taxes.pngThe IRS is changing one of its innumerable rules, and they want to know what you and I think by February 27, 2014 (see 78 FR 71535 – Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities). Isn’t that nice of them?

78 FR 71535 doesn’t look threatening. This is, after all, the IRS.  78 FR 71535 looks inscrutable. This is the stuff we pay lawyers to read. Reading this stuff and understanding what it means is how lawyers earn their pay.

As understanding of 78 FR 71535 has oozed up through the news media, the significance of this new tax guidance is slowly being made known. Consider these quotes.

According to Hans Bader, we have a clear First Amendment violation. (from

“This is a First Amendment violation,” Bader said.

The IRS has also said it could expand similar rules to to 501(c)(3) groups, such as CEI and other think tanks and nonprofit groups that are forbidden under their tax exempt status from endorsing candidates, but have traditionally weighed in on Supreme Court nominations, cabinet secretary nominations and other executive and judicial nominees that would be classified as “candidates” under the new rule.

“Thus, think tanks, which have historically been allowed to criticize executive and judicial nominees for their misconduct or bad policies, could be banned from doing so, simply by the IRS radically redefining the candidate-related partisan political activity they are already forbidden to engage in (electioneering) to include non-partisan criticism that has nothing to do with election campaigns or electioneering,” Bader wrote in a post on the blog.

(from here)

Supposedly, there is bipartisan agreement (from

In a rare agreement between Tea Party and liberal activists, organizations across the political spectrum say new regulations drafted by the Internal Revenue Service to curb a surge in political spending and activity by nonprofits are far too broad. They fear that enforcement of the regulations would chill more neutral civic initiatives such as voter registration efforts and candidate forums.

A strong backlash from conservatives was anticipated after the I.R.S. made the recommended changes public in November. Many contend that the Obama administration is out to muzzle them, citing the heightened scrutiny the I.R.S. gave to nonprofit applications from Tea Party-affiliated groups. But groups associated with more liberal causes are also calling on the I.R.S. to substantially rethink or withdraw the proposal, criticizing it as overreaching, impractical and undemocratic.

(from here)

But maybe not (from

Senate Democrats facing tough elections this year want the Internal Revenue Service to play a more aggressive role in regulating outside groups expected to spend millions of dollars on their races.

In the wake of the IRS targeting scandal, the Democrats are publicly prodding the agency instead of lobbying them directly. They are also careful to say the IRS should treat conservative and liberal groups equally, but they’re concerned  about an impending tidal wave of attack ads funded by GOP-allied organizations.  Much of the funding for those groups is secret, in contrast to the donations lawmakers collect, which must be reported publicly

(from here)

So what should we make of this proposed IRS rule change? Here is a response to the IRS’s request for comments one of readers of this blog was kind enough to share. Note that Denny Daugherty, the author, strongly desires an informed citizenry. Thus, he participates in multiple nonpartisan organizations, and he would not be happy with the change.

February 15, 2014

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

Dear Ms. Giuliano:

            I write in opposition to the proposal, which would erase the longstanding distinction between political advocacy and voter education, and forbid the mere mention of a candidate’s name by certain tax-exempt organizations notwithstanding that it is in a communication that neither advocates the election or defeat of the candidate.  Throughout its provisions, the proposal evinces a hostility to the exercise of free speech and the franchise I am shocked to hear from the government of a free people.

            What activity could be more consistent with promoting the common good and general welfare than the promotion of voter registration and voting on Election Day, unaccompanied by an appeal to support particular candidates?  Yet this rule would label such non-candidate related activity as forbidden candidate-related activity. 

            The proposal ignores the fact that among those candidates are incumbents already responsible for serving the public.  Your proposal would muzzle any public discussion by tax-exempt social welfare organizations of business coming before legislatures and other elected bodies that acknowledges the identity of the officials making critical decisions.  Such groups could not mention that Senator Able serves on the Committee on Finance which will soon be voting on matter X or that Senator Baker is one of the few senators who has not yet declared a position on matter Y.  It would thereby effectively stifle the ability of citizens to exercise their right to petition their government, peaceably assemble and speak freely.  So long as communications are not “on behalf of or in opposition to” a candidate, they should not be penalized by IRS.  Why should public officials be free from public scrutiny for 60 days each election year?  Are you going to insist Congress and state legislatures refrain from taking any actions during the period of silence you would impose?

            I lead a tax-exempt organization that for more than 20 years has sponsored debates among the opposing candidates for public offices in our community.  This rule would prohibit us from doing so, if our tax exemption were under 501 (c)(4) rather than (c)(3), by penalizing the hosting of events within 60 days of an election attended by one or more candidates.  Again, by changing the prohibition from express advocacy to a mere relationship, this proposal will penalize organizations which merely attempt to educate and inform voters without attempting to influence the outcome of the election.  This function is vital to the effective functioning of a democracy and more needed than ever in the face of the closing of more and more local newspapers.  No explanation is offered for penalizing an organization because of the mere attendance of candidates, regardless of whether the candidates speak, are endorsed, or face their opponents in debate.  Are we expected to stand at the doors of public events and bar the entry of any visitor who is a candidate for office in the next election? 

            Why should voters’ sources of information about candidates and issues, or where to register to vote, be limited to campaign organizations, political parties and for-profit entities?  Voter guides that honestly present the views of candidates on issues provide important information to voters in low-profile races or when candidates want to obscure their positions on issues on which there is not broad consensus.  When the guides don’t declare a particular position or candidate “right,” they are not “political” but educational.

            Remarkably, the proposed rule would treat as candidates those under consideration for nomination and confirmation as appointed officials. This situation bears no resemblance to a competitive election with two or more candidates competing for the favor of the public.  Rather such appointments and confirmations represent the actions taken by those already elected to office.  Why should tax-exempt organizations and their members be muzzled from exchanging information about this legislative business, any more than they are with respect to any other decisions before their elected officials?.

            You request comment as to whether these rules should be applied to other types of section 501 organizations.  If they are to apply to some tax-exempt organizations, they should apply to all.  However,  they should apply to none.  Trade unions should have no more rights, and no less, than civic leagues.  Those activities of either that inform, rather than seek to persuade, should be free from IRS regulation.  Certainly there is no justification for affording more flexibility to organizations whose supporters are entitled to tax deductions than would be afforded 501(c)(4) groups by this rule.

            As the preamble notes, the Internal Revenue Code has exempted social welfare organizations since its passage in 1913.  The preamble does not provide any justification for changing the longstanding criteria applicable to these organizations.   Recently, we have seen significant abuses on the part of the IRS in the awarding of tax exemptions.  If there have been abuses by tax-exempt organizations, address them by enforcing the current regulations.  You have not shown defects in the current regulations to justify the severe restrictions you propose to impose on the exercise of First Amendment rights.

            I urge Secretary Lew to announce his intention not to pursue these regulations at the earliest possible date, so that civic organizations may concentrate on doing their job without having to divert resources to fighting the threat of losing their tax exemptions.                               


Denny Daugherty

Without making accusations or casting blame, Daugherty focuses on harm the rule change would cause. Further, he observes the lack of justification. Perhaps we have good cause for suspicion and anger, but we can only guess what might be motivating this change. So we are better off putting the objective first, protecting our rights.

What distinguishes our political campaigns from outright warfare? We observe rules built upon our federal and state constitutions. So it is that our political candidates and their supporters campaign for our votes instead of fighting over us with clubs and bullets. Because the IRS rule change would arbitrarily infringe upon our First Amendment rights (including our freedom of speech and our right to peaceably assemble and petition the Government for a redress of grievances), we must oppose such rule changes or risk losing our ability to peacefully choose our leadership.

Would You Like To Comment?

I just received an email from The Family Foundation on 78 FR 71535.  Their email provided a link where we can comment online.  Here is what they suggest your comment include.

The IRS is holding a public comment period on these proposed guidelines through February 27thSubmit your comment by clicking here.  Tell the IRS that their guidelines must:

  1. Clearly define the qualifications of an organization “primarily engaged in social welfare” so organizations like churches and The Family Foundation can know definitively if they are included or not.
  2. Apply the guidelines equally to 501(c)(5) and 501(c)(6) organizations (i.e. labor unions).
  3. Refrain from limiting free speech and religious liberty of 501(c)(3) organizations (like churches and The Family Foundation) by limiting their speech on issues that can be related to candidates.

Comments are closed.

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