IRS: Agency to Consider Changes to 501(c)(4) Eligibility Rules as Requested by Campaign Legal Center and Democracy 21

Today, the Campaign Legal Center joined Democracy 21 in responding to an Internal Revenue Service (IRS) letter stating that the agency will consider changes to regulations governing 501(c)(4) tax status eligibility. The organizations previously filed a rulemaking petition on the matter with the IRS, calling on the agency to adopt new regulations making clear that 501(c)(4) organizations may engage in no more than an insubstantial amount of candidate election activity—far less than the amount currently conducted by many high-profile organizations claiming 501(c)(4) tax-exempt status.

Last week, Lois Lerner, IRS Director of the Exempt Organizations Division, replied in a letter that the IRS “will consider proposed changes” in eligibility regulations for section 501(c)(4) tax-exempt groups.  The tax status has been widely misused by organizations that have spent tens of millions of dollars on political advertising in battleground states largely attacking candidates for federal office.

“We are encouraged that the IRS has recognized the threat posed by these shadow party committees that are using a privileged tax status to keep secret the names of donors who are pumping tens of millions of dollars into our federal elections in an attempt to pick the winners and losers on Election Day,” said J. Gerald Hebert, Executive Director of the Campaign Legal Center.  “We hope that the IRS will proceed quickly and effectively in curbing this wholesale abuse of the tax code for partisan political ends.  Left unchecked, this problem will only grow worse and is an urgent matter that must be dealt with by the IRS now.  We are counting on the IRS to stop this charade being put on by political operatives from both parties which poses a very serious threat to our democracy.”

In the letter today, the Campaign Legal Center and Democracy 21 again strongly urged the IRS to promptly institute a rulemaking proceeding to address the widespread abuse of the 501(c)(4) tax status and to take measures “in the interim to stop the blatant abuses of the tax laws that are resulting in massive amounts of secret money being laundered into our national elections by groups claiming to be ‘social welfare’ organizations.”

Since initially filing a rulemaking petition in July 2011, the Campaign Legal Center and Democracy 21 have on multiple occasions written to the IRS to challenge the eligibility for 501(c)(4) tax status of a number of Republican and Democratic affiliated groups, including Crossroads GPS, Priorities USA, American Action Network and Americans Elect.

To read the letter sent today by the Campaign Legal Center and Democracy 21, click here.

To read the IRS letter responding to both organizations, click here.