IR-2013-92: Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations:
The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.
REG-134417-13, Guidance for Tax-Exempt Social Welf are Organizations on Candidate-Related Political Activities
This document contains proposed regulations that provide guidance to tax-exempt social welfare organizations on political activities related to candidates that will not be considered to promote social welfare. These regulations will affect tax-exempt social welfare organizations and organizations seeking such status. This document requests comments from the public regarding these proposed regulations. This document also requests comments from the public regarding the standard under current regulations that considers a tax-exempt social welfare organization to be operated exclusively for the promotion of social welfare if it is “primarily” engaged in activities that promote the common good and general welfare of the people of the community, including how this standard should be measured and whether this standard should be changed.
Wall Street Journal, Obama Administration Proposes New Curbs on Campaigning by Tax-Exempt Groups:
The Obama administration Tuesday proposed a crackdown on the widespread use of tax-exempt organizations for political campaigning, seeking to reduce the influential role that the secretive groups have played in recent elections. The new "guidance" issued Tuesday by the Treasury Department and the Internal Revenue Service would curtail a broad array of these tax-exempt entities' activities, including campaign advertising, voter registration, get-out-the-vote efforts, and distribution of voter guides and campaign material.
The process of completing the new regulations could take months, and officials said they expected a lot of feedback, acknowledging the political battles ahead.
The involvement in politics of tax-exempt groups organized under section 501(c)(4) of the tax code has been viewed by many as the biggest abuse of modern campaign finance rules, which aim to limit the influence of wealthy donors in elections.
The use of these organizations became a prominent issue in recent campaigns when groups such as the conservative Crossroads GPS and liberal Priorities USA raised millions of dollars from donors who could remain anonymous under tax rules. Critics say the groups have been too lightly regulated by the IRS, due in part to confusing regulations. ...
A string of major court decisions in 2010, including the landmark Citizens United decision, provided a major boost to 501(c)(4) entities by making it easier for companies and labor unions to contribute money to them. That led to a flood of donations.
The largest such organization, Crossroads GPS, which is run in part by GOP strategist Karl Rove, raised $180 million for the 2012 campaign from about 1,500 donors. The biggest single contribution to Mr. Rove's group was $22.5 million. By contrast, the Republican and Democratic parties were prohibited from accepting donations larger than $30,800. Donors to individual candidates were capped at $2,500 per election.
President Barack Obama criticized the existence of outside political entities, though a group of his supporters created Priorities USA to support his re-election.
A total of 10 of these 501(c)(4) entities raised more than $10 million each to spend on the 2012 election, according to data from the Center for Responsive Politics.
- Accounting Today, Treasury and IRS to Issue Guidance for 501(c)(4) Tax-Exempt Social Welfare Organizations
- Bloomberg, IRS Limits Political Activity in Post-Tea Party Flap Rule
- CATO Institute, Who’s Afraid of Political Speech?
- Center for Competitive Politics, Treasury Releases Vague Details on New IRS Guidance
- CNN, IRS Proposes New Rules for Tax-Exempt Organizations
- Election Law Blog, “Obama Administration Proposes New Curbs on Campaigning by Tax-Exempt Groups”
- Financial Times, Tax-Exempt Political Groups Face Curbs
- Fiscal Times, White House Targets Dark Money Campaign Donors
- New York Times, New Campaign Rules Proposed for Tax-Exempt Nonprofits
- Politico, President Obama Pitches New Rules for Political Nonprofits
- Roll Call, Proposed IRS Rules on Political Nonprofits Divides Parties
- Reuters, Obama Administration Proposes New Limits on Tax-Exempt Political Groups
- Think Progress, Treasury And IRS To Crack Down On Super PACs Masquerading As Tax-Exempt Social Welfare Groups
- Time, Obama Targets Dark-Money Groups
- USA Today, IRS Moves to Curb Tax-Exempt Groups' Political Activity
- Wall Street Journal, Q&A: Reining In Social-Welfare Groups
- Wall Street Journal, The History of the 501(c)(4) Exemption
- Washington Post, Obama Administration Proposes New Rule Curtailing Political Activities by Nonprofit Groups
- Washington Times, IRS Moves to Clean Up Scandal of Tea Party Targeting
(Hat Tip: Rick Hasen, Donald Tobin.)