Here's the problem
There is a ton of debate and discussion about the IRS and the "targeting" of groups applying for non-profit status with "conservative" sounding words in their name. These groups were subjected to extra scrutiny, and asked questions that the IRS is not supposed to be asking.
The fact is that Congress needs to clear up some confusion under the actual Internal Revenue Code as codified in Federal law. If you want to read the entire text of what I'm going to excerpt, links will follow below the excerpts. The most important words are bolded.
26 USC § 501 - Exemption from tax on corporations, certain trusts, etc.
"An organization described in subsection (c) or (d) orsection 401(a) shall be exempt from taxation under this subtitle unless such exemption is denied under section 502 or 503."
501(c)(3)
"Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
501(c)(4)
"(A)Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
The fact is that Congress needs to clear up some confusion under the actual Internal Revenue Code as codified in Federal law. If you want to read the entire text of what I'm going to excerpt, links will follow below the excerpts. The most important words are bolded.
26 USC § 501 - Exemption from tax on corporations, certain trusts, etc.
"An organization described in subsection (c) or (d) orsection 401(a) shall be exempt from taxation under this subtitle unless such exemption is denied under section 502 or 503."
501(c)(3)
"Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
501(c)(4)
"(A)Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
(B)Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.
As you can see, there is a specific prohibition against those non-profits that are recognized under section 501(c)(3) from engaging in political activity and there is not one for those in section 501(c)(4). In actuality, the intent of the Code has been construed that as long as the political activity supported the "social welfare" aim, these organizations were allowed to engage in political activity.
On the other hand, the IRS has also been inconsistent about enforcing the prohibition in section 501(c)(3) regarding political involvement of not-for-profits. There was a big to-do not too long ago about churches and their leaders using their pulpits to engage in "lobbying" their congregations. I spent nearly two decades working for a not-for-profit where the prohibition against the organization or anyone claiming to be working on its behalf engaging in political activity was spelled out in the employee manual.
Congress makes laws. The IRS promulgates policies and procedures in how those laws are implemented. Clarity is needed here. Prohibit 501(c)(4) organizations from engaging in any political activity. Or don't. But make it clear what the law is. Then have the IRS enforce that law.
It is also time to make a definitive choice regarding whether or not the identity of donors should be allowed to remain confidential. The recent Prop 8 election in California illustrated what can happen when the identity of donors to political campaigns become public knowledge.
The plain and simple truth is that just because someone's business may suffer from a boycott because of their choice to support a political agenda is not a good reason to allow them to donate in secret. There are two sides to every single issue. Prop 8 is a good example, but I can give you a better one. When news broke that Chick-Fil-A had made donations to "gay hate groups", the battle-cry "Boycott Chick-Fil-A" was shouted loudly. And as one group boycotted them, another group stepped forward and lined up in droves to buy their product. Their business may have actually grown as a result, because once they stopped making those donations, some ended their self-imposed prohibition on eating the chain's offerings.
So the time has come for Congress to act. Investigating partisanship at the IRS is fine. But that's not the critical issue. That happens to be allowing political activists to wash money through 501(c)(4) organizations, which was not the intent when this law was passed.
On the other hand, the IRS has also been inconsistent about enforcing the prohibition in section 501(c)(3) regarding political involvement of not-for-profits. There was a big to-do not too long ago about churches and their leaders using their pulpits to engage in "lobbying" their congregations. I spent nearly two decades working for a not-for-profit where the prohibition against the organization or anyone claiming to be working on its behalf engaging in political activity was spelled out in the employee manual.
Congress makes laws. The IRS promulgates policies and procedures in how those laws are implemented. Clarity is needed here. Prohibit 501(c)(4) organizations from engaging in any political activity. Or don't. But make it clear what the law is. Then have the IRS enforce that law.
It is also time to make a definitive choice regarding whether or not the identity of donors should be allowed to remain confidential. The recent Prop 8 election in California illustrated what can happen when the identity of donors to political campaigns become public knowledge.
The plain and simple truth is that just because someone's business may suffer from a boycott because of their choice to support a political agenda is not a good reason to allow them to donate in secret. There are two sides to every single issue. Prop 8 is a good example, but I can give you a better one. When news broke that Chick-Fil-A had made donations to "gay hate groups", the battle-cry "Boycott Chick-Fil-A" was shouted loudly. And as one group boycotted them, another group stepped forward and lined up in droves to buy their product. Their business may have actually grown as a result, because once they stopped making those donations, some ended their self-imposed prohibition on eating the chain's offerings.
So the time has come for Congress to act. Investigating partisanship at the IRS is fine. But that's not the critical issue. That happens to be allowing political activists to wash money through 501(c)(4) organizations, which was not the intent when this law was passed.
posted by me at 6:51 AM
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