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CFIF Submits Comments In Opposition to Proposed IRS Rules Targeting 501(c)(4) Nonprofit Organizations Print E-mail
Thursday, February 27 2014

The Center for Individual Freedom (“CFIF”), together with American Commitment and American Encore, Inc., this week submitted exhaustive public comments in opposition to the IRS’ proposed rule that would unconstitutionally limit the activities of nonprofit social welfare organizations.

“The rule proposed by the Department of Treasury and the Internal Revenue Service would effect a stunning and unprecedented restriction on core political speech by thousands of nonprofit organizations,” the comments begin.  “The proposed rule would sweep broad categories of previously exempt activities into a newly created category called ‘candidate-related political activity,’ which would not be considered tax exempt ‘social welfare’ activity.  By this one bold stroke, the proposal would flout the mandate of Congress in numerous respects, effect an inappropriate partisan agenda, and impose restrictions on protected First Amendment activities more pervasive and intrusive than ever considered, to our knowledge, by any Congress or any federal agency. The apparent assumption that ‘anything goes’ in restricting political speech in exchange for a tax exemption is seriously mistaken.  The proposed rule must be withdrawn and abandoned.”

The comments were prepared by Bobby R. Burchfield with the law firm McDermott, Will, & Emery.

Read the Executive Summary of the comments below.

Download the full comments, as they were submitted, here.



CFIF, American Commitment, and American Encore, Inc. strongly urge the Department of Treasury and Internal Revenue Service to withdraw and abandon the proposed rule.  As set forth below, the rule is procedurally deficient, contrary to law, and unconstitutional for many reasons.  Among the many serious flaws discussed below, this summary highlights just three.

First, the rule is contrary to the intent of Congress.  Throughout the 100-year history of the social welfare exemption, Congress has never authorized limits on the ability of section 501(c)(4) entities to engage in political activities.  This is true even though Congress has explicitly limited the ability of 501(c)(3) organizations to engage in such activity.  The language, history, and structure of section 501(c) and section 527 further confirm this point.  Moreover, the proposed regulation violates an express instruction in the Bipartisan Campaign Reform Act that the electioneering communications provision in the federal campaign laws must not be “construed to establish, modify, or otherwise affect the definition of political activities . . . for purposes of the Internal Revenue Code of 1986.”  2 U.S.C. § 434(f)(7).  The proposed rule also ignores the explicit instructions in section 107 of the recent Consolidated Appropriations Act of 2014.  The proposal to rewrite the law so substantially at this moment in time is suspect.

Second, if adopted, the proposed rule would create numerous inconsistencies and anomalies in relation to other provisions of the tax code and the federal election laws.  Some items that the proposed rule would deem “campaign-related political activity” (“CRPA”) for a section 501(c)(4) entity would be acceptable non-political activity for a section 501(c)(3) entity, and would not be considered “exempt function” activity for a section 527 entity.  Likewise, certain “campaign-related political activities” would be considered non-campaign activity under the Federal Election Campaign Act, and some CRPA would even qualify as official business by office-holders.  The confusion and basic oddness that the rule would engender strongly counsel against adoption.

Finally, and most fundamentally, the proposed rule targets core political speech and association in a way more expansive and breathtaking than any governmental initiative of which we are aware.  Although purporting to start with BCRA’s definition of “electioneering communication,” which the Supreme Court has already ruled cannot be used to restrict speech, the proposed rule dramatically expands the definition to create a concept of “campaign-related political speech” that unabashedly sweeps in speech and associational activities at the very heart of the First Amendment.  The apparent assumption that the IRS can decide, without Congressional authorization, to grant tax exemptions only to those entities that abandon their First Amendment rights of speech and association is based on a serious misunderstanding of First Amendment law.  By changing the longstanding requirements for a 501(c)(4) tax exemption, on which thousands of entities are relying, in a way explicitly targeted at First Amendment speech and association, the IRS is in effect imposing a new tax on protected activity.  That is certainly not allowable.

For all these reasons, and others set forth in more detail below, the rule must be withdrawn and abandoned.


Download the full comments, as they were submitted, here.


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