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:

1. Should donations to entities be subject to public disclosure requirements when they engage in advocacy in relation to elections?
2. Should standards for tax exempt status be clarified or revised with respect to the level of political activity that is permitted?
3. What new safeguards are needed to ensure that IRS personnel do not bring politics into the administration of tax laws?

ELEC held that independent expenditure activity comes within the meaning of “aid or promote” the election or defeat of a candidate as used in the definition of “political committee” under New Jersey law because that definition does not differentiate between activity that is “coordinated” and activity that is “independent” of a candidate.  ELEC applied the “major purpose” test derived from Buckley v. Valeo (1976) in concluding that spending in excess of half of the Fund’s total spending on independent expenditures in New Jersey elections would constitute a “major purpose” of supporting New Jersey candidates in 2013 elections.

Because the Fund is a “political committee,” ELEC stated it must observe New Jersey law with respect to contribution limits in addition to registration and contributor reporting requirements.  Specifically, the Fund may receive no more than $7,200 per election from a contributor (except for contributions from political party committees and legislative leadership committees).  ELEC reached this result notwithstanding the Fund’s representation that since the time of the U.S. Supreme Court opinion in Citizens United v. FEC (2010) and the subsequent Court of Appeals opinion in Speechnow.org v. FEC (D.C. Cir. 2010) (en banc), no court has upheld a government restriction on the amount that an independent expenditure-only committee (more popularly known as a super PAC) may receive as a contribution.

Will this ELEC Advisory Opinion become the subject of a court challenge?  Stay tuned.

Genova Burns Giantomasi Webster LLC Of Counsel Gregory E. Nagy assisted with this post. 

In Danielczyk v. United States, which we’ve previously discussed here, the Court will consider whether to accept a case that challenges the constitutionality of the ban on campaign contributions by corporations in the Federal Election Campaign Act and whether restrictions or bans on the right to make campaign contributions should be reviewed under strict scrutiny, as other restrictions on political expression are, or instead under a less stringent standard.

In McCutcheon  v. FEC,  the Court will consider whether to accept a case that  challenges the constitutionality of 2 U.S.C. section 441a(a)(3)(A), which limits individual contributions to federal candidates to $46,000 over the course of a two-year election cycle (i.e. the biennial limit).

If either of these cases will be accepted, that will be noted among the regular orders due out at 9:30 a.m. on Tuesday.  Stay tuned.

The FEC  has released Frequently Addressed Questions on Lobbyist Bundling on its website  to assist reporting committees in determining if it must file Form 3L.

Individual contributors can now contribute up to $2,600 per election to a candidate and $32,400 per calendar year to national party committees. The total amount of federal contributions that an individual can give during a two-year cycle also increased to $123,200, including $48,600 to candidates and $74,600 to parties and PACs.

In the meantime, New York City’s law continues its evolution.  Last week, the City Council voted by an veto-proof margin of 47-1 to exempt member organizations and corporations from disclosing member-to-member communications regarding candidates and ballot issues as “independent expenditures.” This bill passed over the opposition of the NYC Campaign Finance Board, a reminder that the legislature often has the last word on the scope of the campaign finance laws to which its members – as candidates – are subject.