Not satisfied with the level of controversy they generated by the targeting of nonprofit groups based on their political leanings, the IRS has gone all-in with a recent proposal to classify many legislative advocacy and civic activities of non-profit groups as “candidate-related political activity.” To say that the proposal has gotten a lot of attention would be an understatement: at the close of the public comment period, more than 140,000 individual comments had been filed. Proponents have cited their interest in ridding the political process of “dark money.” Opponents, such as the NAM and a myriad of nonprofit groups across the political spectrum, note that the IRS proposal strikes at the very heart of the First Amendment.
The rule moves beyond FEC definitions of political activity and sweeps in such core good government practices as get out the vote (GOTV) drives, distribution of voter guides, and voter registration activities. It seeks to classify any communication containing the name of a candidate (of course, every member of the House of Representatives and a third of all US Senators are candidates in any even year) as political activity if it takes place within 30 days of a primary or 60 days of a general election. Even holding events with elected officials within these time windows would be transformed into a political activity if this proposal were adopted. Communications involving state and local candidates are also swept in.
As drafted, the proposal applies to 501(c)(4) entities—however, the IRS indicates it is considering applying the new rules more broadly, asking for comments on how the changes would affect 501(c)(5), such as labor unions, and 501(c)(6) business organizations, like the NAM. This is a strong suggestion as to the direction in which the agency is headed. Regardless, any rule adopted for 501(c)(4) entities pertaining to political activity could be applied by the IRS and tax law practitioners by analogy (if not directly) to other tax-exempt organizations, and thus it hardly matters whether the rule is applied directly. It will chill legislative advocacy and civic engagement across all types of nonprofit groups.
In short, the proposal is an onerous incursion into the First Amendment rights of associations and goes to the very heart of our ability to effectively represent our members. The NAM is all-in to fight this misguided proposal. To access our formal comments, click here.