IRS Proposes Regulations Regarding Political Activities for 501(C)4 Organizations

The IRS is seeking to clarify what exactly is meant by “political campaign activity” for 501(c)4 organizations. On November 26, IRS and the Treasury released proposed regulations that would establish a “bright-line rule” to determine political conduct inconsistent with the 501(c)4 tax-exempt status. These proposed regulations are in response to the recent charitable organization scandal with the hope that clearer boundaries will help reduce the need for fact-intensive inquiries.

Under the tax code, 501(c)4 social welfare organizations are to be operated exclusively for the promotion of social welfare. Current regulations state that the “promotion of social welfare” does not include direct or indirect participation in political campaigns on behalf of or in opposition to any candidate. The proposed regulations introduce the concept of “candidate-related political activity.” Under these regulations, the promotion of social welfare could not include any direct or indirect candidate-related political activity, defining this activity as follows:

  • Communications. Candidate-related political activity would include communications that expressly advocate for or against a candidate. This covers all forms of communications – written, printed, electronic, video, and oral – made 60 days before a general election or 30 days before a primary election, and that clearly identify a candidate for public office. Also included in this type of activity are communications that must be reported to the Federal Elections Commission (FEC).
  • Contributions. This encompasses contributions to a candidate, political organization, or any tax-exempt organization engaged in candidate-related political activity. Both financial and in-kind donations are included in this definition, as well as other forms of support; examples provided include volunteer hours and free or discounted rentals of facilities or mailing lists.
  • Election-Related Activities. Voter registration, get-out-the-vote drives, distribution of material prepared by or on behalf of a candidate or a section 527 organization, and preparation or distribution of a voter guide would be considered candidate-related political activity. Event appearances are also included. If your 501(c)4 organization were to host an event within a certain period of an election (30 days within a primary, 60 days within a general) that features a candidate on the event program, you could be found in violation of tax-exempt rules under the proposed regulations.

Any activities under these three categories that are paid for by the organization or conducted by its directors, staff or volunteers; communications made as part of an official activity or in an official publication of an organization; or other communications the organization pays to create or distribute would be considered attributable to the 501(c)4.

The IRS recognizes that these proposed regulations may be restrictive, but sees benefits to providing clearer boundaries. Comments on these regulations are being accepted until February 27, 2014, and the IRS and the Treasury are also looking for feedback as to whether similar standards should be adopted for 501(c)5 and (c)6 entities.

While these are only proposed regulations, 501(c)4 organizations could see some sort of regulatory change around this issue in the near future. We’ll make sure to provide updates and details to keep you informed.
For more information, the full text of the proposed regulations are available in the November 26, 2013 Federal Register.

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