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Comments on Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities

24 Pages Posted: 25 Feb 2014 Last revised: 18 Jun 2014

Brian D. Galle

Georgetown University Law Center

Donald B. Tobin

University of Maryland Francis King Carey School of Law

Date Written: February 22, 2014


The Notice is a good first step. It creates bright-line standards that are easy to apply and that will eliminate much of the gray area regarding permissible political activity. Clearer lines will reduce the discretion on the part of the IRS. By decreasing the IRS’s discretion, the regulation will reduce the opportunity for the IRS to be used as a political tool in an Administration’s tool box.

However, the Notice does not go far enough. Congress has established a regulatory regime that has as its central purpose the disclosure of any significant campaign contributions by individuals or firms. In recent years many organizations have exploited the confidentiality rules of § 501(c)(4) to evade that regime, to the detriment not only of U.S. political discourse but also the non-profit sector. The Final Rule should ensure that groups with significant partisan political activity cannot obtain exemption under § 501(c)(4), or indeed under any parallel provision of § 501.

We believe, however, that groups carrying out "substantial" electioneering activities should generally be eligible for exemption under § 527, and that the IRS should make that clear in the Final Rule. The main consequence of any ruling denying § 501(c)(4) status based on the political activity of the organization, therefore, would simply be to require the disclosure of an organization’s donors, and to ensure that the organization’s political expenditures are disclosed contemporaneously with the election they seek to influence.

Accordingly, the Final Rule should be designed in a way that channels organizations with any substantial amount of undisclosed electioneering activity into § 527. For example, we propose a strong presumption that any group with candidate-related political activity of more than 10% of its budget, or of more than an overall cap of some amount, such as $1 million, whichever is lesser, should be recognized as a § 527 political organization and not as a § 501c(4) social welfare organization. The final rule should interpret "electioneering" broadly to include facially non-partisan activities that can be used to partisan advantage, including candidate-related advertising that falls outside the window immediately surrounding an election. Groups that voluntarily disclose their donors could retain c(4) status.

Additionally, we suggest that the IRS seriously consider developing rules to limit the use of for-profit entities to evade § 527. We urge the IRS to take a clearer stand on its enforcement plans and legally dubious Forms 990. And we argue that nothing in the Notice, or in what we additionally suggest here, would raise serious First Amendment concerns.

Keywords: social welfare organizations, 501(c)(4), nonprofit, electioneering, candidate-related expenditures, 527, PAC, campaign finance law

Suggested Citation

Galle, Brian D. and Tobin, Donald B., Comments on Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities (February 22, 2014). Ohio State Public Law Working Paper No. 239; Boston College Law School Legal Studies Research Paper No. 321. Available at SSRN: or

Brian Galle (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

Donald Tobin

University of Maryland Francis King Carey School of Law ( email )

500 West Baltimore Street
Baltimore, MD 21201-1786
United States

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