Proposed regulations - Tax-exempt social welfare organizations not allowed “candidate-related political activity” 

November 26: The Treasury Department and  IRS today released for publication in the Federal Register proposed regulations concerning the qualifications for tax-exemption as a social welfare organization pursuant to section 501(c)(4).

According to a related Treasury Department release, the proposed regulations [PDF 226 KB] will:


  • Define the term “candidate-related political activity” and refer to existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, and suggestions made in unsolicited public comments
  • Amend existing regulation to indicate that the promotion of social welfare does not include “candidate-related political activity”
  • Request comments concerning this and other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare
  • Reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules

Terms defined

According to the Treasury release, the proposed regulations would specify that candidate-related political activity include:


Communications—


  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party
  • Communications expenditures that must be reported to the Federal Election Commission

Grants and contributions—


  • Any contribution that is recognized under campaign finance law as a reportable contribution
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (the proposed regulations clarify that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity)

Activities closely related to elections or candidates—


  • Voter registration drives and “get-out-the-vote” drives
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties)
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program

According to today’s release, Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). Comments will be requested.


The proposed regulations also would seek comments regarding whether standards similar to those proposed today are to be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.


Comments and requests concerning today's proposed regulations are due 90 days from the date of publication in the Federal Register, which is scheduled for November 29, 2013.



For more information, contact:


Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084





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