IRS Scrutiny Looms for Ted Cruz Amid Podcast Revenue Concerns

Exploring the Tax Ramifications of Political Podcasting.

by Nouman Rasool
IRS Scrutiny Looms for Ted Cruz Amid Podcast Revenue Concerns
© Nathan Howard/Getty Images

Texas Senator Ted Cruz is potentially under the Internal Revenue Service's radar concerning financial activities tied to his podcast, sparking a conversation among tax experts about the nuances of campaign finance and personal income.

The spotlight on Cruz intensifies as tax professionals delve into a $630,000 contribution from iHeartMedia to the Truth and Courage Super PAC, a supporter of Cruz’s reelection efforts. This payment, connected to the senator's podcast, "Verdict With Ted Cruz," raises questions about whether these funds should be reported as income.

Despite assertions from Cruz's office and iHeartMedia that the senator does not receive direct payment for his role in the podcast, tax specialists argue that the transaction might still influence Cruz’s tax obligations.

According to Brian Galle, a tax law professor at Georgetown University, the essence of earning income does not change regardless of payment redirection. "This was a payment for a series of appearances by Ted Cruz and not by anybody else,” Galle emphasized to The Houston Chronicle.

Indirect Income Implications

Calvin Johnson, a tax professor at the University of Texas at Austin, supports this perspective, suggesting that the financial support Cruz receives indirectly through podcast-related advertisements funded by the Super PAC should still be declared as income.

"The tax statute is perfectly clear that transfers in connection with performance of services—and that's what this is—get taxed to the services," Johnson clarified. Conversely, Andy Grewal, a professor of income tax law at the University of Iowa, offers a differing viewpoint.

He argues that Cruz would only face legal issues if there was an entitlement to payment which was then redirected to avoid taxation. “If he's just showing up, I don't see it,” Grewal stated, reflecting on the complexities of such tax scenarios.

Amidst these tax debates, Cruz’s campaign has robustly denied any wrongdoing. A campaign spokesperson reaffirmed Cruz’s commitment by highlighting his thrice-weekly, uncompensated appearances on the podcast. Rachel Nelson, Vice President of Public Relations at iHeartMedia, further confirmed that their contributions are strictly linked to advertising sales, with no direct compensation to Cruz.

As the November election approaches, where Cruz will contend against Democrat Colin Allred for the Texas Senate seat, these financial inquiries might stir significant public and political discourse, reflecting the intricate interplay between campaign financing, personal income reporting, and electoral integrity.