased.  My basis in the stock becomes the FMV at the time of transfer ($10,000), so when I sell it I would only pay taxes for gains beyond the original $9,900.  Assuming a 15% tax on long-term capital gains, this scenario under Section 1014 would result in a real tax savings to me of 15% of $9,900 -- a $1,485 savings. 

You can see, then, why Section 1014 is beneficial across-the-board, but particularly for middle class families.  Conisder first the polar ends of the wealth divide.  Families of lower means don't tend to have significant assets with appreciated but unrealized value to transfer on death.  Wealthy families on the other hand will usually have such assets, but they also have access during life to very talented estate planners who could work around tax liabilities and help shield assets if the Section 1014 rule were eliminated. 

The bulk of the impact would therefore seemingly hit middle class families who typically hold at least modest amounts of appreciated assets at the time of death.  Although not subject to the estate tax, these heirs would face large tax bills upon realizing any of the decedent's appreciated gains should Section 1014's basis step-up rule be eliminated.  In this sense, repeal of Section 1014 would be the equivalent of a death tax for all income levels. 

Granted, Tijana will probably point out that we are sometimes overly averse to termination of a tax benefit (like 1014) because of the rhetorical force of such changes.  Ending a benefit looks like a tax increase but is in fact merely a regression to the mean.  But once something like Section 1014 becomes entrenched the endowment effect kicks in and baselines are readjusted. 

Maybe I'm a hypocrite, because the same could be said about Bush's tax cuts -- they've become the new baseline, so repealing them will look like tax increases -- but I'm all for repealing those tax cuts. 

Regardless, though, my intuition (and keep in mind that I'm no tax expert) is that Section 1014 overlaps with other tax rules enough that experts could help rich families avoid feeling the sting of losing the benefits of a basis step-up.  For the rest of us who rely on Section 1014 but don't have that knowledge or access to estate planning, losing it would be quite damaging.

One additional note: Section 1014 sunsets after 2009, but it's scheduled to be replaced with 26 U.S.C. 1022.  Section 1022 is a bit more complex, but it essentially restricts the basis step-up described above to $1.3 million in assets.  Anyone possessing assets above that amount that would previously have received a stepped up basis upon transfer by death will only get the benefit of the rule for the first $1.3 million in assets.  I don't have any problem with Section 1022, because it certainly doesn't impact middle or lower class families.  I will, however, keep my eye on the issue and see if a general repeal of Sections 1014/1022 (eliminating the basis step up for all assets) is put on the table.  That's where I'll start to get worried.

Posted at May 5, 2007 10:33 PM in response to The History and Future of the Estate Tax

Posted at May 5, 2007 2:29 PM in response to The History and Future of the Estate Tax

The Petition Clause point is meant as food for thought, not really as a viable litigation option.  Although I think it's interesting on a theoretical level, I have little doubt that it wouldn't be received with open arms by courts (let alone the Court).  Traditionally, the clause addresses actual physical access to the courthouse, at least as far as I recall based on my (minimal) knowledge of the case law surrounding the clause.  Nevertheless, I think it's worth some thought.

Posted at February 24, 2007 3:27 AM in response to The Problem with Credit Card Penalities

Thanks for the link post.

I'll add here that Seana Shiffrin was kind enough to contact me regarding this post, and she provided some excellent feedback on my original points.  I extend my thanks, and I note for our readers that I'll be exploring some of these problems and issues in the coming months as I dig deeper into the topic.

Posted at February 24, 2007 3:23 AM in response to The Problem with Credit Card Penalities

Regarding the initial point, relating to Jason's post, the adhesion contract issues -- including the fact that the terms are disclosed after contract formation, which seems absurd -- is a great point.  Unfortunately, the Supreme Court hasn't agreed.  Take a look at Carnival Cruise Lines v. Shute, 499 US 585 (1991), for example, which is a fascinating (if upsetting) read.  Then consider things like concert tickets and airline tickets, where the terms are printed on the ticket itself and aren't available to the consumer until after purchase... but the tickets are non-refundable.  Very interesting, no? 

Posted at February 23, 2007 12:08 PM in response to The Problem with Credit Card Penalities