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Friday, July 27, 2012

FEC, IRS in Total War on 501(c)(4) Groups

UPDATE: Click here http://www.ericdixonlaw.com/2012/07/obamas-total-war-on-501c4-political.html

Original post --


The cloak of secrecy over "social welfare" tax-exempt organizations which have been lawfully engaging in political activity, while shielding the identity of their contributors, will end, at least temporarily.  Now, all federal political activity will require donor disclosure.

The Federal Election Commission has just issued a new advisory stating it now requires disclosure of all donors giving $1,000 or more to an organization, such as one exempt under Section 501(c)(4), which engages in electioneering.  Notably, the disclosure will now be required, regardless of whether the donor intended to give to the entity for any electioneering purpose.  

The FEC advisory does not specifically mention 501(c)(4) organizations, which were the primary means for circumventing the FEC's total disclosure policy.  However, it should be clear that 501(c)(4) organizations are the target.

As 501(c)(4) organizations must have a primary purpose of "social welfare," such as an educational or civic affairs purpose which may not be electioneering at all, this may deter some donors from giving to the organizations if the organizations do anything which the donors would not want to be associated with.  

In essence, this policy and enforcement change will mean that organizations and donors can avoid disclosure only by avoiding all political activity relating to federal campaigns.  This narrows -- if not eviscerates -- the difference between a 501(c)(4) organization and a 501(c)(3) organization.

A District of Columbia district court case prompting the regulatory change will be appealed.  The regulation requiring the new disclosure will be in place pending the appeal.

I will continue my analysis on this breaking political development.

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