Question: If you’ve got a lot of money and want to influence elections, should you give your money to a tax-exempt “social welfare” organization – a 501(c)(4) – or a tax-exempt political action committee?
Answer: It depends. If you want to donate anonymously, give to the former. Donors don’t have to reveal themselves like they do if they give to PACs.
That’s a strange distinction the Obama administration wants to address by seeking new rules governing political activity by social welfare organizations. These groups – which include the Republican Crossroads GPS and the Democratic Priorities USA – skirt disclosure requirements of PACS and raked in $256 million in 2012, up from $82.7 million in 2008.
Internal Revenue Service rules currently allow tax-exempt social welfare groups to conduct some political work, but it can’t be their main activity. There’s no written rule about what percentage constitutes too much, but it’s generally been assumed that less than half of a group’s activity could be politically oriented.
Clearly many such “social welfare” organizations on both the left and the right have stepped over the line. And clumsy federal attempts to get a handle on perceived abuses led to accusations earlier this year that the IRS had targeted groups with “tea party” or “patriot” in their names.
Now the Treasury Department proposes to take some of the confusion out of the equation by clamping down on political activity by tax-exempt social welfare groups. Proposed new IRS rules, which will be considered during a lengthy public comment period – would clearly define what activity would not be allowed. And no surprise: Those who like the current system just fine for the anonymity it allows are howling.
Under the proposed new rules, such “candidate-related political activity” as running ads that clearly advocate for a certain candidate or candidates of a political party, registering voters and distributing campaign literature would be out of bounds for social welfare groups that want to keep their tax-exempt status.
The administration is right to try to better define what social welfare organizations can and can’t do. Political activity should be funded by political action committees that allow voters to get at least some information about who’s funneling huge amounts of money into elections.