Why the IRS Should Want to Develop Rules Regarding Charities and Politics

39 Pages Posted: 16 Sep 2011

Date Written: September 14, 2011


Organizations tax-exempt under section 501(c)(3) of the Internal Revenue Code, often referred to as charities, cannot, at risk of loss of exemption, “participate in, or intervene in (including the publishing or distributing of statements) any political campaign on behalf of (or in opposition to) any candidate for public office.” That is, they are subject to a campaign intervention prohibition. These organizations cannot endorse or oppose a candidate for public office or contribute to the candidate’s campaign. The IRS has long interpreted this campaign intervention prohibition broadly. An applicable regulation, for example, refers to violating the prohibition “directly or indirectly.” Revenue Ruling 2007-41, the most recent and comprehensive official IRS pronouncement on the subject, explains that “[w]hether an organization is participating or intervening, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office depends upon all of the facts and circumstances of each case.”

How the IRS interprets, communicates, and enforces the campaign intervention prohibition, particularly indirect intervention, has been - and continues to be - a matter of controversy. Representatives from the charitable community, both before and after the publication of Revenue Ruling 2007-41, have urged greater clarity regarding the criteria for campaign intervention. A number of commentators have suggested that current rules may be unconstitutionally vague and that, to avoid this problem, violation of the campaign intervention prohibition be limited to activities involving express advocacy.

This difference between the IRS and the charitable community rehearses the difference between rules and standards. As Louis Kaplow has explained in an influential article, Rules Versus Standards: An Economic Analysis, the choice between rules and standards involves “the extent to which a given aspect of a legal command should be resolved in advance or left to an enforcement authority to consider.” By asking the IRS for clarity and bright lines in defining the prohibition, the charitable community emphasizes a key ex ante consideration, the impact of guidance on appropriate charitable behavior. By offering a multifactor approach dependent on the particular situation, the IRS stresses an equally important ex post consideration, the impact of guidance on enforcement. Both set of considerations, of course, have a place in any calculus. Kaplow’s article, however, sets out a framework to help those that must give content to legal commands guidance on how to decide whether to frame such content as rules or standards. This article argues that, under Kaplow’s analysis, the IRS’s own concern for encouraging compliance by those subject to the law should lead it to develop more rules in this area. That is, this article emphasizes why the IRS itself should want to promulgate rules.

Part I sets forth Kaplow’s analytical framework, which demands consideration not only of levels of enforcement but also how the affected community will choose to learn about the legal command in any decision between embodying legal commands as rules or as standards. Part II describes the legal commands at issue. Part III considers aspects of Kaplow’s analysis related to enforcement. It examines the available sanctions, the numbers of parties subject to enforcement actions, and the kinds of sanctions in fact imposed. Part IV discusses the nature of the affected community and how members of the community will seek legal advice. Part V addresses a question Kaplow mentions frequently, but only in passing - the underlying norms a statutory command reflects. This part discusses both the legislative purpose in enacting the prohibition and attitudes toward its constitutionality. Part VI considers arguments against rules, both generally and as applied to tax law. Part VII applies the Kaplow analysis to all these considerations and concludes that the IRS should invest the time to develop a set of rules. Part VIII concludes.

Suggested Citation

Aprill, Ellen P., Why the IRS Should Want to Develop Rules Regarding Charities and Politics (September 14, 2011). Case Western Reserve Law Review, Forthcoming, Loyola-LA Legal Studies Paper No. 2011-33, Available at SSRN: https://ssrn.com/abstract=1927611

Ellen P. Aprill (Contact Author)

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States
213-736-1157 (Phone)
213-380-3769 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics