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Feb 19, 2014

CREW Files Comments Criticizing IRS’s Proposed Section 501(c)(4) Regulations

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Washington, D.C. — Today, Citizens for Responsibility and Ethics in Washington (CREW) filed comments with the Treasury Department and the Internal Revenue Service (IRS) strongly criticizing proposed regulations for tax exempt organizations involved in politics. Current IRS regulations grant tax-exempt status under section 501(c)(4) of the tax code to groups “primarily engaged” in promoting social welfare. The tax laws, however, require such groups to be “operated exclusively” for social welfare purposes.  The administration’s proposal fails to address this issue, instead merely soliciting comments on whether — at some unspecified future date — the IRS should propose a fix to this.

Read CREW's comments on the proposed IRS regulations

"Despite the torrent of bad publicity the IRS received about its handling of section 501(c)(4) groups, the agency’s proposal does nothing to address the root problem. The IRS has recognized difficulty for more than 50 years, but continually kicks the issue down the road," CREW Executive Director Melanie Sloan said.

The existing IRS regulation not only contravenes the law, but has paved the way for section 501(c)(4) groups to spend hundreds of millions of dollars trying to influence elections without disclosing their donors. Making the regulation consistent with the statute would limit this spending, enhance disclosure, and drastically reduce the need for fact-intensive analysis – the IRS’s stated goal in proposing the rules.

The proposed regulations take a different tack, attempting to provide a clearer definition of political activity. In the view of CREW – and many others across the political spectrum – the regulations miss the mark.

“While the agency’s intentions may be good, the proposals are not. They both exclude activities that are clearly political and include activities that clearly are not. It is hard to understand how the IRS could think it makes sense to treat non-partisan voter registration activities as political, but exclude political sham issue ads run more than 60 days before an election,” Sloan said.

In addition to filing these comments, CREW is encouraging members of the public to submit their own comments telling the Treasury Department and IRS to close the regulatory loophole that allows vast amounts of dark money to pour into our political system. 

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