Clarifying IRS Rules on Political Intervention:
Comparing the Current Rules to the Colvin Committee Draft
April 13, 2011
In June 2009, OMB Watch convened a group of tax law experts, legal practitioners, and
nonprofit professionals to discuss whether and how the IRS regulations governing nonprofit
organizations' political activities should be revised. Based on those discussions, a committee,
chaired by Greg Colvin (with Beth Kingsley as vice chair), of nine tax law experts has developed
a draft of six proposed rules which are designed to clarify those rules.
This document, which contains a side-by-side comparison of the current and proposed rules, is
designed to highlight the most important changes.
For further information, please contact Jessica Randall at OMB Watch: [email protected]
or 202.234.8494, or Greg Colvin: [email protected] or 415-421.7555.
CURRENT RULE
PROPOSED RULE
Internal Revenue Code (IRC)
definition of political
intervention: sections 501 (c),
162(e)
Participation or intervention in a
campaign in support of or
opposition to any candidate for
elective public office
No change
IRC definition of political activity
under section 527
Attempting to influence the
selection, nomination, election,
or appointment of any individual
to Federal, State, or local public
office, or office in a political
organization, or election of
Presidential or VP electors
Align with definition in sections
501(c) and 162(e)
Definition of "candidate" in
Treasury Regulations
Offers himself or is proposed by
others
Follow federal or state election
law definition of "candidate"
Basic IRS approach to
interpretation
"Depends on all the facts and
circumstances"
"
Connecticut Ave. NW
Washington, DC 20009
171,Q
tel: 202.234•. 8+91,
fax: 202-2S1<.8581'
(would eliminate unnecessary
reference to appointive offices
or political organization offices)
New regulations with:
* Bright lines
* Safe harbors
* Less uncertainty
email: [email protected]
web: http:/ hv\"'w.ombwatch.org
CURRENT RULE
Primary purpose test for
501 (c)(4), (5), (6) organizations
to be exempt
Level of political intervention
that triggers loss of exemption
is uncertain
Basic political speech rule
None, facts and circumstances
Exceptions to political speech
rule, alloWing speech
None, facts and circumstances
Express advocacy of election,
defeat of identified candidate
Speech that does not refer to
or reflect a view on a
candidate
Speech that refers to and
reflects a view on a candidate,
not within an exception
Is intervention
Strict liability: exemption fails if
political intervention (with share
of overheard) exceeds 49% of
annual expenditures or annual
staff time; safety of lower levels
to be reso Ived.
Communication to any part of
the electorate that (a) refers to
and (b) reflects a views on a
clearly-identified candidate
Three exceptions if no express
advocacy:
1. Comment on public official
re: actions to be performed
2. Use impartial methodology
3. Defend organization or its
issues
Is intervention
Unclear, depends on facts
and circumstances
Permitted
Unclear, depends on facts and
circumstances
Presumed to be intervention,
but may be rebutted if furthers
exempt purposes, unrelated to
any candidate campaiQn
Permitted
Litmus tests, voter pledges: no
candidate identified
IRS may allow, but uncertain
Issue advocacy v. intervention
Rev Ruls 2004-6 and 2007-41,
multiple factors, hard to apply in
close cases, uncertain result
Intervention, under Rev Rul 76­
456
Asking candidates for their
pledge or endorsement on an
issue
PROPOSED RULE
Grass roots lobbying of
officeholder who is a candidate,
reflecting a view on him or her
Uncertain, apply multiple
factors of Rev Rul 2007-41 ,
depends on facts and
circumstances
Voter engagement activities:
registration, GOTV, etc.
Depends on facts and
circumstances
Voter guides, public opinion
surveys, legislative scorecards,
candidate questionnaires and
debates
IRS uses variety of old rulings
(Rev Ruls 78-248, 80-282),
application to modern
communications unclear,
depends on facts and
circumstances
{00350396.DOCX; 1}2
Bright line speech definition
and three exceptions, limit
uncertainty
Modify Rev Rul 76-456, so
organization can ask
candidates, and publicize result
if can be done wlo bias
Use first exception: direct,
limited, reasonable relation to
actions the official may yet
perform in current term of
office, no reference to election
Must be entirely neutral when
mentioning candidates,
otherwise OK (but see below)
Second exception: present info
gathered using open, fair
methodology; even-handed;
each candidate can present self
in the best light; at least two
candidates participate
CURRENT RULE
PROPOSED RULE
Self-defense: candidate attacks
organization or comments on
its vital issues
Unclear, facts and
circumstances
Third exception: organization
may respond in manner
commensurate with candidate's
publicity
Evidence of organization's
intent
IRS authority says nonpartisan
intent is irrelevant; IRS officials
orally say partisan intent is also
irrelevant, but no firm written
gUidance issued
Subjective intent of
organization is irrelevant; only
objective manifestations of
actions taken to intervene in a
campaign are relevant
Deployment of organization's
resources to a campaign for or
against a candidate
No general rule, depends on
facts and circumstances; some
spotty rulings on paid use of
facilities and mailing lists
Follow Federal Election
Campaign Act (FECA) basic
definitions of "contribution" as a
nationwide standard
Monetary donations to
candidate or party campaigns
Is intervention
Is contribution, therefore is
intervention, even if small
In-kind contributions, including
expenditures "coordinated" with
campaign
No clear authority, depends on
facts and circumstances
Is contribution, therefore is
intervention, no matter how
small
De minimis use of staff time in a
campaign
Is intervention
Is intervention
Selective GOTV or voter
registration in areas suggested
by a candidate's campaign
Likely to be intervention under
Rev Rul 2007-41, Situation 2
Is intervention due to
coordination
Use of organization's name,
logo, etc. in name of affiliated
501 (c)(4) or PAC
Internal IRS training materials
suggest this is OK, but no firm
guidance
Not a contribution under FECA,
thus not intervention
Renting out facilities or mailing
lists, selling to a campaign at
fair market value
Rev Rul 2007-41 seems to
require offering resource to
competing candidates
If not a contribution under
FECA, not intervention
IRC 527(f) tax on lesser of
investment income or political
expenditures of 501(c) entities
Regs re: tax on expenditures
indirect or allowed by FECA or
similar state law "reserved"
(unfinished) for 30 years,
causing great uncertainty
Timing, targeting, other facts
and circumstances still may
make activity intervention
Approach is vague,
ambiguous, unpredictable
Finalize the reserved 527
regUlations, consistent with the
proposed bright-line definitions
of political intervention
If conduct is safe under rules
on speech and resource
deployment
"Facts and circumstances"
{00350396.DOGX; 1}3
Timing, targeting, other facts
and circumstances irrelevant
Use to defend organization,
mitigate penalty, if needed