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Levi and the 501s
Asking tax collectors to regulate election spending is a terrible idea
IF GOVERNMENTS ask for feedback on new policies it is usually a prelude to doing what they had in mind anyway. Not so with the Internal Revenue Service (IRS)’s consultation on tax rules for social-welfare organisations, which are more interesting than they sound. By the time it closed on February 27th, the exercise had attracted more than 68,000 comments. Some suggested that the IRS was the tool of a dictatorship bent on destroying America’s democracy. Others were less polite.
At issue was the taxman’s attempt to define what social-welfare organisations (known as “501(c)(4)s†after the line in the tax code that covers them) may do without losing their tax-exempt status. Thousands of organisations that play a big part in public life, from the National Rifle Association to the local green pressure group, fall into this category.
IRS rules already limit the extent to which 501(c)(4)s can get involved in political campaigns. The new rules are tighter: “political†activity would include any public statement that mentions a candidate near an election, and even private communications if they advocate voting for or against a candidate. The American Civil Liberties Union, another 501(c)(4), thinks this would have the effect of “chilling a vast amount of core political speech about crucial issues of the dayâ€.
Social-welfare groups first appeared in the tax code in 1913, but their role in campaigns has only attracted attention since the Supreme Court’s Citizens United decision in 2010, which removed some restrictions on political spending by companies and unions. The special appeal of 501(c)(4)s is that they do not have to disclose who their donors are. In 2008 $70m was spent on fighting elections by groups that did not disclose their donors. In the 2012 election cycle that quadrupled to $311m. This trajectory has continued: the amount spent by groups with anonymous donors in the current election cycle is three times greater than at the same point in 2012, says the Centre for Responsive Politics, which tracks campaign spending.
In theory these organisations are restricted to spending less than half of their money on campaigning. In practice there are various ways round this rule. Some spend up to their allocation on attack ads and then pass the rest on to another similar group, which does the same, and so on until there is nothing left unspent.
Asking tax collectors to regulate election spending is a terrible idea
IF GOVERNMENTS ask for feedback on new policies it is usually a prelude to doing what they had in mind anyway. Not so with the Internal Revenue Service (IRS)’s consultation on tax rules for social-welfare organisations, which are more interesting than they sound. By the time it closed on February 27th, the exercise had attracted more than 68,000 comments. Some suggested that the IRS was the tool of a dictatorship bent on destroying America’s democracy. Others were less polite.
At issue was the taxman’s attempt to define what social-welfare organisations (known as “501(c)(4)s†after the line in the tax code that covers them) may do without losing their tax-exempt status. Thousands of organisations that play a big part in public life, from the National Rifle Association to the local green pressure group, fall into this category.
IRS rules already limit the extent to which 501(c)(4)s can get involved in political campaigns. The new rules are tighter: “political†activity would include any public statement that mentions a candidate near an election, and even private communications if they advocate voting for or against a candidate. The American Civil Liberties Union, another 501(c)(4), thinks this would have the effect of “chilling a vast amount of core political speech about crucial issues of the dayâ€.
Social-welfare groups first appeared in the tax code in 1913, but their role in campaigns has only attracted attention since the Supreme Court’s Citizens United decision in 2010, which removed some restrictions on political spending by companies and unions. The special appeal of 501(c)(4)s is that they do not have to disclose who their donors are. In 2008 $70m was spent on fighting elections by groups that did not disclose their donors. In the 2012 election cycle that quadrupled to $311m. This trajectory has continued: the amount spent by groups with anonymous donors in the current election cycle is three times greater than at the same point in 2012, says the Centre for Responsive Politics, which tracks campaign spending.
In theory these organisations are restricted to spending less than half of their money on campaigning. In practice there are various ways round this rule. Some spend up to their allocation on attack ads and then pass the rest on to another similar group, which does the same, and so on until there is nothing left unspent.
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