IRS mulls restricting speech by non-profit groups in general, in proposed restrictions on 501(c)(4)’s

IRS mulls restricting speech by non-profit groups in general, in proposed restrictions on 501(c)(4)’s

left wing irsOn November 29, the IRS proposed rules “limiting political speech” by nonprofit 501(c)(4) groups.  In Orwellian fashion, the proposed rules seek to redefine non-partisan, non-election-related criticism of government abuses as “candidate-related political activity.”  As the Venable law firm notes, they label “a wide variety of activities as candidate-related and therefore not qualifying 501(c)(4) ‘social welfare’ activity.”

I recently discussed an example in the December 16 edition of the Wall Street Journal:

Those rules restrict even truthful, nonpartisan criticism of IRS and bureaucratic wrongdoing by classifying it as “candidate-related political activity.” For example, if an IRS official subjects citizens to incredibly burdensome demands for irrelevant information just to harass them for their political or religious beliefs, no 501(c)(4) group could later criticize that official’s nomination to be IRS commissioner, without engaging in restricted activity. That’s because the IRS’s proposed regulation defines even unelected government officials, like agency heads and judges, as “candidates” if they have been nominated for a position requiring Senate confirmation. The IRS’s proposed rules are an attack on the First Amendment that will make it easier for the government to get away with harassing political dissenters and whistleblowers in the future.

Although these proposed rules in their initial form apply only to 501(c)(4) groups, and only restrict the amount of such “political” activity they can engage in, rather than entirely banning it, the IRS says it may change the limit to a total ban in the final version of its rule, and may eventually apply the ban to non-partisan 501(c)(3) groups, like think-tanks and other tax-exempt charities, in the future.  Thus, think-tanks, which have have historically been allowed to criticize executive and judicial nominees for their misconduct or bad policies, could be banned from doing so, simply by the IRS radically redefining the candidate-related partisan political activity they are already forbidden to engage in (electioneering) to include non-partisan criticism that has nothing to do with election campaigns or electioneering (Think-tanks are currently forbidden to engage in any electioneering, but are perfectly free to criticize bureaucrats and judges, for the time being.).

The IRS could easily convert the proposed limit on 501(c)(4)’s engaging in such non-partisan criticism into a total ban (and thus use it as a tool to silence the Tea Party groups it previously targeted, along with groups the IRS described as “educating on the Constitution and the Bill of Rights”), just by adding a seemingly-innocuous provision clarifying that 501(c)(4)’s — organized under a tax law for groups that promote “social welfare” — must “exclusively” promote the social welfare, rather than merely do so as their primary function.  Currently, the proposed rule combines an incredibly broad definition of “candidate-related political activity” to encompass non-partisan criticism of executive and judicial nominees, with a classification of all such activity as categorically not being in furtherance of “social welfare.”  But right now, it merely limits such activity, rather than banning it, because the current IRS rules merely require a 501(c)(4) social welfare group to be “primarily,” rather than exclusively, devoted to promoting “social welfare.” Advocates of expanded regulation of non-profits point out that the statute does not say “primarily,” but rather “exclusively”: “Section 501(c)(4) of the [Internal Revenue] Code provides a Federal income tax exemption, in part, for ‘[c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.’’’  In response, the IRS’s proposed rules “invite comments from the public on what proportion of an organization’s activities must promote social welfare,” and whether the “‘primarily’ standard in the section 501(c)(4) regulations . . . should be changed.”

The statute itself never suggests — as the IRS now argues without explanation — that non-partisan criticism of government abuses and wrongdoing fails to promote “social welfare.” In reality, such criticism does indeed promote the betterment of society, since society itself has a vital interest in such criticism, in light of the ”profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open,” including ”vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials” for alleged wrongdoing, as the Supreme Court observed in New York Times v. Sullivan (1964).  Moreover, it typically does not raise the risks involved in direct intervention in political campaigns, such as the risk that non-profits, if allowed to engage in electioneering, will seek to curry favor with lawmakers by disseminating propaganda in their favor, or will be pressured or extorted into doing so to keep their federal funds or tax-exempt status.  As Justice Stevens once noted, “An artist is likely to paint a flattering portrait of his patron.  The child who wants a new toy does not preface his request with a comment on how fat his mother is.”

The IRS could also use the proposed rule as the first step in gagging 501(c)(3) groups, like think-tanks that expose the failure of government policies and the costs and burdens of government red tape advocated by nominees to head government agencies.  As the Venable law firm notes, the IRS is also weighing applying this breathtakingly broad definition of candidate-related political activity to 501(c)(3)’s, which would ban them from such speech entirely, since they are not permitted to spend even a tiny percentage of their activity on candidate-related political activity such as electioneering: “the Treasury Department has identified a number of specific areas where it is requesting comments—including whether any rules on this topic should also apply to 501(c)(5) and 501(c)(6) organizations [like chambers of commerce, and], whether to adopt a similar approach to define impermissible campaign intervention under section 501(c)(3).”  As the IRS puts it, “The Treasury Department and the IRS request comments on the advisability of adopting an approach to defining political campaign intervention under section 501(c)(3) similar to the approach set forth in these regulations.”  See Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities (proposed rule), 78 Fed. Reg. 71535, 71537 (Nov. 29, 2013).

As discussed earlier, the IRS also hinted that it may expand its proposed rule to categorically forbid 501(c)(4) groups from engaging in such criticism by not only defining it as at odds with social-welfare promotion, but also requiring such groups to “exclusively” promote the IRS’s definition of “social welfare” rather than such criticism.  As the IRS notes,

The Treasury Department and the IRS have received requests for guidance on the meaning of ‘‘primarily’’ as used in the current regulations under section 501(c)(4). The current regulations provide, in part, that an organization is operated exclusively for the promotion of social welfare within the meaning of section 501(c)(4) if it is ‘‘primarily engaged’’ in promoting in some way the common good and general welfare of the people of the community. Treas. Reg. § 1.501(c)(4)–1(a)(2)(i). . . Some have questioned the use of the ‘‘primarily’’ standard in the section 501(c)(4) regulations and suggested that this standard should be changed. The Treasury Department and the IRS are considering whether the current section 501(c)(4) regulations should be modified in this regard and, if the ‘‘primarily’’ standard is retained, whether the standard should be defined with more precision or revised to mirror the standard under the section 501(c)(3) regulations. Given the potential impact on organizations currently recognized as described in section 501(c)(4) of any change in the ‘‘primarily’’ standard, the Treasury Department and the IRS wish to receive comments from a broad range of organizations before deciding how to proceed. Accordingly, the Treasury Department and the IRS invite comments from the public on what proportion of an organization’s activities must promote social welfare for an organization to qualify under section 501(c)(4) and whether additional limits should be imposed on any or all activities that do not further social welfare.

See Proposed Rule, 78 Fed. Reg. at 71538 (Nov. 29, 2013). 

Hans Bader

Hans Bader

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department. Hans writes for and has appeared on C-SPAN’s “Washington Journal.” Contact him at


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