Ways and Means Committee continues inquiries into political activities of tax-exempt organizations

In detail

Request for information and input

The Ways and Means Open Letter states that public reporting has raised concerns among Ways and Means Committee members about political activities that Section 501(c)(3) organizations may be engaging in, the relationships between Section 501(c)(3) organizations and Section 501(c)(4) organizations, and the role of ‘Super’ political action committees (PACs). Given these concerns, the Ways and Means Committee issued a Request for Information (RFI) to solicit information from stakeholders and the public to help the Committee better understand and evaluate the activities of Sections 501(c)(3) and (4) organizations. 

The open letter requests that responses to the following questions be submitted to waysandmeansRFI@mail.house.gov by September 4.

1. Would it be helpful to Sections 501(c)(3) and (4) organizations for the IRS to issue updated guidance on how to define “political campaign intervention” and the extent to which Section 501(c)(4) organizations can engage in “political campaign intervention?” If yes, why?
2. Does the IRS’s current guidance on the definition of “political campaign intervention” properly account for new forms of political advocacy? If not, what should be included in updated IRS guidance to account for forms of political advocacy that currently are not covered?
3. Are there any tax-exempt organizations whose voter education or registration activities you suspect might have had the effect of favoring a candidate or group of candidates in a way that would constitute prohibited participation or intervention? If yes, please describe those activities.
4. Are there changes to Form 990, Return of Organization Exempt From Income Tax, that would help clarify how contributions are being used by Section 501(c) organizations — especially regarding contributions that are used to fund political activities by Section 501(c)(4) organizations or nonpartisan voter education activities in which Section 501(c)(3) organizations are allowed to engage, such as voter registration activities, public forums, and publishing voter education guides?
5. Should Congress consider policy changes to address money from foreign nationals prohibited from contributing directly to political campaigns, candidates, and super PACs flowing through Sections 501(c)(3) and (4) organizations to influence US elections? If so, what specific policy changes should be considered?
6. Does the IRS collect information from Sections 501(c)(3) and (4) organizations that would aid the Federal Election Commission (FEC) in enforcing the foreign national prohibition under the Federal Election Campaign Act of 1971 (FECA)?
7. According to a US Government Accountability Office (GAO) report, IRS examiners “do not review the national origin of sources of donations reported” by tax-exempt organizations on the Form 990, “and do not assess an organization’s compliance with FECA provisions during audits.” Given concerns over foreign influence in US elections, should IRS examiners review the national origin of sources of donations reported by a tax-exempt organization on the agency’s IRS Form 990-series?
8. Are there additional disclosures by Sections 501(c)(3) and (4) organizations engaged in “political campaign intervention” that would help prevent illegal contributions made by foreign nationals to influence US elections?
9. Are you aware of Section 501(c) organizations that are tax-exempt but have the true purpose of influencing elections in favor of one political party? If so, please provide a description of how such organizations achieve that goal.
10. Are you aware of Section 501(c) organizations that are tax-exempt but have misused donor funds for the personal benefit of organization executives or have misused donor funds outside the stated purpose of the donor? If so, please provide a description of those organizations and the relevant conduct.

In addition to the RFI, the Ways and Means Open Letter provides background on the laws and regulations governing Sections 501(c)(3) and (4) organizations.

May 2022 hearing on political activities of tax-exempt organizations

Congress previously has raised concerns about whether Section 501 tax-exempt entities are fully complying with statutory and regulatory prohibitions against certain political activities. 

The Senate Finance Subcommittee on Taxation and IRS Oversight in May 2022, held a hearing on the political activities of tax-exempt organizations. In advance of the hearing, the staff of the Joint Committee on Taxation issued a report summarizing existing laws and providing data on the tax treatment of political activity and lobbying by tax-exempt organizations. 

The May 2022 hearing focused on whether the involvement of Section 501(c)(4) social welfare organizations in political campaign activity has increased significantly in recent decades. Some Subcommittee members and witnesses expressed concern that certain social welfare organizations are funneling “dark money” into politics, providing anonymity to wealthy and foreign individuals seeking to influence elections. 

Committee members and witnesses concerned about the political activities of social welfare organizations stated that the IRS should be appropriated more money for enforcement of the restrictions on social welfare organizations and that any appropriations riders prohibiting new regulations of social welfare organizations be removed in future legislation.