145 T.C. 278 (T.C. 2015), 7043-07, Parks v. Commissioner of Internal Revenue

Docket Nº:7043-07, 7093-07
Citation:145 T.C. 278, 145 T.C. No. 12
Opinion Judge:GALE, Judge:
Party Name:LOREN E. PARKS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent; PARKS FOUNDATION, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Kevin O'Connell, Steven B. Hval, and Tara Lawrence, for petitioners. Mark Alan Weiner, for respondent.
Case Date:November 17, 2015
Court:United States Tax Court
 
FREE EXCERPT

Page 278

145 T.C. 278 (T.C. 2015)

145 T.C. No. 12

LOREN E. PARKS, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent; PARKS FOUNDATION, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Nos. 7043-07, 7093-07

United States Tax Court

November 17, 2015

Decisions will be entered pursuant to Rule 155.

SYLLABUS

PF is a corporation exempt from income tax under I.R.C. sec. 501(c)(3) and classified as a private foundation under I.R.C. sec. 509(a). P is a foundation manager of PF as defined in I.R.C. sec. 4946(b). During its taxable years ended Nov. 30, 1997 through 2000, PF made cumulative expenditures of $639,073 to produce and broadcast 30- and 60-second radio messages. As a foundation manager, P agreed to the making of the expenditures. R determined that the foregoing expenditures were " attempts to influence legislation and/or the opinion of the general public" and therefore taxable expenditures, rendering PF and P liable for excise taxes under I.R.C. sec. 4945(a)(1) and (2), respectively. R further determined that because the taxable expenditures were not timely corrected, PF and P were also liable for excise taxes under I.R.C. sec. 4945(b)(1) and (2), respectively.

Held: Pursuant to the regulations interpreting I.R.C. sec. 4945(e), a communication refers to a ballot measure if it either refers to the measure by name or, without naming it, employs terms widely used in connection with the measure or describes the content or effect of the measure.

Held, further, PF's expenditures for the radio messages were taxable expenditures under I.R.C. sec. 4945(d)(1) or (5) to the extent redetermined herein; consequently PF is liable for excise taxes under I.R.C. sec. 4945(a)(1) to the extent redetermined herein.

Held, further, P is liable for excise taxes under I.R.C. sec. 4945(a)(2) to the extent redetermined herein.

Held, further, PF and P are liable for excise taxes under I.R.C. sec. 4945(b)(1) and (2), respectively, to the extent redetermined herein.

Held, further, the application of I.R.C. sec. 4945 and the regulations thereunder to PF and P does not violate the First Amendment to the U.S. Constitution, and the regulations are not unconstitutionally vague.

Kevin O'Connell, Steven B. Hval, and Tara Lawrence, for petitioners.

Mark Alan Weiner, for respondent.

OPINION

Page 279

GALE, Judge:

These cases were consolidated for trial, briefing, and opinion. Respondent determined excise tax deficiencies for petitioner Loren E. Parks and petitioner Parks Foundation (Foundation) as summarized in the following tables.1

Mr. Parks, Docket No. 7043-07

Excise tax
Year Sec. 4945(a)(2) Sec. 4945(b)(2)
1997 $1,625 $10,000
1998 5,000 10,000
1999 825 10,000
2000 5,000 10,000
Page 280 Foundation, Docket No. 7093-07
Excise tax
TYE 11/30 Sec. 4940(a) Sec. 4945(a)(1) Sec. 4945(b)(1)
1997 -- $6,500 $65,000
1998 $1,979 20,000 200,000
1999 -- 3,301 33,012
2000 -- 34,106 341,062
The issues for decision2 are: (1) whether expenditures by Foundation during its years at issue for the production and broadcast of 30- and 60-second radio messages were taxable expenditures within the meaning of section 4945(d), making Foundation liable for excise taxes imposed by section 4945(a)(1); and, if so, (2) whether Foundation is liable for additional excise taxes imposed by section 4945(b)(1) for failing to timely correct the expenditures; (3) whether Mr. Parks is liable for excise taxes imposed by section 4945(a)(2) because he knowingly agreed to the making of the expenditures; (4) whether Mr. Parks is liable for additional excise taxes imposed by section 4945(b)(2) for refusing to agree to correction of the expenditures; and (5) whether section 4945 and the regulations thereunder as applied to petitioners violate the First Amendment to the Constitution. Background These cases were submitted for decision without trial under Rule 122. The stipulation of facts and the accompanying exhibits are incorporated herein by this reference. At the time the petitions were filed Mr. Parks resided in Nevada and Foundation had its principal place of business in Nevada. Foundation's Status, Organization, Support, and Expenditures Foundation's predecessor was incorporated in Oregon in 1977.[3] In 1979 the Internal Revenue Service (IRS) recognized Page 281 Foundation as a tax-exempt organization described in section 501(c)(3) and further classified it as a private foundation as defined in section 509(a), a classification it retained throughout the years at issue. Mr. Parks has been the sole contributor to Foundation since its incorporation.4 During the years at issue Foundation was governed by a board of directors consisting of Mr. Parks and two of his adult sons. The primary purposes of Foundation, as set out in its restated bylaws, include: (1) enhancing and promoting sport fishing and sport hunting; (2) promoting education by researching and presenting to the public issues of general interest or concern and by supporting alternative educational programs and institutions; and (3) supporting charitable organizations and activities, the goals of which Foundation wished to encourage and promote. In its taxable years ended November 30, 1997 through 2000,5 Foundation expended $65,000, $200,000, $33,011, and $341,062, respectively, to produce 30-and 60-second radio messages6 and broadcast them on commercial radio stations in Oregon (radio messages). Mr. Parks approved all the foregoing expenditures. All were made to Gregg K. Clapper, the Clapper Agency, or radio stations as Mr. Clapper directed.7 Mr. Clapper or the Clapper Agency produced the radio messages and arranged for their broadcast. The parties have stipulated that Mr. Clapper has a long history of involvement with Oregon politics and that the Clapper Agency produces and arranges for the broadcast of political advertisements. Page 282 Oregon Ballot Measure Procedures The Oregon Constitution confers upon Oregon citizens the power of initiative, entitling them to propose statutes or amendments to their constitution (referred to as " measures" ) by petition, and to enact or reject them in elections, independent of the Oregon Legislative Assembly. Or. Const. art. IV, sec. 1. Amendments to the Oregon Constitution can also be proposed by...

To continue reading

FREE SIGN UP