Organizations from the Right and the Left Oppose IRS Proposed New Regulations on 501(c)(4)s

Alliance for Justice

CC:PA:LPD:PR (REG-134417-13) 
Room 5205, Internal Revenue Service 
P.O. Box 7604, Ben Franklin Station 
Washington, DC 20044 

Re: Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities, REG-134417-13 

These comments are submitted in response to the Notice of Proposed Rulemaking (NPRM) on Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities. 

While we appreciate the stated goal of the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) of providing greater clarity to reduce the need for detailed factual analyses in determining whether an organization will engage in political activity, we do not think this NPRM is the right approach. We request that Treasury and the IRS withdraw the proposed regulation and work with the regulated community to develop a better approach. 

The NPRM overreaches by capturing as “political” (defined in the NPRM as “Candidate-Related Political Activity” or CRPA) certain activities without regard to whether they are conducted on a partisan or nonpartisan basis, and in many cases without adding clarity (for instance, by failing to define certain key terms), yet only addresses some of the relevant issues long unsettled for 501(c)(4) organizations. 

If adopted, the proposed regulations would reclassify as CRPA much of the civic engagement work that 501(c)(4)s conduct during election season, such as promoting public participation in elections, strengthening democracy by educating voters, and educating candidates about the needs of the community. Therefore the NPRM would limit how much of this activity—which has long been recognized by the IRS as promoting the general welfare of the community—501(c)(4)s can do. 

For instance, we are troubled that activities such as the following are defined as CRPA: 

Voter registration and GOTV: The NPRM would classify as CRPA all voter registration and get-out-the-vote activities, including efforts to encourage citizens to participate in a referendum election even where no candidates are on the ballot. This will limit the ability of social welfare organizations to encourage eligible citizens to participate in the democratic process by registering to vote and then voting in elections. 
Hosting nonpartisan candidate events: Any event within 30 days of a primary or 60 days of a general election would be considered CRPA if one or more candidates in such election appear as part of the program—even in a non-candidate capacity. The result will be to restrict the ability of 501(c)(4) organizations to sponsor candidate debates and forums which seek to educate the public concerning the candidates’ views, and will also narrow the opportunities available for public officials to meet with their constituents. 
Public communications: Any public communication disseminated within 30 days of a primary or 60 days of a general election that refers to one or more clearly identified candidates in that election or, in the case of a general election, refers to one or more political parties represented in that election will be treated as CRPA. This is true even if the candidate is referenced in a non-candidate capacity. This will limit the ability of 501(c)(4)s to communicate on many policy-related issues in a wide array of communications, including websites, newspapers, magazines, paid advertising, and any other communication that reaches or is intended to reach more than 500 persons. The NPRM abandons the carefully reasoned distinctions between political and legitimate policy advocacy communications the IRS adopted in earlier rulings. 
Grants and transfers to 501(c) organizations: The NPRM considers as CRPA any gift, grant, subscription, loan, advance, or deposit of money or anything of value to any organization described in 501(c) that engages in CRPA, unless the contributor obtains a written statement that the grantee does not engage in CRPA and the contribution is subject to a written restriction that it not be used for CRPA. This proposal is far more restrictive than current law, and could significantly deter legitimate social welfare activities by 501(c)(4) organizations. For instance, grantees may be uncertain about their future plans and reluctant to certify they will never engage in CRPA activities. Moreover, the full amount of the grant will be treated as CRPA regardless of the amount of CRPA actually conducted by the grantee organization. In addition, it would deter many 501(c)(4)s from transferring funds to 501(c)(3) organizations that are engaging in nonpartisan, charitable activities now considered CRPA for 501(c)(4)s. These 501(c)(3) organizations, already absolutely prohibited from engaging in partisan political activities, would not be able to certify that they do not engage in any CRPA. 
Judicial and executive branch appointments: Activities seeking to influence nominations and appointments to executive and judicial branch positions are deemed to be CRPA. There is no legal basis for broadening the definition of candidate beyond elected public office, and in fact doing so completely ignores the Service’s longstanding position, formally stated in Notice 88-76, that such activities do not constitute participation or intervention in a political campaign.

The NPRM states that Treasury and the IRS are considering whether the “primary” standard in the current regulations should be changed and if so, whether it should be redefined to incorporate an “insubstantial part” test. Treasury and the IRS should not use this NPRM to restrict the amount of political activity that 501(c)(4)s may undertake. Congress has chosen over many years and on numerous occasions not to limit the amount of political campaign activity that may be undertaken by 501(c)(4) organizations under the IRS’ long-standing “primary purpose” standard. Treasury and the IRS should not therefore revise the primary purpose test for political activity in the current regulation. 

Finally, we strongly recommend that Treasury and the IRS adopt the same sets of rules for defining political campaign activity for 501(c)(3) and 501(c)(4) organizations. Having two sets of definitions of political campaign activity would only lead to confusion and misunderstanding in the regulated community, especially among the many small and mid-sized organizations that cannot afford to retain legal counsel. However, we do not support applying the new restrictive definition of CRPA to 501(c)(3)s; rather, this provides another reason for rejecting the far-reaching definition of CRPA set forth in the NPRM for 501(c)(4)s. 

For all of these reasons, we urge Treasury and the IRS to withdraw the NPRM and work closely with the regulated community (whether through public hearings, new rulemakings, or other avenues) to determine the best way to address the issues raised in this NPRM. 

Respectfully submitted,

---

January 9, 2014

Dear Members of Congress:

As the people’s duly elected representatives, it is imperative that Congress step in and stop the IRS from codifying its
suppression of conservative groups. This rogue agency can clearly not be left to police itself, and we therefore urge you
to include language in the omnibus appropriations bill to stop the IRS from pursuing rulemaking in this area and to
continue robust oversight of this agency.

The IRS confessed to targeting conservative groups in a stunning abuse of power. While initially blamed on a small
number of so-called "rogue agents" in Cincinnati, subsequent investigations revealed that high-level IRS officials in
Washington, DC actually removed case files of conservative and tea party groups from Cincinnati to Washington, where
they stalled action for years, sent lengthy and intrusive questionnaires, and undermined the rights of association and
speech of conservatives.

Nobody has been held accountable for these outrageous abuses. Indeed, the apparent ringleader of the suppression
scheme, Lois Lerner, was granted six months of paid administrative leave and then allowed to retire with her full
pension. Suppression of political dissent has been rewarded. Even worse, the IRS now proposes not to rectify its own
misbehavior, but to blame the victims and effectively codify its own misdeeds by adopting draconian limitations on the
free speech rights of 501(c)4 social welfare groups via regulation.

The IRS proposal would restrict the free speech rights of such groups by arbitrarily deeming political a wide variety of
activities in the newly-created category of “Candidate-Related Political Activity,” which includes voter registration drives,
candidate debates, voter guides, voting records and key votes. They would restrict any criticism of an incumbent
federal, state, or local politician within 30 days of a primary or 60 days of a general election and effectively require
groups to remove any reference to politicians from their websites during these windows. They even distort the
definition of "candidate" to include appointees, so groups weighing in on executive or judicial nominations would be
restricted.

These draconian rules will effectively muzzle 501(c)4 groups in the run-up to November’s mid-term elections while
unfairly exempting 501(c)5 labor unions that support liberal candidates and causes.

The rules proceed from the assumption that political engagement and discussion of health care, government spending,
and other public policy issues and the merits of nominees who implement them cannot logically be part and parcel of a
social welfare mission. This is not what the law requires and it is inconsistent with longstanding historical practice and
understanding.

While Section 501(c)(3) of the tax code specifically bars those organizations from engaging in political activity, no such
statutory prohibition exists in Section 501(c)(4). For half a century the IRS has defined “social welfare” in our democratic
society to include activities such as nonpartisan get-out-the-vote drives, voter registration, and voter education on
issues of public concern.

The 501(c)(4) category has always been the home of groups that advocate public policy and hold politicians accountable
for the policies they pursue at every level of government. The IRS is disregarding these facts and severely limiting rights
of association and speech, especially for smaller grassroots groups that cannot easily afford high-priced lawyers to
navigate complex new rules.

This latest IRS power grab must be stopped, and we urge you to do so in the omnibus appropriations bill.

Sincerely,

Jim Martin Chairman 60 Plus Association Melissa Ortiz Founder/Principal Able Americans Phil Kerpen President American Commitment Dan Schneider Executive Director American Conservative Union Thomas Pyle President American Energy Alliance Sandy Rios Director of Governmental Affairs American Family Association Mark Fitzgibbons President of Corporate Affairs American Target Advertising, Inc. Gary L. Bauer President American Values Brent Gardner Director of Federal Affairs Americans for Prosperity Grover Norquist President Americans for Tax Reform John Tate President Campaign for Liberty Susan Carleson Chairman/President Carleson Center Welfare Reform Action Fund Sean Noble President Center to Protect Patient Rights

Jeffrey Mazzella President Center for Individual Freedom Matt Patterson President Center for Worker Freedom Elaine Donnelly President Center for Military Readiness* Frank J. Gaffney, Jr. President Center for Security Policy* Tom Minnery President CitizenLink Chris Chocola President Club for Growth Gary Aldrich President and Chairman of the Board CNP Action, Inc. Penny Nance President and CEO Concerned Women for America Legislative Action Committee Peter J. Thomas Chairman The Conservative Caucus Mattie Duppler Executive Director Cost of Government Center Thomas A. Schatz President Council for Citizens Against Government Waste Christopher J. Conover, PhD Research Scholar Center for Health Policy & Inequalities Research* Duke University*

Katie McAuliffe Executive Director Digital Liberty Brian Baker President Ending Spending Ralph Reed Chairman Faith & Freedom Coalition Larry Cirignano President Faithful Catholic Citizens Dick Patten President Family Business Defense Council Paul Caprio Executive Director Family Pac Federal Kenneth R. Timmerman President & CEO Foundation for Democracy in Iran James S. Gilmore III President Free Congress Action Coley Jackson President Freedom Action Matt Kibbe President FreedomWorks George Landrith President Frontiers of Freedom Aaron Stover Director of Development, Eastern Region The Heartland Institute Michael Needham Chief Executive Officer Heritage Action

Mario H. Lopez President Hispanic Leadership Fund Michael Smith, Esq. President Home School Legal Defense Association Heather R. Higgins President Independent Women’s Voice Andrew Langer President Institute for Liberty Seton Motley President Less Government Colin A. Hanna President Let Freedom Ring Christopher Arps Co-Founder Move-On-Up.org Lew Uhler President National Tax Limitation Committee Pete Sepp Executive Vice President National Taxpayers Union Dave Wallace, II Founder Restore America's Mission Ken Hoagland Chairman Restore America's Voice

Lawrence A. Hunter President Social Security Institute David Williams President Taxpayers Protection Alliance Judson Phillips President Tea Party Nation Amy Kremer Chairman Tea Party Express Jenny Beth Martin Co-Founder Tea Party Patriots Todd Cefaratti Founder TheTeaParty.Net C. Preston Noell III President Tradition, Family, Property, Inc. Carl Bearden Executive Director United for Missouri Morton Blackwell Chairman The Weyrich Lunch Ron Robinson President Young America's Foundation Terry T. Campo President YR Alumni Network, Inc.

*Affiliations for identification purposes only.