Citizens United helped spur the formation of IRS 501(c)(4) social welfare organizations that became engaged in independent political activities. Yesterday, the Treasury Inspector General for Tax Administration issued a report addressing the recent controversy regarding the review process for certain 501(c)(4) tax exemption applications.
An organization may qualify for 501(c)(4) status if its primary purpose is to engage in social welfare activity, which is broadly defined. These organizations may engage in unlimited lobbying efforts, as well as political activity, provided political activity is not their primary purpose. The report concludes that IRS employees used “inappropriate criteria” to screen political advocacy groups and those groups with keywords such as “tea party” or “patriot” in their names faced months of delays in getting their applications approved.
With this latest controversy, it would appear there are at least three major issues receiving considerable attention as the role of 501(c)(4) organizations in American politics continues to evolve:
- Should donations to entities be subject to public disclosure requirements when they engage in advocacy in relation to elections?
- Should standards for tax exempt status be clarified or revised with respect to the level of political activity that is permitted?
- What new safeguards are needed to ensure that IRS personnel do not bring politics into the administration of tax laws?