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As IRS Commissioner Koskinen Appears Before Lawmakers, Public Citizen Calls for a Clear Final Rule Concerning Nonprofit Political Activity

Feb. 5, 2014

As IRS Commissioner Koskinen Appears Before Lawmakers, Public Citizen Calls for a Clear Final Rule Concerning Nonprofit Political Activity

Proposed Rules Are a Good First Step but Need Significant Improvement

Note: Today, IRS Commissioner John Koskinen testifies before the House Ways and Means Committee’s Subcommittee on Oversight about the agency’s proposed rules governing political activity for nonprofits.

WASHINGTON, D.C. – While the intent behind proposed new IRS rules governing political activity by nonprofits – to clearly define political activity – is admirable, they should be more comprehensive, Public Citizen’s Bright Lines Project said today.

The IRS’ new rules seek to resolve the ambiguity of the current “facts and circumstances” test that allowed 501(c)(4)s, so-called “social welfare” groups, to spend millions of dollars on elections in 2012 without disclosing their donors. The new rules would more clearly and broadly define much political activity as “candidate-related activity” that would not qualify as “social welfare” activity for purposes of section 501(c)(4) of the tax code. View the Bright Lines Project’s first reactions (PDF) to the IRS proposal.

“The IRS has an opportunity here to correct a standard that has been confusing nonprofits for decades, and we applaud it for taking the initiative and working to do so,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division, which oversees the Bright Lines Project. “However, instead of proposing a clear definition of political activity that would apply to all nonprofits, the agency has proposed a confused rule that affects only a subset of nonprofits. The rules should reflect the reality of how nonprofits work. We hope the IRS seizes this opportunity and improves the system.”

The Bright Lines Project has been working for years to create clear, fair rules that would apply to all nonprofits and would encourage nonpartisan civic engagement while removing opportunities for abuse. The IRS’ proposed rules fall short of those goals, applying only to 501(c)(4)s and leaving other nonprofits under the current, unpredictable, test.

“The new rules were proposed in part as a recognition that the current rules have allowed millions of dollars to flow into 501(c)(4)s to manipulate elections while hiding their donors from public disclosure,” said Craig Holman, government affair lobbyist for Public Citizen’s Congress Watch division. “The proposed rules would prevent that abuse. But they could significantly hinder a variety of nonpartisan civic engagement activities, such as voter registration drives and candidate forums, while at the same time failing to categorize some clearly partisan activity as ‘political.’ ”

The comment period for the IRS’ new proposed rulemaking closes on Feb. 27.