Another Call for IRS to Investigate Social Welfare Orgs

May 8, 2012 Posted by The Law Firm for Non-Profits, P.C. in Advocacy, IRS, Lobbying, News

As you know from our previous post, the IRS has increased its scrutiny of nonprofit organizations engaging in political activity (as it does every 4 years during the presidential election cycle). This is because while 501(c)(4) organizations are allowed to engage in lobbying without limit, they are not allowed to act in favor of or against any candidate for political office.

But some believe that the IRS is not taking its oversight far enough.

Recently, Campaign Legal Center and Democracy 21 joined forces to ask the IRS to investigate 501(c)(4) organizations they believe have engaged in illegal political activity. The groups claim that not only are certain social welfare organizations spending substantially to influence elections but they are also raising millions of dollars in secret donations meant expressly for these purposes. The benefit of 501(c)(4) organizations not having to disclose their donors is an advantage above and beyond being tax exempt.

Common Cause is also pressing the IRS to take action. The organization argues that the American Legislative Exchange Council (ALEC), a 501(c)(3) organization, is “flouting” federal tax laws with its lobbying activities. 501(c)(3) organizations are allowed to engage in lobbying so long as such activities do not become a substantial part of their activities. ALEC counters that the claims are patently false, and ALEC’s lawyer argues that the activities are really just nonpartisan research and analysis, not lobbying.

Only time will tell whether the IRS will proceed with investigations against the named social welfare organizations. Prior calls to action by the watchdog organizations, including 4 prior  letters sent by Campaign Legal Center and Democracy 21, haven’t done the trick.