(February 19, 2014)--For more than 50 years, the issue of 501(c)(4) groups abusing their "social welfare" status has been kicked down the road by the IRS.
Finally, after torrents of bad publicity, others are starting to take notice, but the recent proposals fail to address the main issue.
Current IRS regulations grant tax-exempt status under section 501(c)(4) of the tax code to groups “primarily engaged” in promoting social welfare, allowing up to half of their money to be spent on politics. The tax laws, however, require such groups to be “operated exclusively” for social welfare purposes.
Today, CREW (Citizens for Responsibility and Ethics in Washington)filed comments with both the IRS and the Treasury Department criticizing these proposals for failing to close the regulatory loophole, but the IRS won't act without public pressure.
Here's how you can help stem the tide of anonymous dark money pouring into our electoral system.
You can submit your comments to the IRS here, and we have some suggested language you may use below. Of course you're free to use statements of your own as well.
I am writing to urge the IRS to close a loophole that allows tax-exempt organizations to spend hundreds of millions of dollars on political campaigns while keeping their donors secret. These vast and increasing amounts of “dark money” threaten our democracy by denying the disclosure that deters corruption and informs voters about the interests paying for campaign advertisements.
Federal law requires groups set up under section 501(c)(4) of the tax code to act “exclusively” to promote social welfare. An IRS regulation, however, has interpreted that to mean they only need to be “primarily” engaged in activities that advance the common good, meaning they can spend up to half their money on politics. Since these organizations are not required to disclose their donors, wealthy interests are taking advantage of this loophole to pump money into the political system without disclosing where it came from. This is simply not right.
As the IRS considers new regulations (REG-134417-14) for social welfare groups, it should fix the problem it helped create by matching its rules to the plain language of the law.