FYI – a chance to comment on a proposed regulation

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code.  This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity.  The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

The initial guidance is expected to be posted on the Federal Register later today.

There are a number of steps in the regulatory process that must be taken before any final guidance can be issued.  Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments.  Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur.  “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.”

Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare.  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.  Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.

In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.

Under the proposed guidelines, candidate-related political activity includes:

1.      Communications

  • 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.

2.      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).

3.      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.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased.

Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4).  In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare.  Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.  The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.

21 Responses

  1. If you are going to comment, be sure to cite the exact section of the proposed rule.


  2. Nova, how’s the fear factor among Congressional Dems these days regarding the PPACA? My sense is that the administration managed to staunch the bleeding and bought themselves enough time to muddle through until January.


  3. I think that’s a fair assessment. It’s not that the situation has improved, but it’s seems to have stopped deteriorating.

    that said, CMS today announced it was scrapping online enrollment in the small business exchanges.

    also, congress adjourns on Dec. 13 (the hosue anyway). and the finance committee is going to mark up the SGR fix for the year that day.


  4. “that said, CMS today announced it was scrapping online enrollment in the small business exchanges.”

    I saw that. My impression is that it won’t be as big a deal due to the fact that they already punted the employer mandate, but it will be added to the general pile on.

    The other shoe I’m waiting to see dropped is the back office payment systems that are due before January.


  5. oh, the other thing is that medicare advantage plans are dropping providers.


  6. also: Health care industry market analysts have lowered their estimate of the number of people who will be enrolled in health insurance through the online marketplaces as a result of the problems getting the Affordable Care Act website to function, they said Nov. 21 at a conference. For example, Matthew Borsch, vice president and senior investment research analyst at Goldman Sachs, covering the managed care and health care provider sectors, said his firm has reduced its projection for marketplace enrollment for 2014 from the 7 million that the Congressional Budget Office projected to 5 million, including 2 million uninsured people and 3 million switching from existing plans.


  7. Have a happy Thanksgiving everyone. I’m going to be off line for a week so don’t assume that I have quit or anything. See you in December.


  8. bye jnc. i’m offline for awhile too.
    happy thanksgiving all. and safe travels.

    remember to give the TSA a hard time. but not too hard. I don’t know. fly causal.


  9. Ditto, one day late from me as well. Oh man was I ever busy yesterday. Hope y’all had a great day. We have the grandkids until tomorrow and I’m putting them to work on my cookies today………………….yay.

    Hope all of you enjoyed your day yesterday and will enjoy the weekend. I love this weekend, it’s my favorite of the entire year.


  10. Amazing.

    “We’re evaluating why it is exactly that I didn’t know soon enough that it wasn’t going to work the way it needed to.

    The fact that he still claims not to know either demonstrates stupidity on his part or duplicity. Which of the two is acceptable to you?


    • McWing:

      I thought this line was particularly hilarious, and a good indication of where CNN’s sympathies lie.

      Obama has taken responsibility for the website’s flaws, saying he should have been told earlier about the serious issues with’s digital infrastructure.

      It truly is bizarro world where saying someone else should have done something constitutes taking responsibility.

      Then, of course, is this outright lie.

      He’s also apologized for his vow that people who liked their plans could keep them.

      No he hasn’t.


  11. Scott, agreed.

    Remember when I kept trying to get shrink to tell me why the Nazi’s were right wing and he was unwilling/unable to?

    ‘I am a Socialist,’ Hitler told Otto Strasser in 1930, ‘and a very different kind of Socialist from your rich friend, Count Reventlow’.


  12. What do we make of this if true?

    I wouldn’t put it past obama. obama threatened to sic the DC press corps on any hedge fund managers who opposed his automaker cram-down. When companies announced earnings hits after obamacare was passed, Henry Waxman ordered an explanation or else there would be public testimony in front of Congress.

    When the Left thinks it is doing God’s work, it brooks no opposition.

    One other point – If obama didn’t order this and the IRS is still pulling this shit after the Lois Lerner scandal, we have a big problem.


  13. We’re in the best of hands.

    “It may take until 2017,” he said on ABC’s “This Week.” “It will work really well then.”


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