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Charles Koch’s audacious new $5 billion political scheme Judd Legum

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Charles Koch in 2015 (Photo by Nikki Kahn/The Washington Post via Getty Images)

Billionaire Charles Koch, who will turn 88 on November 1, is funneling his wealth into two secretive organizations that can continue his right-wing political advocacy for years. Koch structured more than $5 billion in donations to exploit a loophole to allow him to avoid paying capital gains or gift taxes. It’s not surprising that Koch is familiar with the loophole — he spent hundreds of thousands of dollars lobbying to create it. 

According to a profile published Tuesday in Forbes, in 2022, Koch donated $4.3 billion in Koch Industries stock to Believe in People, a newly formed 501(c)4 nonprofit organization. The organization is run by Koch’s inner circle, including Chase Koch, his son, Dave Robertson, co-CEO of Koch Industries, and Brian Hooks, the co-author of Charles Koch’s last book. The organization is so new, it has no publicly available filings.

In 2020, Koch also donated $975 million in Koch Industries stock to CCKc4, another 501(c)4 organization controlled exclusively by Chase Koch. (The organization’s name is his initials.) In its 2020 IRS filing, CCKc4 listed its mission as “N/A.” 

But while little is known about the current activities of Believe in People or CCKc4, as 501(c)4 organizations, a large percentage of their assets — in this case, billions of dollars — can be spent directly on political campaigns. Koch was able to make this money available for political spending without paying a dime in taxes. 

Large donations to charitable causes are not subject to gift taxes. But, after the Supreme Court’s 2010 decision in Citizens United, 501(c)4 organizations began to engage directly in political campaigns, which are not charitable causes. So, by 2015, the IRS said they were considering applying the gift tax to large donations to 501(c)4 groups that were not used for charitable purposes. 

For most people, this would not be a big deal. Today, gifts of up to $17,000 are already exempt from the gift tax, and the overall lifetime gift tax exemption is over $12 million. But if, like Charles Koch, you want to gift $5 billion and make it available for political spending, a gift tax could create a tax bill of nearly $2 billion.

Another option Koch had was giving his stock to a 527 political organization, which have long been exempt from gift taxes. But, under federal law, a gift of stock to a political organization is considered a sale. That means Koch would have had to pay capital gains tax. Further, 527 groups are required to disclose how they spend their money. 501(c)4 groups, on the other hand, can operate almost completely in secret. 

In 2015, former Congressman Peter Roskam (R-IL) proposed the “Fair Treatment for All Gifts Act,” to specifically exempt contributions to 501(c)4 from the gift tax. Politico described it as a “tax exemption for megadonors.” The outlet reported that potential gift tax liability was “seen by fundraising operatives as removing one of the few remaining potential obstacles to unfettered big-money spending by nonprofit groups.” The bill sailed through the House but was stalled in the Senate. 

Charles Koch, through Koch Industries, hired a lobbying firm, Siff & Associates, PLLC, to advocate for Roskam’s bill and related issues. In 2015 and 2016, Koch paid Siff & Associates $180,000 to push for the new gift tax exemption. One of the political organizations Koch created and funds, Americans for Prosperity, also advocated for Roskam’s gift tax exemption. “People and organizations should not be silenced because of their political beliefs — certainly not by applying taxes in an inconsistent way. Your bill would prevent them from doing so,” Americans for Prosperity wrote in a March 12, 2015 letter to Roskam.

Koch wasn’t the only one interested in Roskam’s legislation. Campaign finance experts warned that it would inject even more “dark money” into the political system. But Koch had allies from non-profit groups — and not just on the right. Liberal groups like Human Rights Campaign and Alliance for Justice, signed onto a letter advocating for the gift tax exemption, claiming it would “safeguard taxpayers and nonprofit organizations against unfair or biased treatment by the IRS in the future.”

Ultimately, Koch’s lobbying efforts paid off. Roskam’s legislation was quietly included in a must-pass omnibus spending bill in December 2015. Now, Charles Koch is taking full advantage of the loophole he helped create. 

Technically, the 501(c)4 groups recently created by Charles Koch can spend money on political campaigns as long as it is not their “primary purpose.” But practically, Koch and his associates will be able to use the entities to spend as much money as they want on political campaigns without disclosing their spending or paying taxes. 

Craig Holman, a campaign finance expert at Public Citizen, says that the IRS has essentially given up on enforcing limits on political activities. There are many non-profit organizations today, Holman told Popular Information, whose “primary purpose is electioneering activity.” But the IRS allows them to “continue to claim nonprofit status.” Holman described the 2015 passage of the gift tax exemption as “a case of big money winning.” 

Charles Koch’s bogus political rebrand

Koch has spent millions propping up extremist groups like the Tea Party and far-right political candidates. But, following the 2020 election, he attempted a political makeover. In a November 13, 2020, profile in the Wall Street Journal, Koch claimed that he would no longer engage in partisanship. Instead, he would devote his resources “to building bridges across partisan divides to find answers to sprawling social problems.” He described his political network’s efforts to elect far-right Republicans as a “screw-up” that created “a mess.” Moving forward, Koch said, he would “work together with Democrats and liberals.”

This did not prove to be the case. Over the next two years, Koch’s main political spending vehicle, Americans for Prosperity Action (AFP Action), spent $63,401,608 supporting Republican candidates for federal office, $5,576,858 opposing Democratic candidates, and zero dollars supporting Democratic candidates. 86.7% of AFP Action’s spending bolstered candidates who were endorsed by Trump, according to a review of campaign finance data by Popular Information. 

Overall, AFP Action spent 95% of its money on Republican candidates who were formally endorsed by Trump or who actively campaigned as Trump supporters. AFP Action spent just $3.5 million on candidates not aligned with Trump. In addition, Koch Industries PAC, which is also controlled by Charles Koch, was the top corporate supporter to members of Congress who voted to overturn the election.  

Nevertheless, the media continues to promote Charles Koch as if he has evolved into a non-partisan truthteller. “What I think is very dangerous, very destructive for our country is that both parties are becoming increasingly authoritarian,” Koch says in his most recent Forbes profile. There is no mention of Koch’s continued monolithic support of Republican candidates, including Trump’s strongest political allies. 

The other billionaire

Koch is not the first right-wing billionaire to exploit this loophole. In 2020, Barre Seid, a conservative electronics magnate, transferred ownership of his company, Tripp Lite, to a newly-created trust led by right-wing activist Leonard Leo. The Marble Freedom Trust was registered as a 501(c)4 nonprofit. 

When the power management company Eaton purchased Tripp Lite nearly a year later, Leo’s trust made $1.65 billion from the sale. At the time, this windfall was described as “the largest known donation to a political advocacy group in U.S. history.” ProPublica reports that the “structure of the donation allowed Seid to avoid as much as $400 million in taxes,” enabling Leo to net as much as possible. An analysis from the New York Times found that “the $1.6 billion that the Marble trust reaped from the sale is slightly more than the total of $1.5 billion spent in 2020 by 15 of the most politically active nonprofit organizations that generally align with Democrats.”

A co-chairman of the Federalist Society, Leo has played an instrumental role in appointing conservative judges to federal courts for years. Leo has also helped direct millions towards rolling back abortion rights, “stopping ‘woke’ culture, ending federal regulations on climate change, and limiting voting rights.” The full scope of Leo’s ambitions for Marble Freedom Trust remains unknown.

 

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Are U.S. Airlines ‘Playing Into Iran’s Game’? Jay Solomon

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For most of the past year, none of the three major U.S. carriers—United Airlines, American Airlines, or Delta—have flown to Israel. (Photo by Jack Guez via AFP)

Iran’s Supreme Leader, Ayatollah Ali Khamenei, defines his campaign against Israel as being won as much through economics and psychological coercion as through victories on the battlefield. And nearly a year into the Jewish state’s war with Hamas, Iran’s military proxy in the Gaza Strip, Khamenei’s strategy appears to be advancing—with an assist from the U.S. airline industry.

For most of the past year, none of the three major American carriers—United Airlines, American Airlines, or Delta—have flown to Israel, citing the Gaza war and the security threats posed by Tehran and its military allies. And none of these airlines have offered definitive time frames for when their flights might resume. This has left Israel’s national carrier, El Al, as the only direct connection between the country and its closest ally and economic partner on the other side of the world, and has sent airfares between the U.S. and Israel skyrocketing.

In recent days, the cost of a round trip economy flight to Tel Aviv from New York on El Al is around $2,500, according to Israeli travel agencies, up from around $899 before October 7, 2023. United, American, and Delta previously all had at least one daily flight to Israel from New York or Newark, and together served Israel three times a week from Boston, Dallas, Miami, Chicago, and Washington D.C.

The suspension of the American flights is feeding into the economic and diplomatic isolation that Iran’s leaders are seeking, according to Israeli political and business leaders. “The American carriers are playing into Iran’s game,” said Eyal Hulata, who served as national security adviser to two Israeli prime ministers, Naftali Bennett and Yair Lapid, from 2001–2003. 

Jerusalem’s allies in Washington are urgently seeking to establish clearer U.S. government guidelines for when U.S. airlines should halt traffic to Israel, and when it can resume. If not, they warn, American carriers risk bolstering, even unwittingly, the economic coercion that Iran and Israel’s critics in the West are pursuing, often under the banner of the Boycott, Divestment, Sanctions movement, or BDS.

“In my view, unless there’s an objective process put in place to prevent the politicization of air travel, I predict that in the future the BDS movement will try to weaponize air travel as a new means of boycotting Israel,” U.S. Rep. Ritchie Torres (D-New York) told The Free Press. “And a travel ban has the potential to be the most potent weapon in BDS’s war against the Jewish state.”

Torres wrote the presidents of American, Delta, and United in August asking them to map out the guidelines they followed in deciding to suspend their routes to Israel. None of the three airlines issued an official response to Torres’ letter, and his staff says they have communicated with the U.S. carriers’ government affairs teams, but didn’t disclose the result of these discussions.

Current and former Israeli officials told The Free Press they’re particularly confused by the U.S. airlines’ decisions as a number of Middle Eastern, African, and European carriers are currently flying to Tel Aviv despite these security threats. That includes three airlines from the United Arab Emirates—Etihad Airways, FlyDubai, and Wizz Air Abu Dhabi—whose government only normalized diplomatic relations with Israel in 2020 as part of the Trump administration’s Abraham Accords. These pacts seek to integrate Israel economically and diplomatically into the wider Arab world. 

“They should fly to Israel exactly like the Gulf countries and others do,” said Hulata, the former national security adviser. “And if they don’t do this because they are scared of rockets, then there’s something fundamentally wrong in their decision making.”

Hulata, who now serves as a senior fellow at the Foundation for Defense of Democracies in Washington, added: “There hasn’t been a rocket anywhere close to the airport for months.”

Passengers scan the departures board at Ben Gurion Airport on September 2, 2024. (Photo by Ameer Abed Rabbo/Anadolu via Getty Images)

The three major U.S. carriers initially halted air travel to Israel last October 7 after Hamas militants crossed the country’s southern border and slaughtered 1,200 people, mostly civilians. The airlines’ decisions weren’t ordered, however, by the U.S.’s airline regulator, the Federal Aviation Administration. The FAA only cautioned American carriers against flying to Israel at the time. 

The FAA’s position was actually much more restrained than in the summer of 2014. Then, Hamas rocket strikes close to Israel’s Ben Gurion Airport—the primary international hub near Tel Aviv—caused the airline authority to briefly suspend all outbound U.S. flights. Israeli officials were incensed, arguing the ban amounted to an assault on the country’s economy. American supporters of Israel, including former New York mayor Michael Bloomberg, flew to Tel Aviv on El Al flights to show solidarity.

The three U.S. airlines have said in public statements that their decisions on Israel are tied solely to the security threats posed to their crews and passengers. United and Delta briefly resumed flights to Tel Aviv in June, but then suspended them in August in the wake of the assassination of Hamas’s political leader, Ismail Haniyeh, in Iran—an attack Tehran blamed on Israel and vowed to avenge. 

The Iranian military and its proxies launched a barrage of missiles and drones at Israel in April in response to an Israeli strike on an Iranian compound in Syria. But they were almost all intercepted by Israel, U.S., European, and Arab air defenses. The Israel Defense Forces and Pentagon remain on high alert for another Iranian reprisal. 

At present, Delta says its flights remain canceled through October 31; American Airlines cites March 2025 as a potential resumption date; and United Airlines says its services to Israel remain on hold indefinitely. “Our flights to Tel Aviv remain suspended—we look forward to resuming flights as soon as it’s safe for our customers and crew,” a United spokesperson told The Free Press.

American declined to comment and Delta said it is “continuously monitoring the evolving security environment and assessing our operations based on security guidance and intelligence reports and will communicate any updates as needed.”

This travel ban has forced Americans needing to go to Israel to either pay higher El Al fares or find more time-consuming routes through Europe. One U.S. defense expert who needed to meet Israeli security officials in Jerusalem this month to discuss the Iranian threat told The Free Press it took weeks to arrange a flight. No seats on El Al flights were available, and he eventually went via Paris on Air France. “It’s stunning how hard it was to get there,” he said. 

Still, the outspokenness of a number of U.S. airline unions against travel to Israel has raised concerns among members of Congress and the Israeli government that politics may also be factoring into the flight ban. 

A day after the October 7 attack, the president of the Allied Pilots Association, Captain Ed Sicher, ordered the union’s 16,000 members to refuse any requests from American Airlines to fly to the Jewish state. “As noted in APA’s initial update yesterday regarding the safe evacuation of working American Airlines crewmembers from Tel Aviv, Israeli Prime Minister Benjamin Netanyahu has announced that the country is now ‘at war.’ The Israeli security cabinet weighed in today, declaring that the country is in a ‘state of war,’ ” he wrote APA members. “Until further notice, if you are scheduled, assigned, or reassigned a pairing into Israel, refuse the assignment by calling your Chief Pilot or IOC Duty Pilot.”

In February, the Association of Flight Attendants-CWA joined six other major American unions in calling for a formal U.S. ban on military supplies to Israel until Netanyahu agrees to a cease-fire with Hamas. “It is clear that the Israeli government will continue to pursue its vicious response to the horrific attacks of October 7 until it is forced to stop,” reads the statement from the AFA-CWA and six other unions. The spokeswoman for the AFA-CWS, Taylor Garland, has also regularly posted and reposted items on social media demanding a Gaza cease-fire and criticizing the military tactics of the Israel Defense Forces.

Garland and the AFA-CWA declined to respond to numerous requests from The Free Press to comment on Israel and whether the organization backs a U.S. flight ban if the Netanyahu government doesn’t agree to a cease-fire with Hamas. Other airline unions, trade associations, and pilots, however, downplayed the idea that politics were driving decisions, but rather cited security and basic economics. A number noted that insurance costs for the U.S. carriers rise in conflict zones, while the overall demand for flights decrease. Also, the length of U.S. flights to Israel require overnight stays for American pilots and crews, something that’s not normally an issue for European or Middle East carriers. 

“Our number one concern as pilots, no matter where we’re flying—it doesn’t have to be to Tel Aviv, it can be to Toledo—it’s got to be safe and secure,” said Dennis Tajer, spokesman for the APA. “We didn’t make that call, but American Airlines did. Oftentimes, they will bring in a third layer, and that’s commercial interests.” 

One pilot from a major U.S. carrier told The Free Press he regularly signs up to fly to Tel Aviv when the ban appears set to be lifted. But then the airline again cancels, following a new security assessment. “It hurts us financially, but the decision is really down to our security department,” said the airman.

The suspension of U.S. flights to Israel has contributed to a broader shock to the Israeli economy since the war with Hamas erupted last October. Israel’s calling up of 360,000 reservists after the Hamas attack, roughly 4 percent of the population, has placed a particular strain on the economy. The country’s growth contracted 1.4 percent during the second quarter of 2024 from the year earlier, according to Israel’s Central Bureau of Statistics, and its exports of goods and services dropped 8.3 percent. The Israeli economy experienced a double-digit contraction in the months directly preceding the Hamas attack. 

“Aviation has a big impact on our country because we’re like an island,” said Professor Nicole Adler, dean of the Hebrew University of Jerusalem’s Business School. “I know that we have Syria and Egypt and so on around us. But most traffic is coming in via airlines, and it’s very sad that this war has gone on for as long as it has.”

Since October, Iran and its proxies across the region have made no secret of their desire to constrict international trade and passenger traffic going into and out of Israel. According to Iranian officials, this will both drain Israel’s economy and impose a psychological toll on the broader populace. 

Much of Tehran’s efforts have centered on the Red Sea, where the Iranian-backed Houthi militia has launched hundreds of attacks on tankers and other maritime vessels transiting through the Suez Canal—some on their way to Israel. Just this month, the Yemeni militants launched six missile strikes on international maritime traffic, including on Panamanian- and Saudi-flagged oil tankers.

On Sunday, the Houthis successfully launched a long-range missile at central Israel for the first time. Israeli defense officials said their air defense system largely destroyed the projectile, though some fragments landed on agricultural land and near a railway station. 

This, combined with the reduced air traffic, has prompted self-congratulatory comments from Iranian officials, including Ayatollah Khamenei, that their multifront war against the Jewish state is working. Since becoming Iran’s Supreme Leader in 1989, the 84-year-old cleric has made clear that the path toward liberating Palestine will be achieved as much through making Israel unlivable to its Jewish residents as through open warfare. 

“Four million people will leave Israel. [This means] reverse migration,” Khamenei told a television audience during a June 3 speech marking the death of the Islamic Republic of Iran’s founder, Ayatollah Ruhollah Khomeini. “In other words, the level of perplexity, confusion, and panic among Israeli officials has reached this degree. Pay attention to this! This is very important!”

Jay Solomon is an investigative reporter for The Free Press and author of The Iran Wars. Follow him on X at @jaysolomon, and read his last piece “How Close Is Iran to the Bomb?

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To the Woman Who Trashed Me on Twitter Kat Rosenfield

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“Why does the political landscape feel like high school?” asks Kat Rosenfield. (Mean Girls 2004, Entertainment Pictures/Alamy Stock Photo)

Back when Donald Trump was last running for election, as the Great Awokening made its speech-chilling sweep through the American media, a small number of writers and public intellectuals admitted to not being entirely onboard with the new orthodoxy of privilege checking, sensitivity reading, racial affinity groups for 8-year-olds, and so on. These people were, depending on who you ask, either very brave or very stupid.

In public, and especially on Twitter, this cohort became objects of loathing and derision, excoriated by peers for refusing to “read the room.” But behind the scenes, we were inducted into a weird little priesthood of the unorthodox—mostly via Twitter DMs, which served as a sort of backchannel confessional for fellow writers who agreed that things appeared to be going off the rails, but were too afraid of being canceled to admit as much on main.

The first time I received one of these messages, it was from a woman named Jane. She was a colleague—we both had permanent freelance gigs at the same online teen magazine—and wanted me to know that she shared my concerns about the increasing hostility to free expression in progressive spaces. 

“I’m trying to tell myself every day that this censorship, hypersensitivity etc is the natural exuberance of a new movement still feeling out its own limitations,” she wrote to me once, early on. “I spend so much time every day now wondering if my peers *actually* want to suspend the 1st amendment or are just angry/emotional/posturing.”

Jane would pop into my DMs every time a new censorship controversy erupted in our little corner of the internet, which is to say, we chatted frequently. When I wrote my first investigative feature about how the world of young adult fiction had been overtaken by campaigns to shame and censor authors in the name of diversity, she sent me effusive praise; when she worried aloud about her career, I offered advice and sent her leads on paid writing opportunities. When she wanted to vent about cancel culture, she always started by apologizing. She hated to burden me, she said; she just didn’t have anyone else to talk to.

Five years later, I had just published an article about the Covid-era campaign to eject Joe Rogan from Spotify when my friend Zac sent me one of those messages that almost invariably means someone is talking shit about you online: “Sorry,” he wrote,but I thought you should probably know about this.” When I clicked on the link he’d sent, I discovered that I was being mocked via screenshot by a prominent podcaster who has always hated me for unknown reasons; what Zac wanted me to see was one of the first replies.

“I used to work with this person,” it read. “She was not always like this, but this particular strain of contrarianism is like heroin—there are very few casual users.”

The writer of this comment was Jane.

I thought of this incident recently while reading Kat Timpf’s book, which came out last week, I Used to Like You Until. . .  A reflection on, per the subtitle, How Binary Thinking Divides Us, the book’s opening chapters are dedicated to describing the social liabilities of being employed at Fox News, where Timpf is a regular panelist on the late-night talk show Gutfeld! Her politics are more libertarian (small L) than conservative, and her brand of commentary more Phyllis Diller than Bill O’Reilly (she also does stand-up comedy), which makes her a bit of a misfit—if not on Fox News itself, then certainly in the minds of people who equate the network with a particular brand of shouty, Trumpy Republicanism.


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September 14, 2024 Heather Cox Richardson

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