Laws on political action by tax-exempt groups - updated 9:26pm EST

Please read the link below for a fuller discussion of this issue.

http://thinkprogress.org/justice/2013/05/14/2006851/how-real-disclosure-laws-could-help-fix-the-irs-problem/

By Josh Israel posted from ThinkProgress Justice on May 14, 2013

The Internal Revenue Service is under fire from both parties for improperly targeting certain groups for additional scrutiny because their names included keywords such as “Tea Party” and “patriot.” But the challenge of addressing the skyrocketing numbers of “social welfare” groups registering for tax exempt status could be lessened by fixing the broken disclosure laws for political advertisers.

Since the Supreme Court’s controversial 5 to 4 ruling in the Citizens United v. FEC case in 2010, the IRS has seen a more than 100 percent increase in the number of groups applying for 501(c)(4) status — the section of the federal tax code that governs non-profit groups dedicated to social welfare — from 1,500 in 2010 to 3,400 in 2012.

Not all 501(c)(4) engage in political activity of any kind — the United States Chess Federation, for example, is a fairly apolitical group. Political 501(c)(4) groups are required to adhere to certain rules, including that they not be “primarily engaged” in electioneering activity. In a failed attempt to sort out which groups were apolitical and which needed additional scrutiny, the IRS reportedly tried a variety of ineffective screening methods, including flagging “patriot” groups as well as groups that focused on making “America a better place to live.”

As long as it is not their primary purpose, Citizens United allows (c)(4) groups to spend unlimited funds on “independent expenditure” ads aimed at swaying voters and the deadlocked Federal Election Commission allows these groups to avoid any disclosure of who bankrolls these advertisements. And since the 2002 law governing political advertisements came before the ruling, it does not adequately address the specific issue of disclosure for independent expenditure ads.

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http://www.washingtonmonthly.com/political-animal-a/2013_05/two_rather_important_details_a044751.php

May 15, 2013

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But there are two aspects of the “IRS Scandal” that keep nagging at me.

The first is nicely covered by TNR’s Noam Scheiber today: the applications for 501(c)(4) status that are at issue are not part and parcel of some burdensome government regulation of political speech. They are voluntary, and simply provide the applicant an advance assurance of tax-exempt status before they file their tax returns for a given year. If they are reasonably sure they aren’t afoul of the rules for 501(c)(4) organizations, they don’t need the certification at all. So the idea that the IRS was “shutting down” Tea Party and other groups by sitting on their applications or requiring them to deal with burdensome questionnaires is an exaggeration from the get-go. Besides, most groups like this don’t (and shouldn’t) wind up having the sort of “profits” that generate tax liability to begin with.

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