There is growing interest in IRS procedures for determining certain groups’ rights to tax exempt status. As is so common in this period, some have sought to make a case for political implications; many agree that the matter should be addressed objectively. The House Ways and Means Committee has begun hearings to consider whether some conservative groups have been singled out, targeted, or significantly delayed, in the application for tax exempt status.
The issues the committee will examine pertain to tax exempt status 501(c)(4). The Supreme Court’s Citizens United decision has contributed to an unprecedented influx of money into the election process, raising questions about donor disclosure and political activities by 501(c)(4) tax-exempt organizations. According to Independent Sector, the leadership network for nonprofits, foundations, and corporate giving programs:
On Monday, June 25, 2012, the Supreme Court voted 5-4 to reverse a Montana Supreme Court ruling based on a century-old Montana law that prohibits corporations from spending money on political campaigns. The reversal of American Tradition Partnership v Bullock, which was a rebuttal to the 2010 Citizens United v. Federal Election Commission decision, reaffirmed the 2010 ruling allowing corporations to make unlimited political expenditures. The court did not revisit the 2010 case, did not hear oral arguments, and the ruling clarifies that the 2010 rules apply at the state level
A government publication dating back to 1989 states:
A nonprofit may qualify as a public charity if it meets certain public support tests. To qualify for 501(c)(3) status, your nonprofit must be organized and operated exclusively for “exempt purposes.” Such purposes may include scientific, educational, and charitable endeavors. The nonprofit’s net earnings may not be distributed to its directors, members, or any individual. And it must comply with certain restrictions placed upon lobbying and other “political” activities. There are two types of 501(c)(3) organizations: public charities and private foundations. A nonprofit may qualify as a public charity if it meets the public support tests if it normally receives at least one-third of its total support from government and/or from public contributions; or if it normally receives at least 10 percent of its total support from government and/or from public contributions, and meets a “facts and circumstances” test based on five “public support factors.” The higher the percentage of the organizations’ public support, over and above the 10 percent level, the less burden of proving that it is publicly supported, as demonstrated by its having, for example, are representative governing body, or by providing facilities and services directly for the benefit of the general public on a continuing basis.
[edited for clarity and brevity]
One single example of a group delayed in seeking tax exempt status is a constitutionalist group in Montgomery, Alabama, which aspires to be a smaller version of the National Rifle Association. They, like the NRA, desire to be powerful and influential (their words) without having to pay taxes. Chairman Pete Riehm stated, “We wanted to have a voice too. The biggest difference between us and them is money.”
This is a complex matter for the Ways and Means Committee to ponder. We hope they will avoid politicizing the issue. The material here presented is relative, but not enough to clarify much of the substantial material. I concede that some of the above may appear outdated, but it relates in that it illustrates the general purpose of the exemption. I leave it to the reader to move ahead in the formation of significant viewpoints.