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

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.  The Department issued the proposal in the wake of a controversy over improper scrutiny by the Internal Revenue Service of some applications by social welfare groups for tax-exempt status under 501(c)(4).

Latest News
Fiscal Year 2016 omnibus appropriations bill includes limitations on 501(c)(4) regulations
As enacted into law in December 2015, the FY2016 spending bill included a provision preventing the IRS from issuing new regulations governing political activity by 501(c)(4) social welfare organizations for the rest of the current fiscal year—and thus realistically during the remainder of President Obama’s tenure. Nevertheless, IRS Commissioner John Koskinen has said that his agency is not scrapping plans to draft and promulgate new regulations on the issue eventually, saying that "we'll continue to have a dialogue with the Congress about where we're going [and] we'll see what happens in October."

IRS: Uncertain timeline for expanded political activity rules
An IRS official said in May 2015 that it remains too early to determine when the agency might produce a second draft of proposed guidance for tax-exempt political activity. After withdrawing last year a proposal from 2013 that pertained only to the political activity of 501(c)(4) social welfare organizations, the IRS had planned to release a more comprehensive set of rules for all exempt groups during the first quarter of 2015, a deadline it did not meet. IRS Commissioner John Koskinen in January said the forthcoming proposal will offer clarity around the definition of political activity, to whom it should apply, and how much political activity an organization can conduct before jeopardizing its tax exemption. Koskinen later confirmed that any rules would not go into effect before 2017.

House, Senate bills would delay rulemaking for 501(c)(4) political activity
House Ways and Means Committee Chairman Paul Ryan (R-WI) and Oversight Subcommittee Chairman Peter Roskam (R-IL) introduced legislation (H.R. 599) on January 29 that would prohibit the IRS from issuing, revising, or finalizing any changes to the standards for determining whether 501(c)(4) applicants are operating exclusively for the promotion of social welfare. Sen. Jeff Flake (R-AZ) and Finance Committee member Pat Roberts (R-KS) introduced a companion bill (S. 283) in the upper chamber the same day. The Senate and House measures set the expiration date for the proposed prohibition in February and December 2017, respectively.  

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.


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

Senate PSI recommendations to IRS (September 2014)

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