If you’re reading this, chances are you consider yourself an activist. That means you interact, directly or indirectly, with 501(c) organizations. But soon after Sept. 30, political and civic activists of all ideologies may need to reassess their action plans and reconfigure their strategies. That’s because the Internal Revenue Service is poised to substantially revise regulations governing the tax-exempt status of political speech by 501(c)(4) organizations.
Exempt from paying taxes (although donations aren’t tax deductible), 501(c)(4)s are primarily “social welfare” organizations, and any partisan political activity they engage in must be “secondary,” not the organization’s primary purpose. Current IRS rules on what constitutes primary political activity are “hopelessly vague,” Emily Peterson-Cassin of Public Citizen’s Bright Lines Project tells me, like a speed limit sign that says "don’t go too fast.”
While groups of all shapes and sizes unsurprisingly try to use that ambiguity to their respective advantages, there’s no level playing field here. Freedom of advocacy is meaningless in the abstract. It’s wealth that counts, and the regulatory ambiguities of 501(c)(4)s mostly benefit groups with a lot of money.
Conservative billionaires have funded many of these groups to the tune of hundreds of millions of dollars, sometimes from only a few donors, sometimes only one. They’re clearly engaging in primarily partisan activity, well over the edge of propriety. The result is a world where, according to Peterson-Cassin, “bad-actor donors and corporations who want to spend unlimited money on elections and not have voters know who they are can do it through c4s,” but also where "careful nonprofits (most nonprofits) don’t know how to follow the rules and the IRS can’t objectively enforce them.”
The proposed new rules, which have been the subject of intense public commentary, purport to solve these abuses by defining “candidate-related political activity” to include everything from appeals to vote for or against a candidate, to media materials favoring a candidate, to get-out-the-vote efforts, to any direct or indirect communication about political candidates containing statements made by employees or contractors of 501(c)(4)s whatsoever.
No one other than the IRS seems to like this proposal. While the rules are comprehensive, they’re like using a sledgehammer to kill a housefly, counting “as political activity nonpartisan civic participation efforts that currently don’t count, like voter registration drives, hosting debates, nonpartisan get-out-the-vote efforts, and the like,” Peterson-Cassin said. This will crowd out a lot of civic activity, including discussion of the impact of elections on public interest issues.
Recognizing the overreach of the proposed rules, conservative groups are trying to scorch the earth, using the undesirability of the proposal to attack the IRS’s ability to tax advocacy groups altogether. They’re performing a rhetorical trick to obfuscate how big money groups take advantage of 501(c)(4) status, using taglines like “New IRS rules will ban political speech,” and other words like “silence” and “prohibit,” when the IRS rules concern only status for taxation, not freedom of speech.
A handful of liberal and left groups, willing to play on the competitive and unhindered field desired by conservative groups, have joined in opposing the rules. One group, however, Public Citizen, is taking a more nuanced stand that is unlikely to curry favor from either side, while recognizing the need to set boundaries between policy advocacy and electoral advocacy. Public Citizen’s Bright Lines Project has proposed a different set of rules, which place certain activities in the category of “per se [political] intervention,” and designate others “safe harbor” activities. Additional activity not contemplated by the proposal would undergo a “facts and circumstances analysis” to determine whether it constitutes political intervention.
The proposal would designate as per se interventions calls for votes, contributions to candidates, and any kind of encouragement for people to vote for or against candidates based on their positions. Safe harbor activity, on the other hand, would include comparative voter education materials, efforts to influence policy rather than elections, nonpartisan voter communication “targeted to [an] organization’s natural constituency,” the publication of incumbent’s voting records, and speakers making personal remarks about elections at public events, as long as those events or speakers aren’t billed as election-themed.
This proposed alternative makes sense to many. It’s pretty generous, but makes clear that partisan advocacy isn’t tax-exempt. Its allowance of informative advocacy that might mention candidates is important. Policy advocacy groups, or groups that seek to raise public consciousness on pressing issues, often have to invoke elected officials or candidates as part of their advocacy narrative. Policies and public interest causes interact with elected officials and candidates for office. Discussion about that interaction shouldn’t be considered campaigning or electioneering, and a nonpartisan drive to get people registered to vote is not partisan advocacy at all.
With an improvement like that, you’d hope that the rulemaking process would take its course, allowing the Internal Revenue Service to consider alternatives and counterproposals. But that’s not going to happen, at least not this time around – and ironically, that’s because of the same conservative politicians who would have stood to benefit from more flexible 501(c) rules.
Conservative groups, and all sides of this discussion, lost their ability to influence the IRS’s rulemaking process because of the Republican congressional attack on the IRS. In addition to calling for impeachment of the agency’s boss because of alleged mistreatment of conservative groups, last December Congress banned the agency from continuing with the rulemaking process for 501(c)(4) groups altogether. That ban gets lifted on Sept. 30, and having been forced to skip what could have been a deliberative process, the agency will likely implement the original proposed rule changes without revision. Then everyone will lose – although big and dark money groups will at least have to find different ways to manipulate elections.
It’s worth repeating: Freedom of advocacy is meaningless divorced from its socioceconomic context. Come October, all 501(c)(4) groups may be playing under a new set of rules – one that could be too restrictive for those willing to play fair. When that happens, good-faith organizations ought to step up their efforts to amend the rules once again, to include safe harbor provisions for genuine public interest efforts. Are bad rules better than vague rules? We may soon find out.
Matt Stannard is policy director at Commonomics USA.