The war against secret corporate money in elections moved to a new front as two campaign finance reform groups called on the Internal Revenue Service to investigate whether these groups, organized as nonprofits, are eligible for the tax exempt status they currently claim.
The Campaign Legal Center and Democracy 21 told the IRS that the primary purpose of a 501(c)(4) organization such as Crossroads GPS, Priorities USA, American Action Network and Americans Elect is not social welfare but rather political spending.
Nonprofit 501(c)(4) organizations have emerged as popular fundraising vehicles because unlike traditional 527 political organizations, 501(c)(4) groups can shield donor identities and still participate in campaign activity, so long as it is not the organization’s primary purpose. By claiming the tax-exempt 501(c)(4) status groups allow their donors to evade traditional public disclosure requirements associated with campaign contributions despite engaging in no social welfare activities.
Court decisions interpreting the IRS regulations have established that 501(c)(4) groups cannot “engage in more than an insubstantial amount of any non-social welfare activity” which has translated into a practice where 501(c)(4) groups spend up to 49 percent of total expenditures on campaign activities.
Simply put, if a group’s de facto primary purpose is to promote the election of candidates, it cannot be organized as a 501(c)(4). If we want free, fair and clean elections, those abusing and avoiding disclosure requirements must be punished and their tax exempt status revoked.
Photo from Tracey O via flickr.