IRS proposes tax-exempt update outlawing 'candidate-related political activity'
The IRS is expecting to get lots of comments on a regulatory proposal guidance it is issuing today.
That’s because the proposal is to amend the regulations on tax-exempt social welfare organizations to exclude “candidate-related political activity.”
“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” U.S. Department of the Treasury Assistant Secretary for Tax Policy Mark J. Mazur said in a news release. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”
“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”
According to the agencies, the IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. The proposal, they said, would reduce the need to conduct fact-intensive inquiries by replacing the test with more definitive rules.
The agency is also seeking comments on other aspects of the proposal, including on what proportion of a 501(c)(4) organization’s activities must promote social welfare.
Under the proposed guidelines, candidate-related political activity includes:
- Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
- Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
- Communications expenditures that must be reported to the Federal Election Commission.
Grants and Contributions
- Any contribution that is recognized under campaign finance law as a reportable contribution.
- Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).
Activities Closely Related to Elections or Candidates
- Voter registration drives and “get-out-the-vote” drives.
- Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
- Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
- Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.