Wikimedia Commons / Gage Skidmore
U.S. Sen. Ted Cruz smirks from the stage at a 2019 event hosted by conservative group Turning Point USA.
Tax experts told the Texas Republican's hometown newspaper that he may be required to report income from his podcast distribution contract on tax documents — even if he's not personally collecting cash for creating the shows.
"It's still going to be his income, because he's the one who 'earned it,'" Georgetown University tax law scholar Brian Galle told the Chronicle. "This isn't like a charity that auctions off one hour of free accountant time or something ... This was a payment for a series of appearances by Ted Cruz and not by anybody else."
Both Cruz and San Antonio-based radio company iHeartMedia have largely been mum on details about the latter's deal to distribute podcast The Verdict With Ted Cruz. While Cruz's camp has said he's not compensated for the show, federal filings show iHeartMedia has so far this year flowed some $630,000 into a super PAC that lists its primary objective as helping Cruz win another term.
Earlier this month, two campaign finance watchdog organizations asked the Federal Election Commission to review the transaction. The filing by the Campaign Legal Center and End Citizens United argues that, by appearances, Cruz directed iHeartMedia to pay corporate dollars into the Truth and Courage super PAC in violation of federal campaign finance law.
In comments to Chronicle, Georgetown prof Galle compared Cruz's situation to that of a nun who works in a hospital but sends her back pay to the church due to a vow of poverty. The IRS has ruled that the nun still earned taxable income, even if she shifts it elsewhere.
"You can’t tell the government it’s not my money if you’re the one who earned it," said Galle, a former Justice Department tax prosecutor. "It doesn’t matter where the money goes."
A spokesman for the Truth and Courage PAC told the Chronicle it owns the podcast and all taxes associated with it.
However, University of Texas at Austin tax scholar Calvin Johnson told the Chronicle that even if Cruz isn't drawing a traditional paycheck under the distribution deal, he's a direct beneficiary of the money iHeartMedia puts into Truth and Courage PAC.
"The tax statute is perfectly clear that transfers [made] in connection with performance of services — and that’s what this is — get taxed to the services," Johnson told the paper.
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