Letter - People Power United's letter of support for clarification of Political Activities of Tax Exempt Organizations under Section 501 of the Internal Revenue Code
🗽A well informed citizenry is the best defense against tyranny.
September 2, 2023
Re: Request for Information: Understanding and Examining the Political Activities of TaxExempt Organizations under Section 501 of the Internal Revenue Code
Dear Chair Smith, Subcommittee Chair Schweikert, and Members of the Ways and Means Committee,Â
We are grateful for the chance to answer your inquiry about nonprofit political involvement dated August 14th. People Power United is a grassroots group that champions progressive values and people power.
The prohibition of partisan political activity for 501(c)(3)s and the limitation of it for other nonprofits has been beneficial to the nation as long as the regulations are well comprehended. It is essential that 501 (c)(3) organizations remain non-partisan. This arrangement has ensured that charitable donations from Americans are not used for political objectives and has assisted in preserving the independent credibility of our charitable and religious sectors.
The lack of clarity in defining political activity for nonprofits has been a major factor in allowing individuals to take advantage of the tax code to increase their secret election spending and suppress free speech. This "facts and circumstances" test has allowed for more aggressive electioneering from anonymous donors which was not the original intent for the campaign finance system.
It is only in the last few years that some nonprofits have begun appealing to donors who wish to influence elections while keeping their identity hidden. The 2010 Citizens United decision spurred the creation of partisan (c)(4) organizations designed specifically to exploit existing rules that were never designed for this new type of election spending.
In 2014, the IRS and the Treasury Department began to create rules to make the political activity of 501(c)(4)s more clear. However, a rider in the Financial Services and General Government Appropriations title blocked this progress and still prevents the department from finalizing the rules. In order to make progress on the issue, Congress must take away this rider and either let the Treasury Department continue their rulemaking from 2014 or start a new one.
The Tax Inspector General's 2018 report found that a number of complaints concerning the illegal engagement in political activities by non-profit organizations were not forwarded to the appropriate branch of the IRS committee for investigation and potential auditing. To ensure that the recommendations of the report are put into effect and to make sure there is ample oversight of such political activities by non-profit entities, the Tax Exempt and Government Entities division should be provided with more staff and resources.
While we agree with the substance of the request and appreciate your interest in this matter, we notice that text of the Request and particularly the ensuing appendices hint at a narrative that nonprofit civic participation activities geared towards an organizations’ natural constituency should in some cases constitute impermissible political activity. We could not disagree more. Voter education, enrollment, and other civic participation activities are central to the objectives of nonprofit organizations, including 501(c)(3)s, and were taken into account by Congress when they wrote section 501.
Our People Power United membership strongly supports a clarification of political activity so that nonprofit organizations, including 501(c)(3)s, can continue their efforts of voter education and enrollment in a non-partisan manner and free of partisan interference.
Sincerely,
Laurie Woodward Garcia
People Power United