Restaurants get unexpected help in protecting the tip credit

Working Lunch: A Congressional investigation is likely to throw sand into the well-oiled lobbying machinery of One Fair Wage.

The group aiming to kill the tip credit in several states this fall could be derailed by Congressional scrutiny of the way it’s treated taxwise by the IRS, according to this week’s episode of Working Lunch, the podcast that focuses on restaurant-related political issues.

Co-hosts and veteran lobbyists Joe Kefauver and Franklin Coley spotlight the unexpected move by the House of Representatives’ Oversight and Accountability Committee to investigate the IRS’ treatment of the group, One Fair Wage, as a nonprofit that does minimal lobbying.

As Coley noted, the union-backed organization readily acknowledges on its website and via its field efforts that political advocacy is a major activity.  Those efforts include the drives underway in a number of states to get initiatives on the November general-election ballot to phase out the tip credit, an employer concession widely used by full-service restaurants.

Oversight Committee Chairman James Comer (R-Ky.) has asked the IRS to turn over documents relating to the agency’s treatment of One Fair Wage as a group involved primarily in charitable work. The agency has been much more stringent in policing the tax statuses claimed by conservative groups, according to Comer.

Regardless of whether the investigation halts or impedes One Fair Wage’s efforts to kill the tip credit through state referenda, the group will likely lose political capital as a result of pretending it’s something other than a lobbying organization. As Kefauver put it, the union proxy is acting as if it’s a do-gooder deserving the same tax treatment as the Girl Scouts of America.

“This just adds on to a lot of the other question marks around the organization,” said Coley, co-partner with Kefauver in the Orlando, Fla., lobbying and consulting firm Align Public Strategies. “They have looked like a front group. Their motives have come off as questionable. Their facts have come off as questionable.

“We need to capture some of this stuff and say, ‘Legislator X, these folks are not who they present themselves to be,’” he said.

The disconnection figured into anti-tip-credit legislation losing its backing in Maryland in recent weeks, Coley added.

“The legislator [who introduced it] in Maryland said, I went out on a limb with these guys and I got freakin’ hosed for it,” he explained.

For a full account of how the investigation of the IRS could color the industry’s struggle to preserve the tip credit in states like Massachusetts, Ohio and Arizona, hit Play on this week’s episode.

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.


Exclusive Content


Restaurants bring the industry's concerns to Congress

Neary 600 operators made their case to lawmakers as part of the National Restaurant Association’s Public Affairs Conference.


Podcast transcript: Virtual Dining Brands co-founder Robbie Earl

A Deeper Dive: What is the future of digital-only concepts? Earl discusses their work to ensure quality and why focusing on restaurant delivery works.


In the fast-casual sector, Chipotle laps Panera Bread

The Bottom Line: The two fast-casual restaurant pioneers have diverged over the past five years, as the burrito chain has thrived while Panera hit a wall. Here's why.


More from our partners