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Comments to IRS: Proposed Rules Can Limit Secret Election Spending

The proposed IRS rules to regulate secret political spending by nonprofits are a great first start. With a few necessary modifications, the plan will be a powerful improvement over the status quo.

Published: February 28, 2014

The Bren­nan Center for Justice submit­ted comments to the IRS in support of the agency’s proposed changes to rules govern­ing the polit­ical activ­ity of 501(c)(4) organ­iz­a­tions. The comments also outlined how the IRS proposal can be improved to ensure it does not unne­ces­sar­ily restrict legit­im­ate, nonpar­tisan activ­ity.


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John A. Koskinen
Commis­sioner of Internal Revenue
CC:PA:LPD:PR (REG-134417–13), Room 5205
Internal Revenue Service
P.O. Box 7604, Ben Frank­lin Station
Wash­ing­ton, DC 20044

Re:       IRS-2013–0038, Guid­ance for Tax-Exempt Social Welfare Organ­iz­a­tions on Candid­ate-Related Polit­ical Activ­it­ies

Dear Commis­sioner Koskinen:

The Bren­nan Center for Justice at NYU School of Law[1] respect­fully submits these comments in response to the Notice of Proposed Rule­mak­ing (the “NPRM”) issued by the Internal Revenue Service and the Treas­ury Depart­ment on Novem­ber 29, 2013.[2]

The Bren­nan Center strongly supports the effort by the IRS to create a clear defin­i­tion of polit­ical activ­ity for nonprofit organ­iz­a­tions, which is needed to bring agency regu­la­tions back in line with the govern­ing stat­ute and improve trans­par­ency in elec­tions.

Congress created the vari­ous forms of tax-exempt entit­ies for differ­ent purposes. The NPRM focuses on organ­iz­a­tions governed by § 501(c)(4) of the tax code, which requires that they be “oper­ated exclus­ively for the promo­tion of social welfare.”[3] Other 501(c) organ­iz­a­tions have distinct purposes, such as organ­iz­a­tions formed to promote a common busi­ness interest.[4] Congress author­ized a distinct tax-exempt entity under § 527 for organ­iz­a­tions devoted to polit­ical activ­ity and required that contri­bu­tions to and expendit­ures by 527 groups be disclosed.[5]

In the 1950s, the IRS ruled that 501(c)(4)s can engage in some polit­ical activ­ity as long as it is not the organ­iz­a­tion’s primary purpose.[6] For decades after­ward, polit­ical spend­ing by (c)(4)s remained insig­ni­fic­ant. But once the Supreme Court allowed corpor­a­tions to spend directly on elec­tions in Citizens United v. FEC,[7] polit­ical expendit­ures by (c)(4)s exploded. With (c)(4) elec­tion spend­ing in 2012 at $256 million, it is clear that the regime Congress created is being flouted.[8] Their massive elec­tion spend­ing flies in the face of the congres­sional require­ment that (c)(4)s be oper­ated exclus­ively for social welfare. And since (c)(4)s are not required to disclose their donors, Congress’s scheme to ensure that elec­tion spend­ing be trans­par­ent is being frus­trated, depriving voters of inform­a­tion they need to determ­ine how to inter­pret the messages they are bombarded with. The nonprofit form was created to foster organ­iz­a­tions that are devoted to the general welfare of their communit­ies, not to further­ing partisan polit­ical goals.

The proposed IRS rules are needed to help ensure that the nonprofit form is not abused by those who want to anonym­ously spend massive sums on elec­tions. While the NPRM is a prom­ising first step, the Bren­nan Center offers several sugges­tions for improve­ment. We strongly recom­mend limit­ing social welfare groups to an insub­stan­tial amount of polit­ical activ­ity and apply­ing the same defin­i­tion of polit­ical activ­ity across all 501(c) groups. In addi­tion, it is crucial that nonpar­tisan voter engage­ment be excluded from the defin­i­tion of polit­ical activ­ity to avoid discour­aging vital civic services that are not designed to influ­ence elec­tion outcomes. Other recom­mend­a­tions are also discussed below. We request that the NPRM be revised and that the public be given an oppor­tun­ity to comment on the revised version.

  1.  The NPRM is Needed to Fulfill the Congres­sional Command that 501(c)(4)s Be Oper­ated Exclus­ively for Social Welfare and to Limit the Use of Those Organ­iz­a­tions as a Source of Dark Money

After Citizens United issued an invit­a­tion to wealthy interests to spend unlim­ited sums on elec­tions, the nonprofit form became an attract­ive vehicle for those who preferred that their spend­ing remain anonym­ous. Congress commanded that (c)(4)s only engage in social welfare activ­it­ies, and the IRS devi­ated from that command with its primary purpose test. What is worse, the IRS has not given clear guid­ance on what counts as polit­ical activ­ity or how much is enough to make it an organ­iz­a­tion’s primary purpose. Instead, the facts and circum­stances of each case are examined by agency staff, lead­ing to confu­sion and incon­sist­ency. In recent years, savvy polit­ical oper­at­ors have taken advant­age of the situ­ation and twis­ted the purpose of the (c)(4) form, making it into a vehicle for secret elec­tion spend­ing. The IRS has the chance to fix this and return to the congres­sional design by clearly defin­ing polit­ical activ­ity and placing limits on it.

In addi­tion to the devi­ation from Congress’s plan for (c)(4)s that has come about due to the inter­ac­tion of the primary purpose test and post-Citizens United spend­ing, the health of our demo­cracy is suffer­ing as well. Trans­par­ency in elec­tion spend­ing is in decline. There has been a dramatic decrease in the percent­age of outside polit­ical spend­ing subject to full disclos­ure of the source of funds, from nearly 100% in 2004 down to approx­im­ately 40% in 2012.[9] At the same time, the dollar amount of anonym­ous outside spend­ing or “dark money” has increased several times over in recent years, to more than $300 million in 2012.[10] That number does not even include so-called issue ads that attack or praise a candid­ate without expressly call­ing for a vote for or against the candid­ate, unless they were aired close to an elec­tion. And this massive spend­ing was highly concen­trated: the ten highest spend­ing organ­iz­a­tions accoun­ted for over three-quar­ters of the total.[11]

In fact, it seems that the differ­ence in disclos­ure require­ments is the reason that so much spend­ing flows through nonprofits rather than polit­ical commit­tees. One example illus­trates both prob­lems: the devi­ation from the stat­utory scheme and the dangers for our elec­tions. In the spring of 2012, the exec­ut­ive director of a group that would spend millions on the elec­tion that year showed attendees at a lunch­eon ads attack­ing Barack Obama and then soli­cited contri­bu­tions while prom­ising, “We don’t make our donors’ names avail­able.”[12] This group was appar­ently devoted to bring­ing about a partic­u­lar outcome in the pres­id­en­tial elec­tion, not the general welfare of the community. And voters who saw the ads were kept in the dark about the iden­tit­ies of the funders and their agenda.

  1. A Clear Defin­i­tion of Polit­ical Activ­ity Will Bene­fit Social Welfare Organ­iz­a­tions, and Ensure Fair and Uniform Enforce­ment of the Law

The NPRM would create a new, bright-line defin­i­tion of “candid­ate-related polit­ical activ­ity” for 501(c)(4)s to replace the current test that requires an indi­vidu­al­ized invest­ig­a­tion into the facts and circum­stances of each case. IRS rule­mak­ing in this area is to be applauded. Clar­ity will make enforce­ment more predict­able and effi­cient, and will limit the abil­ity of polit­ical groups to abuse the (c)(4) form for polit­ical purposes. The rules should make clear that any nonprofit that exceeds the allow­able amount of polit­ical activ­ity has the option of regis­ter­ing as a 527 polit­ical commit­tee or setting up a segreg­ated fund registered as a 527 and disclos­ing only donors to that fund. With a clear defin­i­tion and rules keep­ing 501(c) groups to no more than an insub­stan­tial amount of polit­ical activ­ity, substan­tial elec­tion­eer­ing will be done through polit­ical commit­tees subject to disclos­ure rules, as it should be.

Some have claimed that the IRS proposal is an attempt to give the agency the power to elim­in­ate groups based on their polit­ical view­point. On the contrary, the creation of a bright line that will apply in the same way to every­one is the polar oppos­ite of an attempt to target polit­ical enemies. A clear defin­i­tion will reduce discre­tion and confu­sion, making it more likely that 501(c) groups will exper­i­ence uniform and predict­able enforce­ment.

In recent years, the lack of a clear defin­i­tion of polit­ical activ­ity has made it extremely diffi­cult to ensure that social welfare organ­iz­a­tions are legit­im­ate nonprofits primar­ily devoted to further­ing the common good, as required by law. It has created confu­sion, as organ­iz­a­tions report differ­ent amounts of polit­ical spend­ing to the IRS and the Federal Elec­tion Commis­sion.[13] And reports indic­ate that some groups spend more than half of their expendit­ures on polit­ics, rais­ing the ques­tion of whether the current regime is an effect­ive limit on 501(c)(4) polit­ical activ­ity.[14] The lack of clar­ity makes enforce­ment by the agency time consum­ing and incon­sist­ent, and it has led to accus­a­tions of polit­ical target­ing.[15] Ambi­gu­ity regard­ing what consti­tutes polit­ical activ­ity repres­ents bad policy and makes it diffi­cult for indi­vidu­als and organ­iz­a­tions to know what is expec­ted of them, under both the tax code and the elec­tion code.

  1. New Rules Are Compat­ible With the First Amend­ment

The IRS effort to create a bright-line rule defin­ing “candid­ate-related polit­ical activ­ity” has been disin­genu­ously attacked by some as a viol­a­tion of free speech, but this charge is misguided. Although there are prob­lems with the NPRM that must be fixed, a bright-line rule in this area will not offend the First Amend­ment. In Citizens United v. FEC, the Supreme Court held that corpor­a­tions must be allowed to spend money on polit­ics, but it also recog­nized that the Consti­tu­tion protects not only the rights of speak­ers, but the rights of listen­ers to know who is speak­ing: “The First Amend­ment protects polit­ical speech; and disclos­ure permits citizens and share­hold­ers to react to the speech of corpor­ate entit­ies in a proper way. This trans­par­ency enables the elect­or­ate to make informed decisions and give proper weight to differ­ent speak­ers and messages.”[16] As Justice Antonin Scalia has explained, “Requir­ing people to stand up in public for their polit­ical acts fosters civic cour­age, without which demo­cracy is doomed. For my part, I do not look forward to a soci­ety which . . . campaigns anonym­ously . . . and even exer­cises the direct demo­cracy of initi­at­ive and refer­en­dum hidden from public scru­tiny and protec­ted from the account­ab­il­ity of criti­cism. This does not resemble the Home of the Brave.”[17]

Further­more, the NPRM defines polit­ical activ­ity by nonprofits in order to facil­it­ate enfor­cing the limits on how much elec­tion­eer­ing they can do—it is not a ban on that activ­ity. Organ­iz­a­tions that find the 501(c) rules limit­ing have the option of creat­ing a polit­ical commit­tee under Section 527 and comply­ing with campaign finance law. Thus the regu­la­tion will not silence speech but rather help to further the First Amend­ment value of an informed elect­or­ate.

The changes the NPRM would bring about will increase the oblig­a­tion on groups parti­cip­at­ing in polit­ics to disclose their donors, as polit­ical commit­tees do. Increased disclos­ure has also been attacked by oppon­ents of the NPRM, who claim that it will uncon­sti­tu­tion­ally burden speech. But disclos­ure of polit­ical contri­bu­tions and spend­ing is indis­put­ably consti­tu­tional. In Citizens United, an 8–1 major­ity of the Supreme Court held that disclos­ure is consti­tu­tional, saying that “disclos­ure require­ments may burden the abil­ity to speak, but they impose no ceil­ing on campaign-related activ­it­ies and do not prevent anyone from speak­ing.”[18]

The Supreme Court has protec­ted anonym­ous speech in certain circum­stances, but not in the area of large spend­ing on elec­tions.[19] The public has a vital interest in know­ing who is trying to influ­ence their elec­ted offi­cials, partic­u­larly by means of money rather than persua­sion. Certainly excep­tions should be made when indi­vidu­als will be subject to threats of viol­ence for enga­ging in polit­ical speech.[20] But those who spend millions of dollars trying to influ­ence elec­tion outcomes should not be permit­ted to hide their iden­tit­ies, at least not without some specific show­ing of harm.[21]  

The Bren­nan Center applauds the IRS for moving to better police the bound­ar­ies of the vari­ous forms of tax-exempt entit­ies. Greater clar­ity in the rules will discour­age big elec­tion spend­ers from using 501(c)(4) organ­iz­a­tions as an end-run around campaign finance laws, and will make enforce­ment uniform across organ­iz­a­tions. Import­antly, the Bren­nan Center’s criti­cisms of the current version of the proposed rules should not be construed as disap­proval of IRS rule­mak­ing in this area gener­ally. To the contrary, new rules regard­ing polit­ical spend­ing by 501(c) organ­iz­a­tions are vital to ensur­ing the integ­rity of our elec­tions and the tax code.

  1. Polit­ical Activ­ity by 501(c)(4)s Should Only Be Permit­ted in Insub­stan­tial Amounts

Though the proposed rules better define candid­ate-related polit­ical activ­ity, they do not alter the so-called “primary purpose test,” which is used to determ­ine whether an organ­iz­a­tion can continue to qual­ify as a (c)(4) under the tax code. Consequently, the IRS has reques­ted comments on “what propor­tion of an organ­iz­a­tion’s activ­it­ies must promote social welfare for an organ­iz­a­tion to qual­ify under section 501(c)(4) and whether addi­tional limits should be imposed on any or all activ­it­ies that do not further social welfare.”[22]

As the IRS has explained in the NPRM,[23] the exist­ing primary purpose test stems from the stat­utory language of the tax code, which specifies that 501(c)(4) organ­iz­a­tions shall consist of “[c]ivic leagues or organ­iz­a­tions not organ­ized for profit but oper­ated exclus­ively for the promo­tion of social welfare . . . and the net earn­ings of which are devoted exclus­ively to char­it­able, educa­tional, or recre­ational purposes.”[24] The IRS promul­gated rules specify­ing that a 501(c)(4) was considered to be oper­ated exclus­ively for the promo­tion of social welfare “if it is primar­ily engaged in promot­ing in some way the common good and general welfare of the people of the community.”[25] The rules expli­citly state that “[t]he promo­tion of social welfare does not include direct or indir­ect parti­cip­a­tion or inter­ven­tion in polit­ical campaigns on behalf of or in oppos­i­tion to any candid­ate for public office.”[26]

These rules have remained the same since they were first promul­gated in 1959,[27] and consequently pred­ate both Citizens United[28] and even the Supreme Court’s seminal campaign finance case, Buckley v. Valeo.[29] In short, the regu­la­tions were final­ized in an era that had not even begun to conceive of the campaign finance envir­on­ment we have today.

It has been claimed that the exist­ing primary purpose test allows nonprofits to main­tain their (c)(4) status so long as their polit­ical spend­ing does not reach 50% of their budget.[30] However, this threshold has never been offi­cially confirmed by the IRS.

Regard­less, it is clear that the current legal envir­on­ment allows (c)(4)s to spend signi­fic­ant amounts of money on polit­ical activ­ity without endan­ger­ing their nonprofit status. Nonprofits claim­ing 501(c)(4) status collect­ively repor­ted spend­ing $92 million in the 2010 federal elec­tions[31] and $256 million in the 2012 federal elec­tions.[32] Signi­fic­ant amounts were likely spent in state elec­tions during this period as well.[33]

Substan­tial polit­ical spend­ing was under­taken by specific 501(c)(4)s on both the right and left in 2012. On the right, Cross­roads GPS and Amer­ic­ans for Prosper­ity spent $71 million and $36 million, respect­ively. On the left, the League of Conser­va­tion Voters spent $11 million while Patriot Major­ity USA spent $7 million.[34] Beyond this, many 501(c)(4)s suppor­ted a single candid­ate — both Repub­lic­ans and Demo­crats — with over $100,000 in polit­ical spend­ing.[35] Hence, new regu­la­tions would affect organ­iz­a­tions of all polit­ical stripes, not just those of a partic­u­lar ideo­logy.

  1. The IRS Should Use a Hybrid Approach to Ensure Insub­stan­tial Polit­ical Activ­ity

The IRS should replace the primary purpose test with an insub­stan­tial amount test that sets clear limits on polit­ical activ­ity. We recom­mend a hybrid approach. Namely, once a (c)(4) organ­iz­a­tion exceeds either a dollar-amount threshold of spend­ing or spends a certain percent­age of its budget, such as 15%, on polit­ical activ­ity, it should be required to choose between estab­lish­ing a 527 for any polit­ical spend­ing over the limit or losing tax-exempt status.

The hybrid approach recog­nizes that spend­ing over a specified dollar amount may be suffi­cient to influ­ence the outcome of an elec­tion or be perceived that way. On the other hand, an organ­iz­a­tion that spends a large percent­age of its budget on polit­ical activ­ity is hardly primar­ily devoted to “social welfare,”[36] regard­less of the dollar amount.[37]

  1. Analog­ous Rules Should Apply to Other 501(c) Entit­ies

Similar rules should apply to other 501(c) groups, except for 501(c)(3) organ­iz­a­tions, which are prohib­ited from enga­ging in polit­ical activ­ity alto­gether.[38] Congress created each of these tax-exempt categor­ies for specific purposes, and it provided a vehicle for polit­ical activ­ity in § 527, subject to specific disclos­ure require­ments. There­fore, the IRS is warran­ted in poli­cing the amount of polit­ical activ­ity by all 501(c)s to prevent them from being used as a massive loop­hole to escape the regime Congress created for tax-exempt polit­ical activ­ity. As discussed in the next section, if analog­ous spend­ing rules are not applied to other 501(c) groups, large anonym­ous elec­tion spend­ing will simply move to forms of nonprofit other than 501(c)(4).

  1. The Same Defin­i­tion of Polit­ical Activ­ity Should Be Applied To All 501(c) Entit­ies

The proposed rule changes apply only to 501(c)(4)s, but the IRS has asked for comments regard­ing whether the same defin­i­tion of “candid­ate-related polit­ical activ­ity” should extend to other entit­ies organ­ized under § 501(c), includ­ing (c)(3)s, (c)(5)s, and (c)(6)s.[39] The Bren­nan Center recom­mends that the same defin­i­tion for polit­ical activ­ity be applied to all nonprofit organ­iz­a­tions. Using differ­ent defin­i­tions will invite further abuse of § 501(c), partic­u­larly through the use of (c)(5)s and (c)(6)s.

The vast major­ity of dark money in recent elec­tions was spent by groups organ­ized under 501(c)(4), which expen­ded $256 million on the 2012 elec­tion, trip­ling their total for 2008.[40] But 501(c)(4)s are not the only vehicle for anonym­ous polit­ical spend­ing. In fact, two of the five highest spend­ing nonprofits in 2012 were organ­ized under 501(c)(6).[41] The Cham­ber of Commerce, one such 501(c)(6), repor­ted more than $35 million in polit­ical spend­ing to the FEC; 501(c)(6)s alto­gether repor­ted over $55 million.[42] Labor unions organ­ized under 501(c)(5) repor­ted spend­ing approx­im­ately $24 million on the 2012 elec­tions.[43] These numbers are likely to increase if polit­ical spend­ing by (c)(4)s becomes more tightly regu­lated, but rules surround­ing (c)(5)s and (c)(6)s remain unchanged under the NPRM.

Recent history provides evid­ence that polit­ical nonprofits will change their beha­vior to try to avoid disclos­ure. For a few months in 2012, a court decision required organ­iz­a­tions engaged in distrib­ut­ing a type of issue ad called an “elec­tion­eer­ing commu­nic­a­tion” to disclose their donors.[44] Amer­ic­ans for Prosper­ity, the 501(c)(4) organ­iz­a­tion with the second highest amount of polit­ical spend­ing in 2012,[45] changed its ads from elec­tion­eer­ing commu­nic­a­tions to inde­pend­ent expendit­ures imme­di­ately after the decision was issued, avoid­ing the disclos­ure require­ment.[46] When an appel­late court over­turned the decision and restored the status quo, Amer­ic­ans for Prosper­ity rever­ted back to issue ads by announ­cing a $1.3 million issue advocacy campaign “to inform citizens of Obama’s Fail­ing Agenda.”[47]

In addi­tion, the nonprofit community would bene­fit from uniform rules and predict­able enforce­ment. Many organ­iz­a­tions are comprised of an affil­i­ated (c)(3) and (c)(4), and others look to revenue rulings apply­ing to one form to fill in gaps in guid­ance for the other. Both enforce­ment and compli­ance would be less burden­some if uniform rules applied.

  1. Nonpar­tisan Voter Engage­ment Activ­it­ies Should Not Be Considered Polit­ical Activ­ity

The proposed rules define candid­ate-related polit­ical activ­ity to include voter regis­tra­tion drives, get-out-the-vote activ­it­ies,[48] distrib­ut­ing voter guides,[49] and host­ing events at which a candid­ate appears.[50] So long as these activ­it­ies are conduc­ted in a nonpar­tisan manner, they should be excluded from the defin­i­tion of “candid­ate-related polit­ical activ­ity.”

Voting is at the very core of our demo­cracy and any free and open soci­ety. Civic organ­iz­a­tions have a long and proud history of work­ing to increase voter regis­tra­tion and turnout in their communit­ies. Consequently, nonpar­tisan efforts conduc­ted to enhance voter regis­tra­tion and voter turnout should not be considered polit­ical activ­ity and should instead be recog­nized for what they are—­fur­ther­ing social welfare. “[M]ore than 50 million Amer­ic­ans, or 1 in 4 eligible citizens, are not registered to vote,”[51] and only 53.6% of the voting age popu­la­tion voted in the 2012 pres­id­en­tial elec­tion.[52] Efforts to improve these numbers are vitally import­ant and clearly fall within the ambit of “the promo­tion of social welfare.”[53]

Simil­arly, nonpar­tisan voter guides should not be considered polit­ical activ­ity. Such guides are designed to empower voters to make informed choices for them­selves, rather than to influ­ence elec­tion outcomes. Provid­ing inform­a­tion to voters is a key element of civic engage­ment for many nonprofits. In a time where billions of dollars are spent on elec­tion advert­ising that is heavy on rhet­oric, mudsling­ing, and distor­tion, civic groups provide a desper­ately needed service in the form of nonpar­tisan, object­ive inform­a­tion about candid­ates. To lump nonpar­tisan voter educa­tion together with elec­tion­eer­ing would sense­lessly risk chilling a vital nonprofit activ­ity that bene­fits many communit­ies.

The Bren­nan Center recom­mends that object­ive criteria be used to determ­ine whether voter guides are nonpar­tisan and there­fore nonpolit­ical. To this end, the Bren­nan Center recom­mends the approach adop­ted by the Bright Lines Project, which is primar­ily concerned with whether speech refers to a clearly iden­ti­fied candid­ate and expresses a view on that candid­ate.[54] In prac­tice, this would mean that nonpar­tisan guides will cover all candid­ates or all those candid­ates that meet some object­ive threshold of viab­il­ity. Nonpar­tisan voter guides report object­ive inform­a­tion like legis­lat­ive voting records or candid­ate state­ments. Guides consist­ing of candid­ate state­ments should only be considered nonpar­tisan if candid­ates are given equal oppor­tun­ity to parti­cip­ate and equal time or space and the organ­iz­a­tion does not endorse or critique any of the candid­ates.

Finally, the NPRM defines host­ing an event at which at least one candid­ate appears within 30 days of a primary elec­tion or 60 days of a general elec­tion as candid­ate-related polit­ical activ­ity.[55] Just as with voter guides, nonprofits can play a vital role in giving members of their communit­ies oppor­tun­it­ies to hear candid­ates speak and inter­act with them. Nonprofits like the League of Women Voters host debates as part of their voter educa­tion and engage­ment efforts.

And as with voter guides, object­ive criteria can be used to demarc­ate nonpar­tisan events. Events at which all candid­ates have an equal oppor­tun­ity to appear—or all candid­ates who meet an object­ive threshold of viab­il­ity—and at which the host organ­iz­a­tion does not express a view on the relat­ive merits of the candid­ates should not be deemed polit­ical activ­ity. [56]

  1. The Defin­i­tion of “Public Commu­nic­a­tion” Should Be Narrowed

The NPRM defines as candid­ate-related polit­ical activ­ity any “public commu­nic­a­tion” that clearly iden­ti­fies a candid­ate within 30 days of a primary elec­tion or 60 days of a general elec­tion.[57] “Public commu­nic­a­tion” is defined to encom­pass commu­nic­a­tions in certain media includ­ing websites, broad­casts, and print peri­od­ic­als, by paid ad, or to more than 500 people.[58]

The Bren­nan Center agrees with the approach of deem­ing commu­nic­a­tions aimed at the general public close to an elec­tion to be polit­ical activ­ity, and we agree that paid advert­ising should be included. But we are concerned that the proposed defin­i­tion of “public commu­nic­a­tion” is too broad and could sweep up inad­vert­ent mentions of candid­ates during the 30/60-day window that are not inten­ded to influ­ence an elec­tion. The recent abuses of the nonprofit form have involved heavy polit­ical spend­ing on mass media. Candid­ate mentions in commu­nic­a­tions aimed at small audi­ences or audi­ences that seek out the organ­iz­a­tion’s speech do not pose the same concerns.

Includ­ing candid­ate mentions on websites is prob­lem­atic for two reas­ons. First, websites are unlike commu­nic­a­tions that appear in peri­od­ic­als or broad­cast media in that they are pass­ive: they are only seen by those who visit the website. Commu­nic­a­tions that reach only those who seek them out pose less of a concern that the speaker is attempt­ing to influ­ence an elec­tion. Second, an organ­iz­a­tion whose website mentions an indi­vidual for reas­ons having noth­ing to do with an elec­tion will be deemed to engage in candid­ate-related polit­ical activ­ity once the 30/60-day window begins. For example, an organ­iz­a­tion might post a press release mention­ing a senat­or’s vote on a bill relev­ant to the organ­iz­a­tion’s mission. Five years later, the release is still avail­able on the organ­iz­a­tion’s website as the senator stands for reelec­tion, and under the NPRM it would be treated the same as an attempt to influ­ence the upcom­ing elec­tion. There­fore, we recom­mend that websites not be included in the defin­i­tion of “public commu­nic­a­tion,” unless the use of a website consti­tutes a paid advert­ise­ment.

In addi­tion, the NPRM’s defin­i­tion of “public commu­nic­a­tion” would include speeches where the audi­ence is composed of more than 500 people. As with websites, the audi­ence for a speech is gener­ally only those who are seek­ing out the speak­er’s message. The concern that nonprofits might be used to funnel money into polit­ical activ­it­ies that evade campaign finance laws is not as press­ing with oral commu­nic­a­tions. We recom­mend that speeches be excluded from the defin­i­tion of “public commu­nic­a­tion.”

For much the same reason, commu­nic­a­tions to an organ­iz­a­tion’s members (other than through paid advert­ising) should be excluded from the defin­i­tion of “public commu­nic­a­tion.”

These issues could be addressed by adopt­ing the defin­i­tion of “public commu­nic­a­tion” found in federal campaign finance law. It covers commu­nic­a­tions “by means of any broad­cast, cable, or satel­lite commu­nic­a­tion, news­pa­per, magazine, outdoor advert­ising facil­ity, mass mail­ing, or tele­phone bank to the general public, or any other form of general public polit­ical advert­ising.”[59]

Note that we agree with the NPRM that express advocacy in any of these forms of commu­nic­a­tion should be considered candid­ate-related polit­ical activ­ity.

  1. The Rule Cover­ing Candid­ate Mentions in Public Commu­nic­a­tions Should Cover a Longer Period of Time

The NPRM defines as candid­ate-related polit­ical activ­ity public commu­nic­a­tions that refer to a candid­ate or polit­ical party within 30 days of a primary elec­tion or 60 days of a general elec­tion.[60] Outside that window, only commu­nic­a­tions that contain express advocacy or are suscept­ible of no reas­on­able inter­pret­a­tion other than as support or oppos­i­tion to a candid­ate would be considered candid­ate-related polit­ical activ­ity.[61]

This regime would allow signi­fic­ant elec­tion­eer­ing through ads that stop short of express advocacy well into the time when campaigns are active. The 30/60-day window has become obsol­ete given the increas­ing length of elec­tions. Partis­ans have decided it is never too early to try to influ­ence voters’ choices. Some likely candid­ates have even been attacked in paid media before they even declare their candid­acy.[62]

In the current elec­tion cycle, spend­ing is already high, many months before the general elec­tion. As of Novem­ber, outside spend­ing by nonprofits was almost five times higher than at the same point in the 2012 cycle—in spite of the fact that 2014 is an off-year elec­tion.[63] Senat­ors up for reelec­tion in swing states have already been targeted by attack ads paid for by 501(c) groups.[64] One 501(c)(4), Amer­ic­ans for Prosper­ity, has already spent more than $27 million on ads since August.[65]

There­fore, we respect­fully recom­mend that the window during which candid­ate mentions count as candid­ate-related polit­ical activ­ity be made longer than 30 days before a primary elec­tion and 60 days before a general elec­tion. Instead, candid­ate mentions that take place within 60 days of a primary elec­tion or 90 days of a general elec­tion should count as candid­ate-related polit­ical activ­ity so long as they also satisfy the other criteria for regu­la­tion of public commu­nic­a­tions.

In the altern­at­ive, the IRS might also consider adopt­ing the Bright Lines Project proposal of regu­lat­ing most commu­nic­a­tions that clearly refer to a candid­ate and express a view on that candid­ate.[66] Such an approach would abol­ish the 30/60-day window and would instead look at the contents of the commu­nic­a­tion with limited refer­ence to context. An expan­sion of the 30/60-day window to a 60/90-day window, however, repres­ents the stronger approach.

  1. Contri­bu­tions Should Not Be Considered Polit­ical Activ­ity If They Are Limited to Nonpolit­ical Uses

The NPRM includes within the defin­i­tion of “candid­ate-related polit­ical activ­ity” a contri­bu­tion to a 501(c) organ­iz­a­tion that engages in anything the regu­la­tion defines as candid­ate-related polit­ical activ­ity.[67] The under­ly­ing basis for this rule is sound. As the Center for Respons­ive Polit­ics has docu­mented, churn­ing money through multiple 501(c) organ­iz­a­tions is becom­ing an increas­ingly popu­lar tactic to hide the origin of polit­ical funds.[68] Hence, trans­fers to polit­ic­ally-active 501(c) organ­iz­a­tions should, as a general matter, be considered polit­ical activ­ity.

But the rule as it is currently writ­ten would gener­ate absurd results: If a 501(c)(4) donated $100 million to another group that engaged in a de minimis amount of candid­ate-related polit­ical activ­ity, the donor organ­iz­a­tion’s entire $100 million grant would be considered candid­ate-related polit­ical activ­ity. Even worse, since the provi­sion covers contri­bu­tions to all 501(c) groups, it would need­lessly burden contri­bu­tions to 501(c)(3)s. The NPRM’s defin­i­tion of “candid­ate-related polit­ical activ­ity” is broader than the current defin­i­tion of polit­ical inter­ven­tion for 501(c)(3)s. Thus, under the NPRM, a contri­bu­tion from a 501(c)(4) to a 501(c)(3) for voter regis­tra­tion efforts would be deemed candid­ate-related polit­ical activ­ity for the 501(c)(4) even though the activ­ity being funded is not considered polit­ical inter­ven­tion by the recip­i­ent 501(c)(3).

The Bren­nan Center recom­mends that contri­bu­tions to nonprofits not be coun­ted as candid­ate-related polit­ical activ­ity if the contrib­ut­ing organ­iz­a­tion places a writ­ten restric­tion on the funds limit­ing them to activ­it­ies that do not consti­tute candid­ate-related polit­ical activ­ity and the recip­i­ent organ­iz­a­tion agrees to abide by the restric­tion. And as noted, we recom­mend that the defin­i­tion of polit­ical activ­ity be uniform for all 501(c) groups, to prevent contri­bu­tions from being deemed polit­ical for a donor when the activ­ity is not considered polit­ical for the recip­i­ent. Addi­tion­ally, if the IRS sets suffi­ciently low thresholds for permiss­ible amounts of total polit­ical activ­ity by 501(c) organ­iz­a­tions as we recom­mend, inter-organ­iz­a­tion trans­fers will be limited in amount. At small amounts, the concern that these trans­fers would consti­tute a loop­hole allow­ing organ­iz­a­tions to evade the limits on polit­ical activ­ity is far less press­ing.

* * * * * * *

The Bren­nan Center is commit­ted to promot­ing our nation’s demo­cratic values by having a full and fair public debate about candid­ates and issues in which all citizens can parti­cip­ate. Unfor­tu­nately, after Citizens United, some have come to see the nonprofit form as an end-run around the trans­par­ency require­ments of campaign finance laws. The Bren­nan Center hails the commit­ment of the IRS to improv­ing the regu­la­tion of nonprofits. Although care must be taken to avoid limit­ing nonpar­tisan civic engage­ment and genu­ine issue advocacy, the NPRM is a welcome step forward.


Respect­fully submit­ted,

Lawrence Norden
Deputy Director, Demo­cracy Program

Ian Vandewalker
Coun­sel, Demo­cracy Program

David Earley
Coun­sel, Demo­cracy Program

[1] The Bren­nan Center is a nonpar­tisan public policy and law insti­tute that focuses on funda­mental issues of demo­cracy and justice. The Bren­nan Center is at the center of the fight to preserve and expand the right to vote for every eligible citizen. Through prac­tical policy propos­als, litig­a­tion, advocacy, and commu­nic­a­tions, the Bren­nan Center works to ensure that voting is free, fair, and access­ible for all Amer­ic­ans. The Bren­nan Center’s Money in Polit­ics project works to reduce the real and perceived influ­ence of special interest money on our demo­cratic values. Project staff defend federal, state, and local campaign finance and disclos­ure laws in courts around the coun­try, and provide legal guid­ance to campaign finance reformers through coun­sel­ing, testi­mony, and public educa­tion. These comments do not purport to convey the posi­tion of NYU School of Law.

[2] Guid­ance for Tax-Exempt Social Welfare Organ­iz­a­tions on Candid­ate-Related Polit­ical Activ­it­ies, 78 Fed. Reg. 71,535 (proposed Nov. 29, 2013) (to be codi­fied at 26 C.F.R. Part 1) (here­in­after Proposed 26 C.F.R. § ___).

[3] 26 U.S.C. § 501(c)(4).

[4] 26 U.S.C. § 501(c)(6); 26 C.F.R. § 1.501(c)(6)-1.

[5] 26 U.S.C. § 527.

[6] 26 C.F.R. § 1.501(c)(4)-1(a)(2)(i).

[7] 558 U.S. 310 (2010).

[8] Ctr. for Respons­ive Polit­ics, Outside Spend­ing – 2012, Open­,­­pend­ing/fes_summ.php?cycle=2012.

[9] Outside Spend­ing by Disclos­ure, Exclud­ing Party Commit­tees, Open­,­­pend­ing/disclos­ure.php.

[10] Id.

[11] 2012 Outside Spend­ing, By Group, Open­,­­pend­ing/summ.php?cycle=2012&disp=O&type=U&chrt=D.

[12] Kim Barker, How Nonprofits Spend Millions on Elec­tions and Call it Public Welfare, ProP­ub­lica, Aug. 18, 2012, http://www.prop­ub­­tions-and-call-it-public-welfare.

[13] Robert Maguire & Vivica Novak, Shadow Money Magic: Five Easy Steps That Let You Play Big in Polit­ics, Hide Your Donors and Game the IRS – Step 2, Open­, Apr. 16, 2013,­

[14] Robert Maguire & Vivica Novak, ATR’s Tax Forms Raise Ques­tions About Use of Cross­roads Grant, “Social Welfare” Purpose, Open­, Nov. 18, 2013,­­tions-about-use-of-cross­roads-grant-social-welfare-purpose.html (Amer­ic­ans for Tax Reform repor­ted differ­ent amounts of polit­ical spend­ing to the IRS and FEC; the higher number consti­tuted more than half of its 2012 spend­ing).

[15] Deirdre Shes­green, 1959 IRS rule is at the center of Tea Party scan­dal, USA Today, June 20, 2013, http://www.usat­­ics/2013/06/20/irs-nonprofits-rule-polit­ics-1959/2439177.

[16] Citizens United v. FEC, 558 U.S. 310, 371 (2010).

[17] Doe v. Reed, 130 S. Ct. 2811, 2837 (2010) (Scalia, J., concur­ring).

[18] Citizens United, 558 U.S. at 366 (internal cita­tions and quota­tion marks omit­ted).

[19] See, e.g., McIntyre v. Ohio Elec­tions Comm’n, 514 U.S. 334, 337 (1995); NAACP v. Alabama, 357 U.S. 449, 451 (1958).

[20] The Supreme Court has said such an excep­tion exists. See Doe v. Reed, 130 S. Ct. 2811, 2821 (2010).

[21] See also David Earley, Malloy Should Stand Up for Elec­tion Trans­par­ency, Conn. Mirror (June 19, 2012), http://ww3.ctmir­

[22] 78 Fed. Reg. 71,538 (Nov. 29, 2013).

[23] 78 Fed. Reg. 71,537–58 (Nov. 29, 2013).

[24] 26 U.S.C. § 501(c)(4)(A) (emphasis added).

[25] 26 C.F.R. § 1.501(c)(4)-1(a)(2)(i) (emphasis added).

[26] 26 C.F.R. § 1.501(c)(4)-1(a)(2)(ii).

[27] 78 Fed. Reg. 71,536 (Nov. 29, 2013).

[28] Citizens United v. FEC, 558 U.S. 310 (2010).

[29] 424 U.S. 1 (1976).

[30] See, e.g., Civic Organ­iz­a­tions and Local Asso­ci­ations of Employ­ees, 26 C.F.R. § 1.501(c)(4)-1(a)(ii)(2)(i) to -(ii); Diane Freda, IRS Offers First Sign 501(c)(4) Polit­ical Activ­ity Rules Could Be Updated, Bloomberg BNA, July 24, 2012, http://www.bnasoft­­ical_Activ­ity_Rules_Could_Be_Updated.asp (“IRS rules for Section 501(c)(4)s are gener­ally considered to allow polit­ical spend­ing of up to 49 percent. While the 49 percent rule does not appear in published IRS guid­ance, IRS offi­cials have alluded to it in some public forums.”); Miriam Glaston, When Stat­utory Regimes Collide: Will Citizens United and Wiscon­sin Right to Life Make Federal Tax Regu­la­tion of Campaign Activ­ity Uncon­sti­tu­tional?, 13 U. Pa. J. Const. L. 867, 876 n.29 (2011).

[31] Outside Spend­ing – 2010, Open­,­­pend­ing/fes_summ.php?cycle=2010.

[32] Outside Spend­ing – 2012, Open­,­­pend­ing/fes_summ.php?cycle=2012.

[33] For the most compre­hens­ive data­base of spend­ing in state elec­tions, see Nat’l Inst. on Money in State Polit­ics,,

[34] Polit­ical Nonprofits: Top Elec­tions Spend­ers – 2012, Open­,­­pend­ing/nonprof_elec.php?cycle=2012.

[35] Taylor Lincoln, Public Citizen, Super Connec­ted 51–53 (updated Mar. 2013), avail­able at­ments/super-connec­ted-march-2013-update-candid­ate-super-pacs-not-inde­pend­ent-report.pdf (list­ing single-candid­ate support­ing outside spend­ers and indic­at­ing at least twenty-six 501(c) organ­iz­a­tions spent at least $100,000 support­ing a single candid­ate); Polit­ical Nonprofits: Top Elec­tions Spend­ers – 2012, Open­,­­pend­ing/nonprof_elec.php?cycle=2012 (indic­at­ing which of those organ­iz­a­tions are 501(c)(4)s).

[36] 26 C.F.R. § 1.501(c)(4)-1(a)(2)(i).

[37] 26 U.S.C. § 501(c)(4).

[38] We recom­mend that every type of 501(c) organ­iz­a­tion oper­ate under a clear rule govern­ing how much can be spent on polit­ics, although we state no view about whether other categor­ies of 501(c) entit­ies should be subject to the same limit as (c)(4)s.

[39] 78 Fed. Reg. 71,537.

[40] Richard Rubin, Big-Money Polit­ics Groups Get Clar­ity From IRS They Hate, Bloomberg, Feb. 19, 2014,–02–19/big-money-polit­ics-groups-get-clar­ity-from-irs-they-hate.html.

[41] Polit­ical Nonprofits: Top Elec­tion Spend­ers, Open­,­­pend­ing/nonprof_elec.php.

[42] Outside Spend­ing – 2012, Open­,­­pend­ing/fes_summ.php?cycle=2012.


[44] Van Hollen v. FEC, 851 F. Supp. 2d 69 (D.D.C. Mar. 2012) (declar­ing invalid 11 C.F.R. § 104.20(c)(9), which regu­lates elec­tion­eer­ing commu­nic­a­tions).

[45] See Polit­ical Nonprofits: Top Elec­tions Spend­ers – 2012, Open­,­­pend­ing/nonprof_elec.php?cycle=2012.

[46] Alex Engler, Dark Money Organ­iz­a­tions Change Strategies to Keep Donors Secret, Sunlight Found. Blog, Sept. 25, 2012, http://sunlight­found­a­­iz­a­tions-change-strategies-to-keep-donors-secret/. A staff member for Amer­ic­ans for Prosper­ity explained that required disclos­ure of donors was “off the table.” Andy Kroll, Karl Rove’s Catch-22, Mother Jones, July 27, 2012, http://www.mother­­ics/2012/07/karl-rove-cross­roads-gps-dark-money-disclos­ure. See also Seth Cline, Court Over­turns Only Rule Requir­ing Secret Groups Disclose Donors, U.S. News & World Rep., Sept. 18, 2012,­turns-only-rule-requir­ing-secret-groups-disclose-donors (“The U.S. Cham­ber of Commerce, for example, made it very clear it would tweak its ad strategy to avoid disclos­ure at a media break­fast follow­ing the ruling. ‘It’s full steam ahead,’ Bruce Josten, the Cham­ber’s exec­ut­ive vice pres­id­ent for govern­ment affairs, told report­ers when asked how the Cham­ber would respond to the ruling. ‘The only thing that may switch is you’re forced to do express advocacy using the magic words ‘vote for,’ ‘vote again­st’ as opposed to high­light­ing a given member’s legis­lat­ive record.’”). The U.S. Cham­ber of Commerce is a 501(c)(6).

[47] AFP Launches $1.3 Million Issue Advocacy Push to Educate Citizens About Obama’s Fail­ing Policies, Ams. for Prosper­ity, Sept. 24, 2012, http://amer­ic­ans­for­prosper­­room/afp-launches-1–3-million-issue-advocacy-push-to-educate-citizens-about-obamas-fail­ing-policies/.

[48] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(5).

[49] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(7).

[50] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(8).

[51] Wendy Weiser et al., Bren­nan Ctr. for Justice, How to Fix the Voting System 2 (2013), avail­able at http://www.bren­nan­cen­­a­tion/how-fix-voting-system (citing Pew Center on the States, Inac­cur­ate, Costly and Inef­fi­cient: Evid­ence that Amer­ica’s Voter Regis­tra­tion System Needs an Upgrade 2 (2012), avail­able at­Files/wwwpewtrust­sorg/Reports/Elec­tion_reform/Pew_Upgrad­ing_Voter_Regis­tra­tion.pdf.

[52] Michael McDon­ald, 2012 General Elec­tion Turnout Rates, U.S. Elec­tions Project, http://elec­ (last updated July 22, 2013). The Bipar­tisan Policy Center estim­ates that voter turnout in 2012 was 57.5%. Press Release, Bipar­tisan Policy Ctr., 2012 Elec­tion Turnout Dips Below 2008 and 2004 Levels: Number of Eligible Voters Increases by Eight Million, Five Million Fewer Votes Cast (Nov. 8, 2012), http://bipar­tis­an­­port.pdf.

[53] 26 U.S.C. § 501(c)(4)(A).

[54] Bright Lines Project, The Bright Lines Project: Clari­fy­ing IRS Rules on Polit­ical Inter­ven­tion – Draft­ing Commit­tee Explan­a­tion 3–4, 12–24 (2013), avail­able at­ments/Bright%20Lines%20Pro­ject%20Ex­plan­a­tion.pdf.

[55] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(8).

[56] See Bright Lines Project, The Bright Lines Project: Clari­fy­ing IRS Rules on Polit­ical Inter­ven­tion – Draft­ing Commit­tee Explan­a­tion 14 (2013), avail­able at­ments/Bright%20Lines%20Pro­ject%20Ex­plan­a­tion.pdf.

[57] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(2).

[58] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(B)(5).

[59] 2 U.S.C. § 431(22); see also 11 C.F.R. § 100.26.

[60] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(2).

[61] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(2)(iii)(A)(1).

[62] See, e.g., Scott Powers, Attacks Begin Before Gubernat­orial Candid­ates Declare, Orlando Sentinel, July 25, 2013,–07–25/news/os-duel­ing-governor-ads-20130725_1_demo­crats-repub­lican-party-charlie-crist; Lind­sey Boerma, Rove group slams Clin­ton on Benghazi in first 2016 attack ad, CBS News, May 13, 2013,­ton-on-benghazi-in-first-2016-attack-ad/.

[63] Robert Maguire, Liberal Dark Money Domin­at­ing 2014 Elec­tions, Open­, Nov. 7, 2013,­­at­ing-2014-elec­tions.html.

[64] Matt Viser, Early start to TV ads war in midterm elec­tions, Boston Globe, Dec. 15, 2013,­­ics/2013/12/15/barrage-under­way-for-midterms-with-anti-health-care-themes-aimed-female-voters/njicRyvK­HOWKxUUjH­B7MtK/story.html.

[65] Matea Gold, With early attacks against Senate Demo­crats, AFP emerges as GOP’s most power­ful ally, Wash. Post, Feb. 4, 2014, http://www.wash­ing­ton­­ics/with-early-attacks-against-senate-demo­crats-afp-emerges-as-gops-most-power­ful-ally/2014/02/04/fce5f7ae-8dd6–11e3–833c-33098f9e5267_story.html.

[66] Bright Lines Project, The Bright Lines Project: Clari­fy­ing IRS Rules on Polit­ical Inter­ven­tion – Draft­ing Commit­tee Explan­a­tion 13 (2013), avail­able at­ments/Bright%20Lines%20Pro­ject%20Ex­plan­a­tion.pdf.

[67] Proposed 26 C.F.R. § 1.501(c)(4)-1(a)(4)(iii).

[68] Robert Maguire, New Filings Shed Light on Hundreds of Millions in Dark Money Spend­ing, Open­, Nov. 21, 2013,­