Tag Archives: AARP

Rep. David Reichert (R-Wash.) along with two other House members has asked the Internal Revenue Service to investigate the American Association of Retired Persons (AARP) for acting more like a profit-making insurance company rather than a tax-exempt advocate for senior citizens. The AARP’s close control and micro-marketing management of companies it allows to use its brand amounts to profit-making activity that should be taxable, assert the lawmakers and others. But for years the AARP has largely successfully defended its non-profit status all the while growing into the seventh largest insurance company in the country.

Reichert, a member of the House Ways and Means Committee, told Fox News: “They’re really trying to manage these companies to increase their revenues.” And they have succeeded greatly. During the recession, when many of its members were struggling financially, AARP’s revenues just from its affiliation with United HealthCare alone jumped from $284 million in 2007 to $427 million in 2009 and $670 million in 2010. But because of their tax-exempt status, little of this is subject to income tax.

A tax lawyer favorable to the AARP, Bill Josephson, played innocent before looking into the situation, claiming that the organization was just receiving royalties or passive income, a common tax loophole for non-profits to use to shelter income from the IRS.  He said, “[This] is the classic royalty situation where the Sierra Club [for example] in effect simply makes its mailing lists available to other charities in return for royalty [payments]. I don’t have a problem with that, nor does anybody else.”

But Reichert, in his letter to the IRS, notes a big difference between the Sierra Club and the AARP. The AARP has virtual