The Treasury Department and the Internal Revenue Service announced a proposed revision to federal tax code that would disrupt the loosely regulated world of dark money in political campaigns.
Under current regulations, 501(c)(4) tax exempt groups must be primarily focused on promoting social welfare. But confusing regulations have allowed political groups like Crossroads GPS and Priorities USA to shield their donors even as they engage primarily in political activity. The new rules would declare “candidate-related political activity” as not promoting social welfare and would specify a range of such activities, thereby restricting so-called “(c)(4)s” from spending more than 50 percent of their money on them.
“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 in a statement. “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.”
Under the proposed guidelines, candidate-related political activity includes:
- 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.
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).
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.
Correction: An earlier version of this story referred to American Crossroads, the affiliated super PAC, rather than the 501(c)(4), Crossroads GPS.