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Senators Call for IRS Investigations into Potential Abuse of Tax-Exempt Status by Groups Engaged in Campaign Activity

February 16, 2012
  • Washington, DC - Colorado U.S. Senator Michael Bennet, along with Senators Al Franken (D-MN), Chuck Schumer (D-NY), Sheldon Whitehouse (D-RI), Jeff Merkley (D-OR), Jeanne Shaheen (D-NH) and Tom Udall (D-NM), today called on the Internal Revenue Service (IRS) to investigate whether organizations claiming tax-exempt status are engaging in a substantial amount of campaign activity.

    In a letter to Douglas H. Shulman, commissioner of the IRS, the Senators requested the IRS enforce the law and prevent abuse of the tax code by organizations receiving tax-exempt status under section 501(c)(4) of the Internal Revenue Code (IRC), which is designated for "social welfare" organizations not engaged in election activity.

    "It is contrary to the letter and the spirit of the statute for political organizations formed primarily to advocate for a political candidate or to run attack ads against other candidates to take advantage of section 501(c)(4)," the Senators wrote in the letter. "We urge you to protect legitimate section 501(c)(4) entities by preventing non-conforming organizations that are focused on federal election activities from abusing the tax code."

    The senators expressed concerns that the IRS regulations were more permissive than federal court interpretation of the code and that some 501(c)(4) organizations were engaged in a degree of election activities that precludes them from claiming tax-exempt status.

    In section 501(c)(4), Congress created a tax preference for social welfare organizations because the nation benefits greatly from their social welfare activities. Under the IRC and IRS regulations, section 501(c)(4) organizations are required to primarily engage in the promotion of social welfare to obtain tax exempt status.

    For instance, long-time partisan operative Karl Rove is a senior official behind a 501(c)(4) "social welfare" charity, yet it's common knowledge that his organization exists to elect and defeat specific political candidates. Elections operations such as Mr. Rove's should not be allowed to masquerade as charities to take advantage of their tax exempt status and hide their donors from the public. It's the IRS's job to enforce the tax code and make sure that "social welfare" organizations are what they say they are.

    The IRC regulations state that "the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office."


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