Reform Groups Call on IRS and Treasury to Move Forward Expeditiously with Rulemaking for 501(c)(4) “Social Welfare” Groups

In a letter sent to the IRS and the Treasury Department, eleven reform groups strongly urged the IRS and Treasury Department to move forward expeditiously with the rulemaking proceeding proposed to revise the existing federal regulations regarding electoral activities by tax-exempt section 501(c)(4) social welfare organizations.

The reform groups include Americans for Campaign Reform, Brennan Center for Justice, Campaign Legal Center, Citizens for Responsibility and Ethics in Washington (CREW), Common Cause, Democracy 21, Demos, League of Women Voters, Public Citizen, The Sunlight Foundation and U.S. PIRG.

The reform groups urged the IRS and Treasury Department to issue new regulations in a timely manner to correct the manifest flaws in the existing rules.

According to the letter:

The IRS revision of its regulations governing section 501(c)(4) tax status became essential following the 2010 Citizens United decision and the resulting explosion of secret money in federal elections. More than $250 million in secret contributions was spent by section 501(c)(4) “social welfare” organizations in the 2012 federal elections.

The letter stated:

The injection of huge amounts of “dark money” contributions into federal elections is a direct result of the existing flawed IRS regulations, adopted more than a half century ago, and the absence of a clear definition of electoral activity by nonprofit groups, combined with the Citizens United decision striking the prohibition on corporate expenditures.

Federal election-related spending by groups claiming section 501(c)(4) tax status far exceeds what is permissible under the Internal Revenue Code.

Last week, the initial comment period ended for the proposal contained in the Notice of Proposed Rulemaking.

According to the letter from reform groups:

Many of the groups signing this letter submitted comments on the proposed rule, agreeing with parts of the proposal and disagreeing with other parts. For example, there is a widespread consensus that nonpartisan voter activities should not be treated as “candidate-related political activity.”

All of our groups agree, however, that it is vitally important for the Treasury Department and the IRS to proceed with the rulemaking and to issue new regulations to prevent the continuation of massive abuses of the tax laws by some groups claiming section 501(c)(4) tax status.

The letter concluded:

Without new regulations issued by the IRS, section 501(c)(4) groups will continue to misuse the tax laws to spend hundreds of millions of dollars in secret contributions in federal elections and voters will continue to be denied essential campaign finance information they have a right to know.

We strongly urge you to proceed expeditiously with the rulemaking proceeding and to issue necessary new regulations in a timely manner.