TUESDAY, Feb. 20 — Lansing Mayor Andy Schor said today he will file reports with the IRS for his fund to pay his “incidental expenses” of being in office.
Schor said still doesn’t know if he’s actually required to do so as he awaits an attorney’s opinion. His decision to retroactively file quarterly expense reports follows stories published in both City Pulse and the Lansing State Journal that raised several questions about the fund and how it was never reported to the federal government.
The “Schor Lansing Fund” raised nearly $170,000 after Schor was elected mayor in November 2017. He established the account in 2013 as a state representative. Until he was elected mayor, though, Schor said the fund raised below $25,000 a year — the federal threshold for having to report his contributions and expenditures.
The fund, however, quickly ballooned to over $100,000 within the mayor’s first week of office. He said he “didn’t think to check on whether we were required to file.” Subsequently, the IRS has no record of the account.
Funds such as Schor’s, known as 527 accounts, are widely used by politicians. Donations and expenditures aren’t capped, and they operate outside the bounds of typical campaign finance laws.
Schor cited a possible exemption to the filing requirements to justify his continued uncertainty. The instructions on IRS form 8871 — “Political Organization Notice of Section 527 Status” — exempts a “political committee of a state or local candidate.” He said the exemption makes mandated filing a legal grey area.
Schor also cited the “NERD Fund” as a precedent. Former Gov. Rick Snyder created a secret fund to pay for expenses he deemed incidental to being in office. The fund raised over $2 million in three years, but Snyder shut it down in 2013 following criticism over not revealing contributors.
A Washington expert on political funds said he does not see a reason Schor would be exempt from filing such reports.
“If these reports aren’t being disclosed to another state agency, I don’t see any reason why this organization shouldn’t be filing its receipts with the IRS,” said Austin Graham, legal counsel for the Campaign Legal Center, a national watchdog on political spending. “It certainly seems like an unusual situation.”
Schor gave City Pulse a detailed expense report last week after he was asked about the fund. It shows he has raised $169,825. Less than one week after Schor was elected mayor, a deluge of tax-free donations from developers, lawyers, lobbyists and labor unions pushed the Schor Lansing Fund well into six digits.
Three local unions pitched in $10,000 each. The local tech firm Dewpoint, the largest single giver, donated $10,500. The city, for context, has spent at least $1.25 million on business with Dewpoint. Other donors chipped in thousands more over the year.
Schor spent about $60,000 on his inauguration ceremony and party. Another $1,131 covered a conference in Washington and $911 paid for food at Lansing Lugnuts games. About $10,000 more was spent at local fundraisers or donation-based dinner events. Another $100,000 still remains in the account.
Schor said Monday that if he is required to file, he will seek a waiver from the IRS for penalties for not filing. Those penalties, according to the federal tax code, could rise as high as $10,000 for each missed quarterly report with daily fines assessed for every day the account was found to be out of compliance with IRS reporting requirements. The IRS also requires holders of 527 accounts to file an annual 990 report as a nonprofit.
“If we don’t get a waiver and are deemed to not be exempt, we will pay the penalties.”
However, a local political consultant said Schor’s fund may not face any fines.
“The IRS is horribly understaffed,” said Adrian Hemond, who heads Grassroots Michigan. “This isn’t just about Andy Schor. It’s an ongoing finance issue. This could be a conscious choice coming from the Trump administration to not enforce these things, or they could just be understaffed.”