Think Tanks Would Benefit from Better IRS Rules for Nonprofit Political Activity

Guest blogger Emily Peterson-Cassin of the Bright Lines Project argues that all nonprofits would benefit from a clearer definition of political activity. Transparify does not edit the content of guest blogs; the views expressed in this blog are those of the author alone, and may not reflect the views of Transparify.

Since the U.S. Supreme Court’s 2010 Citizens United decision, 501(c)(4) “social welfare” groups that can collect donations without disclosing their donors have proven irresistible to those looking for ways to spend millions on manipulating elections in secret. Through these groups, corporations and individuals were able to raise and spend more than 300 million dollars in the 2012 election cycle, leaving voters in the dark about their identity and unable to evaluate their motives.

To its credit, the IRS has recognized that this influx of dark money is a problem for its current system of classifying nonprofit entities.In November 2013, it proposed new rules for 501(c)(4)s that garnered more than 146,000 public comments – a record. The proposed rules are problematic for a variety of reasons, including that they don’t do enough to stop the dark money flowing into our elections. 

Nevertheless, groups that would be affected by the new rules overwhelmingly want the rulemaking to continue. 67% of organizations commenting or signing on to comments on the rules – the very entities the new rules would most affect –encourage the IRS to move forward in their effort to change the rules governing nonprofits, according to our analysis of the comments.

The existing rules not only have allowed groups to aggressively flout tax rules and pour millions into manipulating elections, but they also have constrained smaller groups dedicated to civic engagement. Too afraid of jeopardizing their nonprofit status, smaller groups have not participated in America’s democracy as fully as they are allowed. The IRS’ new rules seek to fix this imbalance by resolving the ambiguity of the current “facts and circumstances” test. Improving this definition will lead to more clarity for IRS agents as they work to monitor abuses and will help nonprofits engage confidently, knowing with certainty what they can and cannot do.

Currently, 501(c)(3) nonprofits such as think tanks are not allowed to engage in any political activity, and neither the proposed rules nor the Bright Lines Project’s suggested rules would change that.

However, the rules as proposed could jeopardize the daily operations of some 501(c)(3)s by complicating their relationships with (c)(4)s. Unless the same rules apply to all 501’s, organizations that fund or work with (c)(4)s could find that they are engaging in prohibited political activity merely by donating to a (c)(4), or possibly even linking to a (c)(4)’s website. 

That’s why the Bright Lines Project has advocated for clear rules that apply to all nonprofits.  Bright-line rules have the potential to greatly increase the amount of civic participation think tanks can undertake. 

The IRS has a long review process ahead, but should not lose focus on the realities that nonprofits face in navigating the confusion caused by the current rules.  The 67% of organizations that want to continue the rulemaking are resoundingly telling the IRS that they have taken a necessary first step. It’s essential that IRS continue the rulemaking and create a final rule that will help bring dark money into the light.

Emily Peterson-Cassin is the project coordinator of the Bright Lines Project, which was formed nearly five years ago to draft and advocate for clearer tax rules governing nonprofits. The project is housed at Public Citizen in Washington, D.C.