The Cold War ended more than 20 years ago, but the battle against global communism rages on – at least in the pages of the Internal Revenue Code. Since the early 1990s, Congress has repealed numerous laws that were once intended to thwart the international communist conspiracy.
But along the way, lawmakers forgot a few, including at least two provisions of the tax law. One makes life harder for contemporary Communists. The other might be doing them a favor.
Internal Revenue Code section 170(k) specifically disallows “deductions for contributions to or for the use of communist controlled organizations.” The code itself does not explain how to identify those organizations, instead relying on a cross-reference to the Internal Security Act of 1950. But the relevant section of that law has long since been repealed, leaving the tax provision in a sort of legal limbo.
It’s unlikely that today's Communists are suffering as a result of this oversight. Especially since the Subversive Activities Control Board – the government panel responsible for identifying and registering Communist organizations – disappeared during the Nixon administration. No list of Commie organizations, so no list of disallowed charitable organizations.
Yet the provision lives on, both within the code and in various IRS publications designed to explain the code's notoriously confusing statutory language. “You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions,” the IRS makes clear in its annual Publication 17, “including Communist organizations.”
Don’t blame the IRS – it’s Congress that forgot to change the law.
Lawmakers also forgot to repeal a provision of the tax law exempting employees of Communist organizations from having to pay Social Security taxes on their wages. (They are similarly forbidden from collecting Social Security benefits derived from those wages, since wages and benefits are linked for all of us.)
When enacted, the Social Security provision was intended to be a punishment; lawmakers didn’t think people trying to overthrow the government should be able to participate in that same government’s premier social program. In fact, the provision was prompted by press reports that jailed Communists were happily collecting Social Security checks while sitting in their cells.
But today, it’s hard not to wonder if young Communists might not actually welcome their banishment from Social Security. As tax lawyer Libin Zhang has pointed out:
- What was a penalty in the 1950s might be a blessing today. Younger employees nowadays might prefer to forgo paying Social Security Tax and give up on the fragile likelihood of receiving Social Security checks in their retirement.
Of course, young Reds might have a hard time using this tax break since, once again, the tax law depends on a cross-reference for its definition of a “Communist-action organization, a Communist-front organization, or a Communist-infiltrated organization.” The reference is meaningless, since no one is keeping lists of those organizations anymore (at least not officially).
You never know, of course. As Zhang suggests, “An employer could voluntarily send in a registration form and see how it goes.” But if they're going to give it a shot, they better move fast. In a sign that lawmakers are finally catching up with current events, the congressional Joint Committee on Taxation has identified both the charity disallowance and the Social Security exemption as examples of "potential deadwood" lurking in the code.
Looks like the Cold War might finally be ending. Let's hope the IRS gets the word this time.