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PRESS
January 22, 2014

CREW Releases White Paper Rebutting Arguments Against Reforming Tax-Exempt Political Groups

IRS form money

Washington, D.C. — Today, Citizens for Responsibility and Ethics in Washington (CREW) released a white paper, The Dark Money Debate: Responses to Arguments Against Reforming IRS Treatment of 501(c) Groups, responding to arguments against proposed reforms that would rein in abuses of tax-exempt organizations for political purposes. Four years after the Supreme Court’s disastrous Citizens United decision opened the floodgates allowing dark money groups to influence elections, there is a concerted effort to keep this system in place and even extend First Amendment constitutional protections to prevent regulation of groups organized under section 501(c)(3) and (c)(4) of the tax code. CREW’s paper directly addresses these fallacious assertions.

Read the white paper.

Read a two-page summary of the white paper’s major points.

CREW’s white paper provides an authoritative legal response to recent attempts to defend the flawed IRS regulations for groups organized under section 501(c)(4) of the tax code. Although the tax code says that such groups must be “operated exclusively” for social welfare purposes, IRS regulations require only that they be “primarily engaged” in social welfare, allowing these groups to spend money on elections without disclosing their donors. The paper rebuts arguments by opponents of dark money disclosure claiming legal precedents support the IRS’s interpretation, and responds to claims that restrictions on political activity by charitable groups organized under section 501(c)(3) and (c)(4) violate the First Amendment.

“Claiming the First Amendment allows tax-exempt groups to freely funnel secret money into our elections deliberately mischaracterizes legal precedents,” CREW Executive Director Melanie Sloan said. “The law is clear: Political spending by charitable and social welfare organizations is prohibited by the tax code.”

The paper also addresses the likely next move by those who want to spend anonymously on politics — increasing reliance on section 501(c)(6) of the tax code. Recognized by the IRS as “business leagues,” these groups are meant to serve the common business interests of their members. As the scrutiny of 501(c)(4) groups has intensified, wealthy groups and individuals have begun turning to 501(c)(6) groups as an alternative means to funnel more anonymous money into political activities. The IRS regulations governing 501(c)(6)s are even vaguer than those for 501(c)(4)s, presenting an attractive option for dark money donors.

This paper is another step in CREW’s continuing efforts to combat the damaging impact of Citizens United on our democracy. CREW is in litigation with the IRS over its failure to amend its 501(c)(4) regulations to comport with the statute, filed a rulemaking petition asking the IRS to clarify its regulations for 501(c)(6) groups, and filed an IRS complaint against Freedom Partners, a prominent business league linked to the Koch Brothers.

“Despite the torrent of bad publicity the IRS received regarding its handling of 501(c)(4) organizations, the agency has done little to address the underlying problems,” Sloan continued. “While the IRS sits idly by, with each election cycle we see an increase in secret money financing more vituperative and deceptive ads, but less and less accountability.”

Citizens for Responsibility and Ethics in Washington (CREW) is a non-profit legal watchdog group dedicated to holding public officials accountable for their actions. For more information, please visit www.citizensforethics.org or contact Jordan Libowitz at 202.408.5565 or jlibowitz@citizensforethics.org.

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