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Group Offers Alternative for New IRS Rules on Non-Profits' Political Activities
The Center for Competitive Politics (CCP)

December, 2013

The Center for Competitive Politics (CCP) today submitted comments to the Internal Revenue Service on the agency's proposed rules governing the political activity of social welfare groups. The group also proposed an alternative draft rule that it says would "greatly reduce the risk of selective enforcement" and protect First Amendment rights.

The proposed IRS rules "suffer from significant flaws," according to the comments, which were submitted by CCP Chairman and former FEC Chairman Bradley Smith and CCP Legal Director Allen Dickerson. Smith and Dickerson write that the IRS proposal "regulates far more speech than can be justified, under either administrative law or the First Amendment, given Supreme Court precedent over the past several decades."

"The IRS should not be regulating political speech at all," said Smith. "It is a tax collecting agency, not a campaign finance regulator. As noted in our comments, if an entity with a social welfare purpose is a PAC under Federal Election Commission rules, it ought to be regulated as a Section 527 organization. If it is not, it should be regulated as a Section 501(c)(4) social welfare group."

The comments submitted by Smith and Dickerson note that "This straightforward approach would harmonize the IRS's rules with those of the Federal Election Commission, the body entrusted by Congress with 'exclusive jurisdiction' for civil enforcement of the nation's campaign finance laws . . . [This] approach offers real clarity without dragging the IRS further into the thicket of political regulation, a tangle from which it-and the Service's reputation for the neutral, nonpartisan collection of revenue-may never recover."

The IRS National Taxpayer Advocate made a similar recommendation in June, saying that the IRS could "rely on a determination of political activity from the Federal Election Commission (FEC) or other programmatic agency."

Should the IRS determine that this approach is insufficient, CCP suggests an alternative rule that provides "greater clarity than either the proposed or current guidance." CCP's comments say its alternative proposal "provides greater certainty to the regulated community, and does so with less chill to constitutionally protected issue speech and fewer administrative costs than the proposed rule announced" by the IRS and Treasury Department.

The CCP comments say that "in order to regain the public's trust, clarification via rulemaking must comport with [the landmark Buckley v. Valeo ruling], a unanimous Supreme Court decision that provides an elegant solution to the complex problem of regulating political speech and association."

The CCP proposed rule would adopt the Buckley case's definition of political activity, which includes only direct support for candidates and political parties and express advocacy for candidates-e.g., "Vote for Jones"-as "political activity" subject to limits. CCP's proposal also adopts "the major purpose" test from the Buckley decision for analyzing "primary purpose" under the tax laws to determine whether a group would be a Section 501(c)(4) social welfare group or not.

"The IRS's current rules are clear as mud-and are a key reason that agency bureaucrats unfairly delayed Tea Party groups who applied for tax exempt status," said CCP President David Keating, who helped draft CCP's proposed rule. "Unfortunately, the proposed rules contain ridiculous definitions of political activity that even charities are allowed to conduct without limit." Under the tax laws, charities are banned from intervening in political campaigns.

The comments filed with the IRS can be found here.

About the Center for Competitive Politics

The Center for Competitive Politics is one of the nation's premier centers of public interest litigation. It is the only public interest law firm with in-house litigation staff solely focused on the defense of First Amendment rights to free political speech, assembly and petition. CCP was co-counsel in v. Federal Election Commission, which held that there can be no limits on contributions to independent expenditure committees. This case created what is now known as Super PACs.


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