IRS issues initial guidance to curb political activity by 501(c)(4) organizations


On November 26, 2013, the Internal Revenue Service (IRS) issued a Notice of Proposed Rulemaking regarding permissible political activities by 501(c)(4) organizations. The proposed rule defines the term "candidate-related political activity" and would make clear that political activities are not included in the promotion of social welfare.

501(c)(4) organizations, or social welfare organizations, are currently evaluated by the IRS based on a "facts and circumstances" test to determine whether they engaged in political campaign activities that do not promote social welfare. The proposed rule is designed to create more certainty about what constitutes “candidate-related political activity.”

The new term and definition of "candidate-related political activity" is modeled after definitions of "political activity" under federal and state campaign finance laws, other IRS provisions, and suggestions made to the IRS by the public. Under the proposed guidelines, candidate-related political activities include:


  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
  • Communications expenditures that must be reported to the Federal Election Commission.

Grants and Contributions:

  • Any contribution that is recognized under campaign finance law as a reportable contribution.
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities.

Activities Closely Related to Elections or Candidates:

  • Voter registration drives and "get-out-the-vote" drives.
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.

The proposed rule contains a provision that could prove useful to many 501(c) organizations and suggests a way that such entities can protect themselves when making contributions to other (c)(4) organizations. Under the proposed rule, an organization would not be treated as having engaged in candidate-related political activity if “the contributor organization obtains a written representation from an authorized officer of the recipient organization stating that the recipient organization does not engage in any such activity and that the contribution is subject to a written restriction that it not be used for candidate-related political activity.” Thus, a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity.

A press release from the Treasury and the IRS notes that additional guidance to address other issues relating to the standards for tax exemption under section 501(c)(4) will be issued soon. In particular, the IRS acknowledges the public scrutiny on the proportion of a section 501(c)(4) organization's activities that must promote social welfare and seeks initial public comments on the issue.

The proposed guidance also seeks public comments regarding whether standards should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations.

The IRS is seeking public comment on the proposed rule, including what portion of a 501(c)(4)’s activity must support social welfare. Once all public comment is received and considered, the IRS will issue additional proposed guidance or final rules.

A full copy of the proposed rule, as well as instructions for filing comments, can be found here.

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