Random Acts of Audit - State and Federal Communications

December 26, 2012  •  

Random Acts of Audit

If you are registered as a state lobbyist, there is a good chance you have received notification for the state to conduct an audit on your lobbying reports. California, Indiana, Pennsylvania, New York, West Virginia are just a few states with random acts of audit.

But, are you ready for an IRS audit of your federal reports?

According to State and Federal Communications friend and client, Ken Gross from Skadden Arps, about 75 percent of the filings to the US Secretary of the Senate are filed using the LDA method, as opposed to the IRS method. That’s fine in practice, but your organization’s IRS filings need to show everything but lobbying activities.

When we are speaking with clients and audiences we emphasize the importance of keeping track of time, not only for your lobbying reports, but for your company’s filing with the IRS since the time devoted for lobbying is not deductible. It is impossible for anyone to spend 100% of time on lobbying because there are other administrative things people have to do, meetings to attend, and conferences to attend.

It is important companies keep two sets of books.

No, this is not The Producers where Matthew Broderick has two books—one to show the government and one not to show the government. It allows your organization to file its LD2 report without having to disclose lobbying expenditures for state and grassroots activities and still have the information to include in the IRS filings.

Take the opportunity to ask the accounting department if they are keeping track of time two different ways to insure your LD2 reports are accurate and, more important, when the IRS is a’knocking you can rest assured your reports are A-OK.

Until next month, I wish you all a Merry Christmas and Happy New Year.


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State and Federal Communications, Inc. provides research and consulting services for government relations professionals on lobbying laws, procurement lobbying laws, political contribution laws in the United States and Canada. Learn more by visiting stateandfed.com.

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