Wednesday, September 28, 2011
Section 501(c)(4) organizations are required to primarily engage in the promotion of social welfare in order to obtain tax exempt status. Court decisions have established that in order to meet this requirement, § 501(c)(4) organizations cannot engage in more than an insubstantial amount of any non-social welfare activity, such as directly or indirectly participating or intervening in elections. Thus, the claim made by some political operatives and their lawyers that § 501(c)(4) organizations can spend up to 49% of their total expenditures on campaign activity and maintain their tax exempt status has no legal basis in the IRC and is contrary to court decisions regarding eligibility for tax-exempt status under § 501(c)(4). An expenditure of 49% of a group’s total spending on campaign activity is obviously far more than an insubstantial amount of non-social welfare activity.
- Associated Press, Watchdogs: End Campaign Groups' Tax-Exempt Status
- Bloomberg, Rove, Burton Political Groups Are Subject of New IRS Complaint
- The Hill, Watchdog Groups Take Aim at Crossroads GPS, Priorities USA
- Huffington Post, Political Groups Are Flouting IRS Rules To Keep Donors Secret, Reformers Say
- Politico, Watchdogs to IRS: Tamp down on Crossroads
- Talking Points Memo, Watchdogs Ask IRS To Probe Non-Profits Affiliated With Karl Rove and Obama Aides