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Saturday, December 3, 2016

by Kim Barker, ProPublica.

The IRS and Treasury Department announced proposed guidelines clarifying the definition of political activities for social welfare nonprofits Tuesday afternoon, a move that could restrict the spending of the dark money groups that dumped more than $254 million of anonymous money into the 2012 elections. Read the guidelines here.

However, the guidelines, which finally define what constitutes “candidate-related political activity,” aren’t a done deal. They will take some time for public comment and debate, and more time to finalize. (The IRS asks that all comments and requests for a public hearing be submitted by Feb. 27.) Experts also cautioned that the real test of oversight on the political spending by nonprofits will be how these regulations are enforced, something that the IRS has been so far reticent to do.

The proposed regulations “are only as good as the extent of compliance with them, which history would indicate requires a realistic threat of enforcement and significant sanctions on the groups involved and probably the individuals running those groups,” said Lloyd Hitoshi Mayer, a law professor and associate dean at the University of Notre Dame who specializes in nonprofits and campaign finance.

Social welfare nonprofits are allowed to spend money on election ads without reporting their donors, as long as they can prove that social welfare — and not politics —  is their primary purpose. But the IRS guidelines for political spending have been vague. They state that the agency will apply a “facts and circumstances” test to each ad, meaning that if an ad walks and talks like a political ad, it’s a political ad.

ProPublica and others have written extensively about how many social welfare nonprofits have exploited loopholes in Federal Election Commission and IRS rules since the Supreme Court’s 2010 Citizens United ruling opened the door to unlimited election spending by corporations and nonprofits.

Some of the groups spend more than political action committees. GOP strategist Karl Rove’s group Crossroads GPS, for example, told the IRS it spent more than $74.5 million on election activities in 2012, more than any other dark money group and all but two SuperPACs, which are allowed to raise and spend unlimited amounts of money from reported donors.

The proposed regulations could dramatically change how the nonprofits spend money. The proposal defines political activity as including any expenditures reported to the FEC and any grants to other tax-exempt organizations that do candidate-related political activity. (We wrote yesterday about one such grant from Rove’s group.) Political activity would also include voter-registration drives and “get out the vote” drives  — even for nonpartisan groups. It would also include holding events featuring candidates within two months of a general election.

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