The IRS’s proposed regulations of Section 501(c)(4) “social welfare” activities continue to generate consternation and controversy as the February 28, 2014 comment deadline approaches.
A. Background
The IRS issued a “Notice of Proposed Rule-Making” in late November 2013, ostensibly to provide needed clarity regarding campaign related political activities of 501(c)(4) organizations. While the proposed regulations were publicly trumpeted as a response to the May 2013 IRS scandal about inappropriate targeting of conservative organizations, it now appears that the regulations were in the works much longer – probably since the U.S. Supreme Court issued its Citizens United decision. In that case, the Court affirmed the First Amendment right of corporations – including Section 501(c)(4) organizations – to spend money in politically related activity, but without the donor disclosure requirements of Section 527 political organizations. And thus so-called “dark money” emerged to fund political activities.
B. Abounding Problems
The proposed regulations are problematic in numerous respects. Significantly, they take aim at free speech rights that underscore our country’s democratic values and that are essential to our democratic system. For example, they prohibit voter education activities that have long been unquestioned as legitimate. In addition, the regulations prescribe 30 and 60-day “black-out” periods for educational issue advocacy that may be “related” to campaign activities, even though the U.S. Supreme Court has ruled such arbitrary timing-related restrictions constitutionally invalid.
Furthermore, the IRS gives itself the discretion to decide whether speech constitutes impermissible “campaign related political activities,” according to the constitutionally suspect “facts and circumstances” criteria. Such approach stands in stark contrast to the Supreme Court’s mandate inFederal Election Commission vs. Wisconsin Right to Life, Inc. (2007) that in free speech issues involving a section 501(c)(4) organization, the proverbial “tie goes to the speaker, not the censor.” Notably, the proposed regulations do not apply to either unions or trade associations, leaving them comparatively unrestricted.
C. The Hue and Cry
Politicians on both side of the aisle, the media, conservative nonprofits, and even liberal leaning nonprofits such as the ACLU have joined the democracy bandwagon. Among other things, they have called the IRS proposed regulations illegitimately conceived, aimed at more inappropriate targeting, chock-full of defects, and a serious threat to constitutionally protected political speech. To date, over 69,000 comments have reportedly been submitted, with public hearings likely to follow.
The House Committee on Oversight and Government Reform issued a lengthy missive to new IRS Commissioner Koskinen on February 4, 2014, charging that the proposed regulations codify the Obama Administration’s earlier attempts to stifle political speech in response to the Citizens United decision, radically depart from both precedent and statutory authority, and significantly impair constitutionally protected speech. The Committee’s letter ended with a request for extensive documentation about the IRS’s development of the proposed regulations as well as the rescission of the regulations themselves, based on the Committee’s conclusion that “[i]nformation received in the course of [its] investigation shows that the proposed regulation is little more than a veiled attempt to stifle the exercise of constitutionally protected speech afforded to non-profit organizations by law.” In response, House Democrats issued their own accusations of improper partisan activities in relation to IRS-related inquiries and called for further oversight investigation.
Additional House hearings have been held with IRS Commissioner Koskinen, nonprofit leaders, and others, complete with more fireworks and accusations of unlawful partisan activities. Proposed legislation is also reportedly in the works. Meanwhile, the chorus of respected voices urging abandonment of the proposed regulations continues to swell.
As the tax-exempt commenter Paul Streckfus pointed out recently, given all the substantial criticism and controversy, perhaps the “proposed regulations are deader than a bug on my windshield.” On a more principled note, this issue squarely pits vitally important free speech and related democratic values against far-reaching government intrusion. Keep watch.
