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Foxnews...
Republican
Lawmakers Question AARP’S Tax-Free Profits From Product Endorsements
By Jim Angle
December 26, 2011
Three House Republican lawmakers are asking the IRS to explain how
nonprofit seniors group AARP is able to shield hundreds of millions of
dollars from tax levies even though, they say, the group is effectively
in “day-to-day control” of products offered by private firms with the
AARP stamp of approval.
Rep. David Reichert, R-Wash., said companies that use AARP’s brand to
sell everything from health insurance to hearing aids are helping the
seniors’ group make huge profits. All the while AARP’s profits gain
tax-exempt status.
“They’re really trying to manage these companies to increase their
revenue,” said Reichert, one of the House Ways and Means Committee GOP
members to sign onto a letter sent to the IRS.
Republican critics note AARP’s income from United HealthCare alone
skyrocketed from 2007 to 2009, even as the recession was hitting,
leaping from $284 million to $427 million during that time, a 50
percent jump. In 2010, those revenues soared even higher -- to $670
million.
“Those increases, I think, are dramatic,” Reichert told Fox News.
A longtime Democratic tax lawyer says “royalties,” or “passive income”
are a common tool for nonprofit groups to earn revenues, and pointed to
the Sierra Club as another beneficiary of “arms-length” arrangements.
“That is the classic royalty situation where the Sierra Club in effect
simply makes its mailing lists available to other charities in return
for royalty,” said attorney Bill Josephson. “I don’t have any problem
with that, nor does anybody else.”
But Republicans say AARP’s deal with United HealthCare is different,
and in the letter to the IRS, they point to what they say are several
examples of AARP’s daily influence over the business, including its
“authority over United’s ‘operating plan’” and its ability to “approve,
modify on a line-by-line basis, or provide specific direction to
United.”
Josephson said if that’s indeed the case, “the kinds of hands-on
relationships (AARP) has with its supposedly arms-length insurance
companies are hardly passive.”
And if it’s not passive, lawmakers contend, the income is taxable.
AARP did not make anyone available for an interview, but did send a
letter to Fox News from Kevin Donnellan, AARP executive vice president
and chief communications officer, who wrote that AARP’s chief aim is
upholding its standards, and its actions are a detailed commitment to
quality control on products offered in its name.
“We have spent more than five decades proving our commitment to helping
older Americans obtain quality, affordable health so, of course, we
take seriously how others use our name,” Donnellan wrote. “We are
disappointed that this work should be the subject of congressional
criticism.”
AARP makes the majority of its revenues from United’s supplemental
insurance policies to seniors, including what is known as Medigap,
which covers things for which Medicare does not pay. One of AARP’s many
ads tells seniors that the insurance can help them protect themselves
“from some of what Medicare doesn’t pay.”
“Save up to thousands of dollars in potential out-of-pocket expenses
with an AARP Medicare Supplement Insurance Plan,” the ad says.
Donnellan wrote that the group’s supplemental plans “help many of the
sickest and most disadvantaged seniors who would otherwise be denied
insurance by accepting more than 99 percent of applicants, which is far
higher than the market standard.”
But AARP’s support for the Obama administration’s new health care law,
which calls for $500 billion in cuts to Medicare, critics say, makes it
all the more likely people would need supplemental insurance, something
AARP stands ready to provide.
“That move alone, as seniors began to go to Medigap insurance,
increases AARP’s revenue over a 10-year period by $1 billion. And we
think that’s just a little bit suspicious,” Reichert said.
See story and video, plus other articles, at Foxnews
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