Monday, January 21, 2013

Starting a Second Term - With Your Own (c)(4)

A number of news sources reported at the end of last week that President Obama was converting his campaign organization into a 501(c)(4) organization, "Organizing for Action."  Apparently this has upset Mike Huckabee (who apparently had his own exempt PAC, as this article points out), but I'd note that that at least we have fair assurance that this new (c)(4) won't be a thinly-disguised campaign funding vehicle, since President Obama can't be re-elected.  It also allows me to emphasize a point lost in most of the "(c)(4) and politics" discussion: (c)(4)'s can engage in essentially an unlimited amount of legislative lobbying, which the IRS views as a proper social welfare activity (see the IRS 2003 EO CPE text, available here), but in theory they cannot engage in an unlimited amount of candidate-for-public-office activity (unlike (c)(3) charities, which cannot engage in any candidate support activities, a (c)(4) can engage in some, as long as that is not their "primary purpose").  

Still, I have become ever-more convinced that we should simply eliminate (c)(4) status from Section 501. Organizations that are truly supporting social welfare should be able to qualify as charitable organizations with some modest limits on their lobbying activity (add some educational functions, cut back a bit on lobbying, and you're probably there, since the IRS can't really enforce the "no substantial part" test under 501(c)(3) anyway).  Everyone else either needs to admit they are a 527 political organization or go away.

JDC

http://lawprofessors.typepad.com/nonprofit/2013/01/starting-a-second-term-with-youre-own-c4.html

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Comments

If you get rid of 501(c)(4), where do organizations that exist almost exclusively to engage in lobbying go? 501(c)(3) won't work, and many of them don't qualify as unions, trade associations, etc. Are you suggesting that that lobbying be declared a 527(e) exempt function activity so that these groups can operate under 527? That would mean that to engage in core First Amendment lobbying activity, they need to disclose their donors. Are you saying that they can't be tax-exempt? It would seem to be a significant constitutional problem to allow taxation to be used, potentially, to punish those espousing unpopular policy positions.

How about if we, instead, get the IRS to write some real regulations about what constitutes political intervention and then give them the funds and the political support they need to really enforce the laws governing lobbying and political activity by tax-exempt organizations?

Posted by: John Pomeranz | Jan 22, 2013 4:31:34 AM

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