Voters almost certainly will endure another election in 2014 without meaningful regulation of nonprofit corporations that claim to be social welfare organizations, but engage heavily in campaigns while benefiting from their tax-exempt status.
President Barack Obama’s administration, through the Internal Revenue Service, last week issued the beginnings of what might one day become regulations that could curtail some political activity by so-called social welfare organizations.
Given the complexity of the undertaking, and high level of interest on the part of lawyers, consultants and politicians, there is virtually no way new rules governing these nonprofit corporations will be in place before the 2016 election.
The IRS proposal leaves basic issues to be determined by the rule-making process. Social welfare organizations risk losing their tax-exempt status if they spend a majority of their time engaged in political activity.
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But the proposal fails to offer a suggestion for the amount of time they ought to be allowed to engage in campaigns. Is it 49.9 percent or is it 20 percent? That presumably will be decided later.
Politically active nonprofit corporations spent at least $336 million in 2012, according to the nonpartisan Center for Responsive Politics. The identities of individual and corporate donors don’t become public, which is why nonprofits have become a preferred method for wealthy donors to influence the outcome of elections.
The IRS noted its goal was to provide greater clarity for political actors and the public, but also said the proposed regulations “may be both more restrictive and more permissive than the current approach.” As The Washington Post noted, “That seemingly contradictory statement reflects the muddy zone now occupied by ‘social welfare’ organizations set up under section 501(c)(4) of the tax code.”
What is and is not political activity will be subject to the rule-making process. Oddly, the IRS proposal suggests voter registration should be considered campaign-related activity. In our view, policymakers should encourage voter registration. So long as social welfare organizations register citizens of all political persuasions, that activity ought to be considered nonpartisan.
Congress should require greater disclosure by politically active nonprofits, and direct the Federal Election Commission , which regulates federal campaigns, to take a greater role in policing politically active nonprofits. Of course, House Republicans and Senate Democrats don’t agree on much of anything.
That leaves it to the IRS, an agency that must protect taxpayer confidentiality, and is ill-suited to regulate campaigns in a democracy that values openness. The better alternative would be for the Federal Election Commission to directly regulate all federal campaign activity, including those by so-called social welfare organizations.