IRS Might Punt, For Now, On Lobbying

April 15, 2014       Mark Hrywna      

The Internal Revenue Service (IRS) is likely to go back to the drawing board with new regulations on political activity of 501(c)(4) social welfare organizations. IRS Commissioner John Koskinsen was quoted in USA Today that the tax enforcement agency is likely to re-write the proposal rules and again solicit public input.

The new regulations would have classified get-out-the-vote efforts or issue communications as political activity, which raised the ire of various nonprofit leaders. During a public comment period that extended to February, the tax agency received a record 150,000 comments on the proposal.

The proposed regulations were criticized by all sides, saying they went too far, possibly even classifying voter education efforts as political activity. At a House subcommittee hearing in February, representatives from a gamut of tax-exempt organizations urged lawmakers to scrap the proposed regulations. Nonprofit leaders feared that the new rules for 501(c)(4) organizations also would restrict the already limited ability of 501(c)(3) organizations to lobby.

Organizations classified as 501(c)(4) social welfare organizations would be allowed to undertake political activity as long as it does not constitute the organization’s primary purposes. Existing regulations had been criticized as being too ambiguous when it comes to political activity after it was revealed last year that the IRS had been giving greater scrutiny to tax-exempt applications of some 501(c)(4) groups.

“While the IRS and Treasury achieved their stated goal of creating clear and definitive definitions, they erred by quashing democratic participation – the heart of what so many social welfare organizations do,” said Alliance For Justice (AFJ) President Nan Aron said, after the regulations were proposed this past November. “The attention paid to the few 501c4s that may be abusing their status obscures the law-abiding and legitimate work of the 110,000 or so (c)(4)s that represent millions of members and activists across the United States,” she said. “The 501c4 organizations we work with do not engage in political work as their ultimately goal. They see political work as a means to an end. They conduct election activities like holding candidate forums and producing voter guides not to help individual candidates but to help voters make informed decisions based on issues they care about.”