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July 24, 2012

IRS Mulls Action on Nonprofit Groups' Campaign Spending

An Internal Revenue Service official has told campaign-finance watchdog groups it might tighten regulations governing political activity by 501(c)(4)-designated "social welfare" organizations, according to Bloomberg and the Los Angeles Times.

In a July 17 letter to Democracy 21 and the Campaign Legal Center, Lois Lerner, head of the IRS office for tax-exempt organizations, said the agency "is aware of the current public interest" in nonprofit advocacy groups' growing campaign spending and "will consider proposed changes in this area."

The watchdog groups have pressed the IRS to take action as groups such as Republican strategist Karl Rove's Crossroads GPS and the pro-Obama Priorities USA that have spent or plan to spend tens of millions of dollars on advertisements in the current campaign.

Under IRS rules, 501(c)(4) organizations are not required to disclose their donors as long as politics is not their primary purpose, which has generally been interpreted to mean politics cannot account for more than 49 percent of their expenditures. The watchdog groups, and some Democratic leaders, have called for a lower and more clearly defined threshold.

Paul Seamus Ryan, senior counsel for the Campaign Legal Center, said any IRS moves on the issue are "not likely to have an impact on this November's election," but he added that his group is "in this for the long haul."

Read a Chronicle of Philanthropy opinion column on the controversy over 501(c)(4) groups' political work.