Congress to Examine Political Activities of Nonprofits

The US House Committee on Ways and Means has released an open letter to groups organized under Section 501(c)(3) or 501(c)(4) of the tax code requesting information and input on the general compliance with existing rules that govern nonprofits and whether foreign sources are funding non-profits’ political activities. 

The Committee is seeking information on the following topics:

• Should the Internal Revenue Service (IRS) issue updated guidance on how to define “political campaign intervention” and the extent to which 501(c)(4) organizations may engage in it? For example, does the IRS’s current guidance on the definition of “political campaign intervention” properly account for new forms of political advocacy?
• Are there changes to Form 990 that would clarify how contributions are being used by 501(c)(4) organizations to fund political activities or 501(c)(3) organizations are using to engage in voter registration activities, public forums, and publishing voter education guides?
• Should Congress consider policy changes to address money from foreign nationals — who are prohibited from contributing directly to political campaigns, candidates, and super PACs — but may be donating to 501(c)(3) and 501(c)(4) organizations that, in turn, spend that money to influence US elections?

And last, the Committee is asking if anyone wants to expose others’ wrongdoing:

“Are there any tax-exempt organizations whose voter education or registration activities you suspect might have had the effect of favoring a candidate or group of candidates which would constitute prohibited participation or intervention? If yes, please describes those activities. … Are you aware of organizations under Section 501(c) that are tax-exempt but have the true purpose of influencing elections in favor of one political party? If so, please provide a description of how such organizations achieve that goal. Are you aware of organizations under Section 501(c) that are tax-exempt but have misused donor funds for the personal benefit of organization executives or have misused donor funds outside the stated purpose of the donor? If so, please provide a description of those organizations and the relevant conduct.”

In support for their need to conduct this hearing, the Ways and Means Committee cited a recent General Accountability Office report on 501(c)(3) and (c)(4) and the gaps in disclosure and enforcement between the Federal Election Commission (FEC) and the IRS. The House letter also contained several attachments that were prominent news in the last election, including: Super PAC suggests that donating to 501(c)(3)s is the “most effective tactic for ensuring Democratic victories;” “Zuckerbucks” – Hundreds of Millions of Dollars Donated to Democrat Aligned Organizations; and a New York Times story the Committee described as revealing “Contributions from Foreign Nationals and the Untraceable Flow of Money Within the Networks of Nonprofit Groups.”

For more information on these hearings, contact Craig Engle, Shira Helstrom, or the ArentFox Schiff attorney who handles your matters.