Tax Overhaul: Republicans Begin by Targeting Tax Exempt Status for AARP

Posted on April 10, 2011


AARP’s prominent role in lobbying for health care reform caught many by surprise.  Seen as a protector of the rights of Senior Citizens, the true nature of the organization’s function was made clear.  It is just another insurance provider but not just any insurance provider.  On of their big sellers: Medigap insurance for seniors.  Therefore, they would stand to accrue windfall profits when the Act was implemented.

Three veteran GOP representatives released a report that estimates the seniors lobby could make an additional $1 billion over 10 years on health insurance plans whose sales are expected to pick up under the new law. They also questioned seven-figure compensation for some AARP executives.

“Based on the available evidence, substantial questions remain about whether AARP should maintain its tax-exempt status,” said the report, released by Reps. Wally Herger of California, Charles Boustany of Louisiana and Dave Reichert of Washington.

AARP said profit had nothing to do with its support for President Barack Obama’s health care overhaul, which expands coverage to nearly all Americans, a longstanding goal of the organization. [Huffington Post]

So many seniors were turned off by AARP’s blatant political stand that they cancelled their memberships.  But ever-growing new membership of the baby boomers offset those losses.  With the release of this report by three Republican members of the powerful House Ways and Means Committee, the “dual nature” of the organization again came under scrutiny.

The business side of the organization runs money-making enterprises. The most lucrative involves “branding” a series of health insurance plans for seniors and older adults with the AARP name, akin to the Good Housekeeping seal of approval.

The public policy side is a civic organization that acts as a watchdog over Social Security and Medicare, representing 37million members and consumers generally. Boards overseeing the business and tax-exempt social policy branches have overlapping directors.

Royalties from licensing the use of AARP’s name earned $657 million for the organization in 2009, or nearly half its total revenue, according to publicly available records. Health insurance plans accounted for most of that.

“During this investigation it became very clear that despite its privileged tax-exempt status, in many cases, AARP represents a for-profit entity, in fact, an insurance company,” Boustany said. [Huffington Post]

Ways and Means Committee Hearings on the matter have been scheduled for Friday.  Looking to the future, here are the current top ten tax exempt groups in the US whose records would also bear scrutiny [list from Top Ten Links.com]:

1. American Association of Retired Persons
Add Bookmark Report Link2. National Federation of Independent Business
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3. American Israel Public Affairs Committee
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4. National Rifle Association of America
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5. ALF-CIO
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6. Association of Trial Lawyers of America
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7. Christian Coalition
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8. National Right to Life
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9. American Medical Association
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10. US Chamber of Commerce
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Further reading:

Ways and Means report: http://waysandmeans.house.gov/UploadedFiles/AARP_REPORT_FINAL_PDF_3_29_11.pdf

Charts: http://waysandmeans.house.gov/UploadedFiles/AARP_Charts.pdf

AARP response: www.aarp.org/checkforyourself