IRS proposes new rules for tax-exempt organizations
November 26th, 2013
03:20 PM ET
9 months ago

IRS proposes new rules for tax-exempt organizations

(CNN) - The Treasury Department and the Internal Revenue Service proposed new rules Tuesday that more specifically define the political activity allowed for tax-exempt organizations.

The proposed rules may affect the way groups that played big roles in the last two election cycles operate in the future. Those groups include the Karl Rove-backed Crossroads GPS, the Koch Brothers-backed Americans for Prosperity and the Democratic group Priorities USA Action.

As of now, certain tax-exempt organizations–known by the IRS designation 501(c)(4)–can conduct political activity and as long their "primary" activity promotes "social welfare." Groups can get around this by focusing on issues that are closely aligned to candidates, rather than encouraging voters to vote for or against the actual candidates.

For example, a group may put out an ad blasting a Senate candidate’s position on a piece of legislation. But as long as the ad doesn’t urge voters to vote against the candidate, then the group can still be considered a tax-exempt, social welfare group.

Also under current tax rules, donors to 501(c)(4)s can remain anonymous.

The IRS wants to introduce a new term: “candidate-related political activity," which seeks to clarify what social welfare groups can and cannot do when it comes to politics.

The new term comes as a response to the lack of clarity over the less-specific term "political activity," which led to the controversial targeting of some conservative and liberal groups seeking tax-exempt status by the IRS in recent years.

Supporters of campaign finance reform say the current rules are too confusing, leading to lax government enforcement, and to abuse by private groups seeking to unduly influence federal elections.

The IRS said it was not targeting groups out of political bias, but because it was trying to determine whether the groups' primary activities were social welfare, rather than political activity.

As spelled out by the IRS, "candidate-related political activity” includes:

1. 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.

2. 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).

3. 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.

According to a release about the rules, the proposal reduces "the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased."

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

Before the agency issues final guidance, it will first seek public comments on the new proposals, and go through other parts of the regulatory process. That could take many months and may not affect next November’s mid-term congressional elections.

Groups challenging the new rules would likely wait until they are fully in place and enforced, before any lawsuits would be filed. Under its precedent, the Supreme Court has generally given deference to a government agency's interpretation of a law it administers.

The American Center for Law and Justice, which represents 41 organizations in a lawsuit against the IRS, released a statement decrying the proposed rules.

“These proposed new regulations put the First Amendment rights of Americans at even greater risk,” said Jay Sekulow, Chief Counsel of the ACLJ. “This is a feeble attempt by the Obama Administration to justify its own wrong-doing with the IRS targeting of conservative and Tea Party groups.”

House Oversight Committee Chairman Darrell Issa, R-California, also blasted the proposed new rules as a "effort by the Obama Administration to limit traditional advocacy efforts by social welfare organizations" that will affect grassroots organizations instead the intended targets.

"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," Issa said in a statement.

Senate Finance Committee Chairman Max Baucus, D-Montana, called the proposal "an important step."

"Unfortunately, groups on both ends of the political spectrum have tried to take advantage of the ambiguity in the law when it comes to the tax treatment of 501(c)4s," Baucus said in a statement.

"We need to ensure clear standards and equal footing for the treatment of tax exempt social welfare organizations."

– CNN’s Bill Mears and Kevin Bohn contributed to this report.


Filed under: IRS
soundoff (27 Responses)
  1. Donna

    Gee, more use of the IRS to target Democrat political opponents just before the 2014 election? What a SURPRISE?!! NOT!

    November 26, 2013 03:32 pm at 3:32 pm |
  2. Name jk. Sfl. GOP CRUZ lee&rubio 24billion dallar LOSS of your tax money conservatives,the garbage of America.

    You have to be an idiot to not think these groups are not political,IRS????? Morons.

    November 26, 2013 03:34 pm at 3:34 pm |
  3. current state of the union

    Donna, don't you ever tire of being 100% wrong 100% of the time?

    November 26, 2013 03:41 pm at 3:41 pm |
  4. Hooper

    Here's an idea whose time has come. Start taxing the organized religious organizations that get involved in elections. Then raise taxes from companies that fail to pay employees livable wages, thus making it necessary for said employees to collected food stamps and other social benefits. How about a few more dollars from companies that provide alcohol and tobacco products. Many of the users of these products sooner or later are a burden on the medical/health providers, so let them pay for some of their own medical care up front. The list can go on and on.

    November 26, 2013 03:46 pm at 3:46 pm |
  5. rs

    Donna

    Gee, more use of the IRS to target Democrat political opponents just before the 2014 election? What a SURPRISE?!! NOT!
    ________________________
    Read the story Donna- it affects all donors, not just the GOP. Jeez!

    November 26, 2013 03:47 pm at 3:47 pm |
  6. Silence DoGood

    @donna "more use of the IRS to target Democrat political opponents"

    The review of this originally showed conservative and liberal groups being targeted equally. This will likely be the same with conservatives just looking for a misstep. After reality comes to light you really need to give up the made-up story. Tell me you are not still believing about the birth certificate and death panels.

    November 26, 2013 03:49 pm at 3:49 pm |
  7. ProudDem

    Donna you obviously didnt read the article...or perhaps understand it. It applies to BOTH sides...the Dems have big PACs that spend way too much money too.

    November 26, 2013 03:50 pm at 3:50 pm |
  8. Dutch/Bad Newz, VA -aka- Take Back The House -aka- No Redemption Votes

    How about this? TAKE MONEY OUT OF POLITICS

    November 26, 2013 03:52 pm at 3:52 pm |
  9. just asking

    yes, i'm sure they say they will treat progressive groups the same as others but we know that will not be the case. nobody has been fired or removed from the irs. the same cast of criminals that targeted the tea party in the last two elections, still works there. more smoke and mirrors from the obama adminstration as they ramp up their opposition supporession machine called the irs.

    these lawless democrat criminals need to be removed from office before they totally destroy this country.

    November 26, 2013 03:52 pm at 3:52 pm |
  10. Donna

    rs
    Donna
    Gee, more use of the IRS to target Democrat political opponents just before the 2014 election? What a SURPRISE?!! NOT!
    ________________________
    Read the story Donna- it affects all donors, not just the GOP. Jeez!
    --

    OH PULLEZE!!! Spare me the stupid replies that say the same people that actively targetted politcial opponents of Obama in 2010 and 2012 are all now all of a sudden fair and balanced and pure as the driven snow. Not a one of them was fired. The same bunch of criminals are still there. I was born on a Sunday, but not last Sunday!

    November 26, 2013 03:56 pm at 3:56 pm |
  11. The Real Tom Paine

    -just asking

    yes, i'm sure they say they will treat progressive groups the same as others but we know that will not be the case. nobody has been fired or removed from the irs. the same cast of criminals that targeted the tea party in the last two elections, still works there. more smoke and mirrors from the obama adminstration as they ramp up their opposition supporession machine called the irs.

    these lawless democrat criminals need to be removed from office before they totally destroy this country.
    ********************************
    Now, explain how effective this Democratic tactic was in NJ and VA. If the goal was to prevent Christie from being re-elected, it certainly did not work. What crewed the Cooch was his fascinatation with the uterus, as well as the GOP AG candidate. What a pathetic display of ignorance.

    November 26, 2013 03:58 pm at 3:58 pm |
  12. Silence DoGood

    @Hooper
    Here's an idea whose time has come. Start taxing the organized religious organizations that get involved in elections.
    (repeating brilliance)

    November 26, 2013 03:59 pm at 3:59 pm |
  13. Rudy NYC

    Republican complaints are as empty as their campaign promises. These are the same people who passed campaign finance reform during the first term of George W. Bush, lose the 2008 election because they were outspent, and then file suit against the very campaign laws they put in place to overturn them.

    November 26, 2013 04:00 pm at 4:00 pm |
  14. IRS - Internal Revenge Service

    The new purpose of the IRS under the Obama administration.

    November 26, 2013 04:04 pm at 4:04 pm |
  15. iconoclast1

    Good. It figures that the right continues to protect the interests of the millionaires and billionaires who want to continue their corrupt ways, pretending the whole time that they are protecting free speech. They aren't. They are simply drowning out the voices of others because they can afford to. They aren't protecting free speech; they're giving preference to expensive speech for their own benefit.

    November 26, 2013 04:13 pm at 4:13 pm |
  16. Stuffit

    I would still like to know what happened to that investigation Obozo was going to do. Like every other scandal, the media does not hold his feet to the fire.

    November 26, 2013 04:15 pm at 4:15 pm |
  17. Silence DoGood

    I think I see a pattern to Donna's diatribes:
    – story is about IRS policy applied fairly: Obama is a criminal
    – story is about IRS policy slanted against certain groups: Obama is a criminal.
    – story does not give details: Obama is a criminal.
    – story is about bunnies as pets: Obama is a criminal.

    November 26, 2013 04:16 pm at 4:16 pm |
  18. Roger

    @ just asking:
    these lawless democratic criminals you speek of, are the only ones standing between the middle-class's survival and the greedy 1%ers TOTAL take over of our economy. PLEASE, stop repeating EVERYTHING the Rabid Rights putting out. Like sheep to slaughter, for gods sakes.

    November 26, 2013 04:16 pm at 4:16 pm |
  19. Rudy NYC

    Stuffit

    I would still like to know what happened to that investigation Obozo was going to do. Like every other scandal, the media does not hold his feet to the fire.
    ---------------------
    They completed it. Issa didn't want to hear it. Turns out that they discovered that liberal groups were targeted for closer scrutiny, just like the conservative groups. They also found that they were far more conservative groups applying, which naturally led to higher numbers of conservatives groups under scrutiny.

    November 26, 2013 04:28 pm at 4:28 pm |
  20. Rick McDaniel

    The IRS wants to limit political activity to the socialist Democratic Party.........in an obvious affront to all other political parties.........and in conflict with freedom in America.

    November 26, 2013 04:30 pm at 4:30 pm |
  21. The Real Tom Paine

    The GOP mantra: no billionaire left behind.

    November 26, 2013 04:39 pm at 4:39 pm |
  22. The Real Tom Paine

    -Rick McDaniel

    The IRS wants to limit political activity to the socialist Democratic Party.........in an obvious affront to all other political parties.........and in conflict with freedom in America.
    ************
    Freedom? Someone who considers Lincoln the worst president in American history is the last person to talk about freedom.

    November 26, 2013 04:40 pm at 4:40 pm |
  23. Name jk. Sfl. GOP CRUZ lee&rubio 24billion dallar LOSS of your tax money conservatives,the garbage of America.

    Rick McDaniel = IDIOT, that includes you , just sayin?????

    November 26, 2013 04:49 pm at 4:49 pm |
  24. Boomer in Mo

    Playing politics should never be tax exempt. The real scandal was that political activity was tax exempt in the first place, not who was being targeted.

    November 26, 2013 04:55 pm at 4:55 pm |
  25. Burt Ward

    Will they ever do anything about mostly the Missionary Baptist Churches preaching and commanding politics from the pulpit? I mean they tell you whom to vote for, what issues to vote in and out, hold rallies at the church for a particular candidate, and provide transportation to the polls so people can proxy vote for those who cant leave the rest home. Those old ladies vote for themselves, then circle back and sign in for Haddie , Rest Acres, and vote for her. The church prints up a voting guide that looks like a real ballot. They take it with them to the polls so they can mark the right candidate. This used to be illegal for a non-profit to get this involved in the process but now its just a matter of routine practice for these churches. One pastor responded to criticism by saying, "I can say what I want from the pulpit any d@mn time I want to say it and the IRS can just go to He||."

    November 26, 2013 05:07 pm at 5:07 pm |
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