The Taxman Cometh
The Internal Revenue Service (IRS) has issued a proposed rule that would affect the Motorcycle Riders Foundation (MRF) and every other advocacy group with the same tax status. The MRF has what is known as 501(C) 4 tax status, this means the MRF can be involved in political activities, however donations to the MRF are not tax deductible for the person or group that donates the money.
Recently the IRS seems to be unfairly targeting conservative tea party type groups. Now its time to punish everyone because the current IRS does not care for the way that some of these groups have been successful in getting out the vote and raising money. 501(c) 4’s are named after the section of U.S. code that defines them. Some of the tea party type groups are also in the (c) 4 grouping, as a “social welfare” group.
The 501(c) 4 is the segment of the nonprofit world best known for organizations like Karl Rove’s Crossroads GPS and the liberal group, Priorities USA. 501(c) 4’s are in fact made up of over 86,000 mostly small organizations nationwide, some of which are almost certainly active participants in our 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; it’s 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 Justin Bieber reflect the experience of the bulk of the people making a living in the music industry. It is true that political spending has skyrocketed since 2008 in the (c) 4 category and that some reform to those groups spending astronomical amounts of money for election purposes is warranted.
This tax status allows the MRF to “be involved in the political process” so long as the primary purpose of the organization is not partisan politics. Under the proposed rules we would be limited to doing work around elections and key votes. The IRS said in a hearing this past Wednesday that they have received an “unprecedented” number of comments and that the “rules would not be finalized anytime soon”.
At this point it is not clear whether the government planned to change the rules for all 501(c) groups, including (c)(5)’s (labor unions) and (c)(6)’s (trade associations).
The new rule would limit what political activities the MRF and other (c) 4’s could do before election dates. What would be considered a “political activity” is not known. It could be as simple as a meeting with an elected official on an issue important to their constituents, a get out the vote effort or even endorsement of candidates.
By confusing protected political speech with electioneering, this proposed rule would silence social welfare non-profit organizations for a minimum of 90-days during an election year. However, because the regulation applies to elections at every level of government, and some state and local governments host elections on odd years, or in differing months of the year, free speech for (c) 4 organizations conceivably could be restricted every year. This is unacceptable and out of line with our form of government. (c) 4 social welfare non-profit organizations serve a valuable role in society and it would be unjust to prohibit their speech. A final ruling could be years away.
The MRF will keep you updated on this issue.