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Proposed IRS Regulations for 501(c)(4) Political Activities (2013)

In November 2013, the Treasury Department issued proposed regulations, which put forth guidance and more definitive rules on political activity for 501(c)(4) organizations. The proposal stipulates that the promotion of social welfare does not include “candidate-related political activity,” defined as any communications expressly advocating for a clearly identified political candidate, as well as those communications made within 60 days of a general election (or within 30 days of a primary election) that identify a candidate or political party, among other items. Also included in the new definition of candidate-related political activity are voter registration events and “get out the vote” drives.

Latest News
New 501(c)(4) political activity rules forthcoming, hearing delayed
The IRS released a statement May 22, 2014 confirming the agency will re-issue a proposal to regulate the political activity of 501(c)(4) social welfare groups, and that a public hearing will occur only after the second draft of rules goes public. IRS Commissioner John Koskinen made comments last month reflecting the IRS decision to scrap the November proposal that received more than 169,000 comments, but had said there would be a hearing on this first version ahead of any new round of guidelines. An IRS official stressed the agency will be incorporating the comments into the forthcoming draft.

IS Position and Action

Following the long-awaited release of proposed rulemaking for 501(c)(4)s engaged in politics in November 2013, the IS Board of Directors endorsed three principles for policy decisions affecting exempt organizations' political activities. Additionally, IS President and CEO Diana Aviv brought public attention to the flaws in the IRS proposal by co-authoring detailed editorial pieces in both the Washington Post and the Chronicle of Philanthropy in December.

On January 10, 2014 IS hosted a sector-wide webinar, featuring insights from Diana Aviv, legal experts and nonprofit leaders about the specific details of the proposed rules and their potential impact on 501(c)(3) public charities and other exempt organizations. The discussion highlighted alternative proposals, offered a strategy for nonprofit partners to respond to the regulations, and answered many participants' questions. Watch the webinar | View the slides

With the close of the public comment period on February 27, 2014, Diana Aviv voiced the concerns of the charitable sector in a Congressional hearing focused on the proposed regulations. A diverse group of more than 100 organizations had joined Independent Sector’s comments on the proposal, which were submitted to the IRS earlier that day. In total, the IRS received more than 169,000 comments, including those from organizations such as the Bright Lines Project, the American Civil Liberties Union, and the Funders' Committee for Civic Participation. The vast majority of these comments shared concerns about the proposal.

Bright Lines Project

Independent Sector endorses the Bright Lines Project, an effort to clarify the rules for exempt organizations' political activity. In response to the proposed IRS regulations, a team of legal experts developed a regulatory proposal that provides a predictable and simple way to help nonprofits identify what is and is not permissible political activity. It protects free speech and encourages Americans to get involved in civic engagement work while still preventing abuse of the political system. The Bright Lines Project invited organizations to use their model comment when drafting their own submissions to the IRS on the proposed guidance released in November 2013.

Legislation

113th Congress
On January 14, 2014, House Ways and Means Committee Chairman Dave Camp (R-MI) introduced legislation that would prohibit for one year the IRS and the Treasury Department from issuing or finalizing any regulations addressing the activities of 501(c)(4) tax exempt organizations. Chairman Camp described the Stop Targeting of Political Beliefs by the IRS Act of 2014 (H.R. 3865) as a reaction to proposed IRS regulations that would stifle the First Amendment rights of 501(c)(4) organizations. In a press release, he noted that the Committee’s investigation into the IRS scrutiny of exempt organizations from 2010 to 2012 is ongoing, and some Republican lawmakers signaled their belief that the proposed regulations are premature. The bill passed the House on February 25, 2014 and is unlikely to advance in the Senate.

In the Senate, Finance Committee member Pat Roberts (R-KS) and Sen. Jeff Flake (R-AZ) echoed the call for a one-year delay on February 11, 2014 by introducing a companion bill (S. 2011) in the upper chamber with 38 Republican cosponsors.

Resources

Proposed IRS Regulations (PDF)

IS Principles on 501(c)(4) Electoral Campaign Activity (December 2012)

IS Principles on Political Activity (December 2013)

The Bright Lines Project

Independent Sector's Comments
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