Thursday, July 21, 2011
Just when I was suggesting that American Campaign Academy is absurd, the IRS relied heavily on the case to deny 501(c)(4) status to several political party training academies in these private rulings. In each of the cases, the training schools trained candidates for a specific political party. In denying exemption, the Service stated:
Educational activities undertaken to provide a partisan benefit are considered to serve private interests, rather than the common good. In American Campaign Academy, supra, the court denied exemption under section 501(c)(3) to a school organized to train individuals for careers as political campaing professionals because its educational activities were operated with the partisan purpose of benefiting Republican Party entites and candidates. The private benefit conferred on these persons was more than incidental, and thus demonstrated a substantial non-exempt purpose that precluded exemption. While you are requesting recognition as an organization described in section 501(c)(4) and not section 501(c)(3) (as was American Campaign Academy), the standard for determining what constitutes private benefit described in American Campaign Academy applies to both sections. As such, for purposes of both section 501(c)(3) and section 501(c)(4), an organization which conducts its educational activities to benefit a political party and its candidates serves private interests. And, as discussed above, an organization that primarily serves private interests fails to qualify for exemption under section 501(c)(4).
Thus, notwithstanding any benefit your educational activities may provide to the community, you fail to qualify for exemption because your trainining program primarily benefits the interests of the Party and its candidates. According to your Articles and Bylaws, your primary activity is to train and recruit ____________________ who are members of the party to run for political office. Like the school in American Campaign Academy, your purpose in conducting this activity is to provide education solely to individuals affiliated with a certain political party who want to enter politics. Indeed, you measure your success in terms of the number of graduates who have run for, or won, elective office representing the Party.
Just to be clear, the theory in American Campaign Academy is a sound one in my opinion, but wrongly applied to cases whether the alleged private benefit is to a political party. Its like condemning a truck-driving school for benefiting trucking companies. As one scholar once said, the case is really about an NGO's identifiable ideology rather than private benefit.