The IRS Moves To Keep Its Cut of Porn Tips
The agency has proposed excluding tips received from "pornographic activity" from a new tipped wage deduction.
A new tax deduction for tipped wages seemed like good news for all sorts of service workers—including those in sexually oriented industries. After all, anyone in a sector that has "customarily and regularly" earned tips can claim a deduction, per proposed regulations from the IRS and the Treasury Department. And a list of "occupations that customarily and regularly received tips" specifically mentions "dancers" (including "club" dancers), "entertainers and performers," and "digital content creators" (including streamers, online video creators, and social media influencers).
Under that rubric alone, exotic dancers, cam girls, adult content creators, and other sex workers who are sometimes tipped directly by customers would seem eligible to deduct these tips when filing income taxes.
But the proposed regulations also contain this clause: "Amounts received for prostitution services and pornographic activity are not qualified tips."
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It also states that "the proposed regulations would provide that amounts received for services the performance of which is a felony or misdemeanor under applicable law are not qualified tips."
That tips for illegal activity are not tax-deductible makes sense. But prostitution is not illegal in all parts of the United States, and all sorts of "pornographic activity" is legal throughout the country. So a blanket exclusion of these sectors isn't just about preventing deductions for illegal acts.
It's a moral judgment about sex work, wrapped up in the tax code.
It's also a thorny regulatory requirement, raising "important practical questions for the Internal Revenue Service," like "Are photos of bare feet a type of pornography?" notes Andrew Duehren at The New York Times.
An imperative to exclude tips earned for "pornographic activity" from the deduction puts the IRS in the position of having to define pornographic activity. Does fetish photography count, even if nobody is engaging in sex acts? What about cam shows where performers engage in sexy chat but don't get fully nude? Is stripping a pornographic activity? How about burlesque shows? Sex therapy that involves demonstrations? Erotic video games?
"The distinction between pornography and other material that just so happens to depict sex has long vexed the nation's finest legal minds," notes Duehren. "Whether or not the I.R.S. tries to come up with its own definition of 'pornographic activity,' enforcing the exclusion would most likely still involve auditing taxpayers who report tips from sources like OnlyFans. An I.R.S. agent would have to view a taxpayer's content, decide if it was pornographic and then deny the deduction for tips, which is capped at $25,000."
When it comes to income taxes, many sex workers are already less than explicit, listing occupations in vague terms like model, actress, and content creator. Unless the IRS plans to start auditing tips from all of these industries, the porn-tip deduction ban would likely involve singling out certain digital platforms for creator audits. But what happens when people find workarounds that allow for more under-the-table tips? Are we going to get even more surveillance of Venmo transactions and bank deposits and things like that?
Ultimately, a pornographic activity exclusion from tip deductions seems pretty unworkable and unenforceable. But it could still lead to a lot of weirdness, discrimination, and financial surveillance nonetheless.
Today's Image, and a Special Plea
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Reason Event Reminder
Does Big Tech do more good than harm? It's an unpopular position, I know, but Reason's Robby Soave and I will try to make that case at Reason's next debate. We're up against Breaking Points' Ryan Grim and Emily Jashinsky, and you can catch it live in D.C. on December 10 at 7 p.m.
Next week! Reason VERSUS continues with a debate about big tech.
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Crisis Pregnancy Centers Have First Amendment Rights, Too
Crisis pregnancy centers and free speech came before the Supreme Court yesterday. The case—First Choice Women's Resource Centers, Inc. v. Platkin—involves a faith-based Christian pregnancy center with five locations throughout New Jersey. As part of a 2023 investigation, the state subpoenaed information on the group's doctors and donors. First Choice argued that there was no reason for New Jersey to seek this information and that doing so violated its First Amendment rights.
You can read yesterday's full oral argument transcript here. Observers have widely agreed that the Court seems poised to take First Choice's side.
The case was dismissed by a U.S. district court by a judge who said any constitutional claims could be made in state court; a federal appeals court upheld that decision. "In asking the Supreme Court to hear the case, First Choice argued that federal civil rights law is intended to guarantee parties a federal forum to assert their constitutional rights," notes Reuters. "It said that forcing it to litigate in state court would effectively deny it that forum, since the constitutional claims would be decided before a federal court could ever hear them."
Crisis pregnancy centers try to dissuade women from getting abortions and have a reputation for being deceptive—or at least less than forthcoming—about their anti-abortion motivations, making them a major target for pro-choice advocates and politicians. Accordingly, many on the left have been quick to condemn free speech complaints from these centers, dismissing them as somehow illegitimate.
"The gist is that the groups claim that they have a First Amendment right to lie to women, and that any state regulation amounts to discrimination," Jessica Valenti and Kylie Cheung write.
But that's decidedly not what's going on here. First Choice isn't claiming its free speech rights are violated by having to follow neutral laws and regulations. It's saying the state is overreaching in the private information it is demanding, and that this could chill support for the group.
If First Choice committed crimes, then the state is free to investigate and punish it for those crimes. But unless the donors are somehow victims of or party to those crimes, it doesn't follow that the state needs this information.
You needn't like or agree with these centers to see the danger here. Giving state attorneys general the power to needlessly collect donor and doctor info from politically disfavored groups is a situation that will reverberate far beyond these pregnancy centers—including, possibly, to pro-choice organizations.
Notably, the American Civil Liberties Union (ACLU) is on First Choice's side here when it comes to the free speech claims. "While the ACLU of New Jersey advocates for different policy outcomes than the plaintiff in this case, we are on the same page that investigatory subpoenas seeking sensitive information put all advocacy at risk," Jeanne LoCicero, legal director of the ACLU of New Jersey, said in an emailed statement. "Federal court should remain open to anyone who believes their First Amendment rights are being violated, regardless of viewpoint."
"At a time when government officials throughout the country abuse regulatory powers to punish their ideological opponents, federal courts must remain a venue in which people can vindicate their First Amendment rights," Brian Hauss, deputy project director of the ACLU's Speech, Privacy, and Technology Project, said.
Follow-Up: KOSA Hearing
On Monday, this newsletter covered the House subcommittee on Commerce, Manufacturing, and Trade holding a hearing to discuss 19 bills related to minors' use of technology and digital platforms. At the hearing, "only rarely was the concern addressed that these internet censorship bills could be used by the government to censor speech it does not like," writes Jane Migliara Brigham. One of the main bills discussed was the Kids Online Safety Act, which mandates tech companies take reasonable measures to protect minors from various harms, but, in the new House version, removes "duty of care" language. "One of the central tensions playing out in [the] hearing: Could KOSA withstand judicial scrutiny with the duty of care? And can a version without it protect kids?" notes Lauren Feiner at The Verge.
More Sex & Tech News
• Cathy Gellis on the Cox-Sony copyright case before the Supreme Court this week:
One can never predict how a court will rule after oral argument. But I do fear that in Cox Communications v. Sony Music Entertainment we are on the precipice of getting yet another major copyright decision from the Supreme Court where the words "First Amendment" are not uttered even once—unless, of course, someone like Justice Alito has something to say about it, because he was basically the only justice whose questions addressed the practical effect on people's ability to speak online should Sony's arguments prevail. ("That doesn't sound workable to me," he said at one point, recognizing how many people would effectively end up losing their Internet access if Sony were right and providers were required to terminate accounts upon receiving an infringement notice.)
• Wired takes a look at Hidden, which it bills as "the first adult platform owned and operated by sex workers." Started by Stella Barely, it's a TikTok-like platform for adult content that wants to give content creators more control and protection. "Hidden takes an 18 percent cut (compared to 20 percent on OnlyFans)" and "has charge-back protections up to $2,500, which deters customers from falsely disputing payments with their credit card companies and getting refunds," notes Jason Parham.
• Cathy Reisenwitz read If Anyone Builds It, Everyone Dies: Why Superhuman AI Would Kill Us All, and was largely unimpressed:
This book didn't change my mind. I started it unconvinced that [artificial general intelligence] will definitely kill us all and I remain unconvinced. I came in unsure that trying to keep everyone alive a little longer is worth forfeiting the possibility that AGI will help us live much longer, fuller, more meaningful, connected, interesting lives. And I remain unconvinced.
But I did enjoy the book. And, I now understand a bit better why these two think AGI will definitely kill everyone quickly.
• "Remember when you thought age verification laws couldn't get any worse? Well, lawmakers in Wisconsin, Michigan, and beyond are about to blow you away," writes Rindala Alajaji at Techdirt:
It's unfortunately no longer enough to force websites to check your government-issued ID before you can access certain content, because politicians have now discovered that people are using Virtual Private Networks (VPNs) to protect their privacy and bypass these invasive laws. Their solution? Entirely ban the use of VPNs.
I've covered this a little in this newsletter before; Alajaji has more details on some of the proposals and why they're a terrible idea.
• The U.S. Court of Appeals for the 2nd Circuit has upheld a lower court's ruling protecting speech about "abortion pill reversal."
