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March 05, 2014

Flood of Objections Could Scuttle Proposed 501(c)(4) Rules

With proposed Internal Revenue Service restrictions on electioneering by nonprofit groups drawing complaints from both left and right, critics hope a deluge of overwhelmingly negative public comments on the new rules will lead to their being revised or scrapped, according to Politico.

While conservative critics contend the new rule violates advocacy groups' free rights, liberal organizations, including some that have called for a crackdown on politicking by 501(c)(4) entities, say the proposal goes too far by limiting activities such as voter education and voter-registration drives.

"Rarely is a regulation proposed that isn't changed, and that should be true here," said Rep. Sander Levin, a high-ranking Michigan Democrat who has criticized the current, broad IRS rules on nonprofits' election activities. A provision limiting groups from putting out voter guides "should not be included," he said.

Marcus Owens, a tax attorney and former director of the nonprofits division at the IRS, said the new rules inappropriately use tax laws to define election activity. He said the regulations "cannot be salvaged" and "should be withdrawn in their entirety."

IRS Commissioner John Koskinen said the agency will take the more than 140,000 comments it received on the proposal seriously and that a public hearing on the plan is likely, given the high level of interest.

An analysis of the comments by the Sunlight Foundation Reporting Group found that more than half contained common language indicating they were generated by organized campaigns, with conservative and anti-union groups such as the National Right to Work Committee, FreedomWorks, and the American Family Association producing sizable "clusters." The Sunlight Foundation advocates tighter rules on nonprofits' election activity.