The PJ Tatler

Levin: 'Common Sense Criteria' Needed to Weed Out 501(c)(4) Groups 'Engaging in Political Decision Making'

Sen. Carl Levin (D-Mich.) cautioned this morning that new rules coming from Treasury Department and the Internal Revenue Service to more sharply define what qualifies as a 501(c)(4) need to be carefully assessed, but said the intention of the rules is spot-on.

“By law, tax exempt 501(c)(4) groups are supposed to be doing social welfare work, not influencing campaigns using money from undisclosed donors,” Levin said. “In a long overdue decision, the IRS is finally proposing using objective, common sense criteria to identify campaign activities by 501(c)(4) organizations and end suspicions it is engaging in political decision making.”

“The specific criteria that have been proposed need to be carefully evaluated, but the general approach of replacing subjective analysis with objective criteria is encouraging, because it promises to reduce concerns about political bias, make tax and campaign laws more consistent, and streamline the review process which will save money for both taxpayers and nonprofits,” he added.

But House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) said it’s simply an effort to crack down on conservative groups in the wake of the IRS scandal.

“This new effort by the Obama administration to limit traditional advocacy efforts by social welfare organizations will have a much more profound impact on grassroots and community organizations than on the well-heeled groups it supposedly targets,” Issa said. “The fact that the administration’s new effort only applies to social welfare organizations — and not powerful unions or business groups — underscores that this is a crass political effort by the administration to get what political advantage they can, when they can.”

“The Committee’s interim report into the IRS’s targeting scandal explained how the Citizens United decision caused the IRS to handle conservative tax-exempt applicants in a distinct and unfair manner,” the chairman added. “The regulation released today continues this Administration’s unfortunate pattern of stifling constitutional free speech.”

The Treasury Department said it expects to receive “a large number of comments” on the proposed guidance and will weigh them in the consideration process.

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur.  “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations.  It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

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, according to Treasury. 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.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”

Under the proposed guidelines, candidate-related political activity includes:

  • Communications
  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
  • Communications expenditures that must be reported to the Federal Election Commission.
  • Grants and Contributions
  • Any contribution that is recognized under campaign finance law as a reportable contribution.
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).
  • Activities Closely Related to Elections or Candidates
  • Voter registration drives and “get-out-the-vote” drives.
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.