The Supreme Court’s Citizens United decision in 2010 has contributed to an unprecedented influx of money into the election process, raising questions about donor disclosure and political activities by 501(c)(4) tax-exempt organizations. A highly politicized issue, Members of Congress and the public have begun to both call for, and question, increased scrutiny of 501(c)(4) organizations that appear to be engaged in partisan political activity.
Treasury releases 501(c)(4) regulation proposal
In November 2013, the Treasury Department issued proposed regulations to provide guidance and more definitive rules on political activity for 501(c)(4) organizations. The proposal changes the definition of social welfare to exclude “candidate-related political activity,” which would encompass any communications expressly advocating for a political candidate, as well as any communications made within 60 days of a general election (or 30 days of a primary election) that identify a candidate or political party, among other stipulations. Also included in the new definition are voter registration drives and many civic engagement events. The IRS requested s on several elements of the proposed regulations, including on the meaning of “primarily” engaging in social welfare activities, how the standard should be measured, and whether these rules should also apply to 501(c)(5) and (c)(6) organizations. Read IS's formal comments | Learn more
IS Position and Action
Independent Sector supports the development of clearer guidelines for 501(c)(4) social welfare organizations that engage in political activities and has actively monitored and contributed to lawmakers' considerations of the topic. In December 2012, the IS Board of Directors adopted a set of guiding principles, used to evaluate any future regulations governing the political activities of 501(c)(4)s.
Following the long-awaited release of proposed rulemaking for 501(c)(4)s engaged in politics in November 2013, the Board similarly acted to endorse three principles for policy decisions affecting exempt organizations' political activities.
501(c)(4) organizations are tax-exempt, but donations to them are not tax deductible and the identities of donors do not have to be disclosed. These organizations are allowed to engage in unlimited lobbying activities, and can engage in some campaign activity, as long as it is not their primary activity.
To be tax-exempt as a social welfare organization described in Internal Revenue Code (IRC) section 501(c)(4), an organization must not be organized for profit and must be operated exclusively to promote social welfare. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity.
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