OK

In what is a Pretty Big Deal, the IRS and Treasury Department jointly announced that they would be proposing new rules on what "political activity" means for 501(c)(4) organizations (aka social welfare groups).  

One of the historical problems for the regulation of political groups by the IRS is how fuzzy and fact specific "political activity" is.  Since the general rule of thumb is that a 501(c)(4) group can't spend more than 50% of its expenditures on political activity1, it becomes pretty important to define what sort of conduct constitutes political activity.

And, of course we've never really had any good tests for what it is, exactly; it is, as they say, a "facts and circumstances" test.  With no bright lines or sharp distinctions, organizations became more and more emboldened to push the envelope.

So these proposed regs are a potentially big deal.2

Per the press release, the following will be considered "candidate related political activity," and will be deemed political activity:

* 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.
* 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 (note that 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).
* 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.
501(c)(4) orgs will still be able to do these things, but now it will very easy to identify political activity, tally the expenditures up, and see if they cross the 50% threshhold.  No more haggling over whether a given attack ad that doesn't expressly say "vote for X!" is "political activity" or not based on all the facts & circumstances.  The upshot is that we should see a bunch of these 501(c)(4)s reorganizing as SuperPACs.  Maybe that's not a whole lot better?  But at least they'll have to disclose their donors.

1 That rule of thumb, as far as I know, has never been formally endorsed by the IRS or the courts, and there's nothing in the press release to suggest that this ambiguity will be clarified in these regs.

2 As of right now, I don't see the proposed regs yet.  They should be up soon, though.  Regs are here in PDF

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