The local fund-raising committee for the Democratic National Convention still has not received tax-exempt status from the IRS, and that could affect donors who want tax deductions.
The Philadelphia 2016 Host Committee, which is responsible for raising at least $60 million for the July 25 to 28 convention at the Wells Fargo Center, has not received the designation under section 501(c)3 of the tax code.
The committee is trying to close a funding gap of at least $4 million less than four weeks before the start of the convention. It applied for tax-exempt charity status in May 2015.
"A year is extraordinary," said Marcus Owens, a Washington tax lawyer who ran the IRS tax-exempt organizations division for a decade. He said the 501(c)3 application process typically takes three months.
"That tells me the IRS has issues with it of some sort," Owens said. "Or the IRS is internally struggling with the political aura of the convention."
By contrast, Cleveland's host committee for the July 18 to 21 Republican convention received 501(c)3 status in August 2014, soon after it applied.
"I don't know what's taking so long," said Anna Adams-Sarthou, spokeswoman for the Philadelphia committee.
In March, Adams-Sarthou said the IRS had put the application on hold because of "technical questions." On Thursday, she declined to specify those questions or anything else the IRS flagged. She also declined to make the lawyers who prepared the application available for comment.
The IRS can only confirm whether an organization is tax-exempt. An IRS official confirmed that the committee is not exempt and declined to comment on the application's status.
Of the $60 million the committee is expected to raise, $46.5 million would be in cash and the rest from in-kind contributions, Adams-Sarthou said. The committee is counting on $10 million from the state; after that, $4 million would remain to be raised.
Owens said the IRS mainly looks at how an applicant plans to spend its money. He said a political convention host committee would have to show that funds would mostly be used for city infrastructure projects, such as filling potholes and fixing streetlights.
"It can solicit money to do public projects for the outside of the convention hall and not the inside," Owens said.
The committee has said it is responsible for rental and preparation of the Wells Fargo Center, transportation and office space for individuals working on the convention, communications, and technology.
If the committee wins tax-exempt status, the designation would be retroactive to when it first applied, in May 2015. If the organization does not receive 501(c)3 status, donors cannot claim a charitable contribution on their taxes.
Adams-Sarthou said that if the committee is denied a 501(c)3 exemption, it would convert to a 501(c)6 organization - a tax-exempt designation used for business leagues and chambers of commerce that promote common business interests.
If the host committee does wind up with that type of exemption, Owens said, businesses could deduct their contributions as business expenses but individuals could not.
"Donors are faced with a conundrum to file contributions and not knowing if their contributions are going to be deductible or not," Owens said.
The host committee said less than 2 percent of its cash donations are from individuals. The committee has refused repeated requests to disclose its list of donors, saying it will do so 60 days after the convention, as required by the Federal Election Commission.
Adams-Sarthou said the lack of a tax-exempt designation has not deterred donors.
"They are aware that we don't have a determination yet," she said. "But so far, they have been receptive and we are still able to bring money in."