Treasury, IRS Propose New Nonprofit Rules

by Eliza Newlin Carney, Roll Call
November 28, 2013

Politically active tax-exempt groups, which spent tens of millions in the previous election without disclosing their donors, would face tighter restrictions under new guidelines proposed Tuesday by the Treasury Department and the IRS.

The initial guidance, outlined in a Tuesday release and slated to be published shortly in the Federal Register, spells out that “candidate-related political activity” may not be defined as promoting the social welfare. The guidance defines such activity to include messages that picture or name a candidate on the eve of an election, potentially restricting the widespread use of campaign-style ads that evade disclosure as so-called issue ads by 501(c)4 social welfare groups.

“The proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” Mark J. Mazur, assistant treasury secretary for tax policy, said in a release. “We are committed to getting this right before issuing additional proposed guidance or final rules.”

The IRS and the Treasury Department have been under growing pressure from Capitol Hill and from activists on the left and the right over controversies involving tax-exempt groups, which have poured big money into campaigns in the wake of the Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling to deregulate political spending.

An IRS scandal involving the agency’s targeting of tea party and other groups seeking tax exemption led to the ouster of several top officials and is still under investigation on Capitol Hill. At the same time, groups promoting political money restrictions have sued the agency for allegedly failing to follow its own regulations governing social welfare groups, rules that the watchdogs argue are at odds with tax statutes and have cleared the way for tens of millions of dollars in undisclosed campaign spending.

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