If you’re concerned about “dark money” in politics and the tsunami of cash from the super-wealthy and corporations pouring into the political system, or if you were outraged by the recent “scandal” involving the IRS’s clumsy assessment of 501(c)(4) groups, your ears probably perked up when you heard that the Internal Revenue Service has issued draft regulations to “provide clarity” to the rules that govern so-called “social welfare” organizations.
Yet the new regs will do almost nothing to fix the things you think are broken and may, in fact, do some real damage to the ability of everyday Americans to have an impact on the political process.
The proposed rules cover 501(c)(4) groups, named for the section of the tax code that governs them. Although this is the segment of the nonprofit world best known for notorious organizations like Karl Rove’s Crossroads GPS, it is actually made up of over 86,000 mostly small organizations nationwide, some of which are almost certainly active participants in your own community’s civic life. They weren’t invented in the last election cycle; they’ve been around for generations. Their purpose isn’t to hide donors but to advance policies. The big, famous guys and the shady newcomers get all the attention, but they aren’t typical of the sector, any more than Lady Gaga and Justin Bieber reflect the experience of the bulk of the people making a living in the music industry.
These groups are involved in elections because it’s often impossible to advance a policy cause without being involved in the political process. For that reason, in 1959 the IRS promulgated rules that said that (c)(4)s can involve themselves in electoral politics, but that partisan activity cannot be their “primary purpose.” Unfortunately, the IRS neglected to define what it meant by “primary,” presumably some percentage of an organization’s total budget.
That kind of ambiguity was fine for a long time, because almost all (c)(4)s were only allowed to communicate messages about candidates to their own members, and many were engaged principally in nonpartisan election activity like get-out-the-vote and voter registration drives anyway.
Then, in 2010, the Supreme Court decided the Citizens United case, and the game changed. Citizens United allowed corporations to spend unlimited amounts in support of, or opposition to, candidates in elections. Most people don’t realize it, but nonprofit groups are corporations, so the new rules also applied to them. Suddenly, the well-worn vagueness of the “primary purpose” test, combined with the fact that (c)(4)s, like all non-political nonprofits, don’t have to publically disclose the names of their donors, made them a perfect vehicle for those looking for a way to inject massive amounts of anonymous money into elections.
It’s no surprise that the IRS is trying to restore order to this previously sleepy corner of the tax code—and to respond to attacks from both the left, right and center—but the suggested regulations (which are open to public comment until February 27) are frankly befuddling. They don’t have much, if anything, to do with the controversial actions of the host of well-funded new (c)(4)s that have popped up post–Citizens United, but they do take a big bite out of the work of the long-established smaller ones.