On November 29, 2013, a Notice of Proposed Rulemaking by the Internal Revenue Service was published in the Federal Register containing proposed regulations that provide guidance to tax-exempt social welfare organizations on political activities related to candidates that will not be considered to promote social welfare.
A 501(c)(4) social welfare organization must be operated exclusively for the promotion of social welfare. Under the current regulations, it meets this standard if it is “primarily engaged in promoting in some way the common good and general welfare of the people of the community." The Treasury Department and the IRS are considering, and seeking public comment on, whether the current section 501(c)(4) regulations should be modified to provide more precision with respect to the meaning of the term "primarily engaged" if the “primarily” standard is retained.
The current regulations also provide that "[t]he promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office." The proposed regulations would replace the term “participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office” with a new term—“candidate-related political activity”—to differentiate the proposed Section 501(c)(4) rule from the standard employed under Section 501(c)(3).
Under the proposed guidelines, 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.
Here are some additional provisions we found interesting:
- The Treasury Department and the IRS request comments on whether any particular activities conducted by section 501(c)(4) organizations should be excepted from the definition of candidate-related political activity as voter education activity and, if so, a description of how the proposed exception will both ensure that excepted activities are conducted in a non-partisan and unbiased manner and avoid a fact-intensive analysis.
- The Treasury Department and the IRS request comments on whether, and under what circumstances, material posted by a third party on an interactive part of the organization's Web site should be attributed to the organization for purposes of this rule.
The proposed guidlines have generated much discussion already. Check out the following:
Alliance for Justice: Treasury, IRS proposal endangers citizen participation in democracy
Adler & Colvin (Nonprofit Law Matters): Just Released Proposed 501(c)(4) Regulations: A Good Start, But Rough …