Widespread Opposition to Proposed Nonprofit Regulations

Print Share on LinkedIn More

December 12, 2013; Washington Post

The Bright Lines Project has been at the forefront of proposing clear definitions and limitations on political activity by nonprofit groups. However, BLP is disappointed in the Obama administration’s proposed regulations. In fact, it’s hard to find anyone who likes the guidance issued on November 27th.

NPQ has written about the proposed regulations regarding political activity and 501(c)(4) “social welfare” organizations. Since the proposed regulations were announced, opposition has come from sources including the Wall Street Journal, Independent Sector, and Public Citizen’s Bright Lines Project. The synopsis of the criticism is that the proposed regulations miss the intended target, hit targets not intended, and (in the case of the WSJ) come from Treasury at a time when the IRS scandal harms the Administration’s credibility on campaign finance reform.

In a Washington Post op-ed, Diana Aviv of Independent Sector and Gary Bass of the Baumann Foundation note that the regulations are aimed exclusively at 501(c)(4) social welfare organizations. This targeting leaves other types of nonprofits, especially 501(c)(6) business leagues, free to engage in political activity without having to disclose the names of their donors. One example that NPQ reported on was Freedom Partners, established by the Koch brothers in time for the 2012 elections. Freedom Partners gave $250 million to various groups to promote election-related activities and engage in “public education” on issues including Obamacare, gun rights, and business interests.

Aviv and Bass go on to make a point also supported by Bradley Smith, former chairman of the Federal Election Commission, in the Wall Street Journal; namely, that the proposed regulations would make impermissible certain nonpartisan activities that nonprofits engage in routinely, such as voter registration. There are other difficulties, such as the possibility that a nonprofit’s appropriate education web content might become inappropriate solely because it wasn’t removed from the web site within a certain number of days before an election. Smith also notes that changing a 501(c)(4) to a political committee has no effect on taxes paid, so taxpayers would see no change in tax revenues.

Aviv and Bass recommend that the Obama administration look more closely at the Bright Lines Project’s proposals for defining political activity that would apply to all nonprofits. Smith believes that the IRS should avoid the entire effort, leaving the 50-year old current regulatory definitions in place. Smith believes the reform process is really about disclosing donors’ names. He says that, traditionally, donors’ names were held to be confidential so as to protect the donors from reprisals, and cites the NAACP as an example. NPQ reported on the same justification being used by the Socialist Workers Party. Smith notes the 1976 U.S. Supreme Court decision Buckley v. Valeo carves out an exception in cases involving “the express advocacy for the election or defeat of a candidate,” but that “the ruling specifically did not include the discussion of candidates and issues as a political-campaign activity.”

Whether the BLP’s definitions are sufficiently “bright line” to satisfy regulators, it will be difficult to generate support for significant reforms. Nonprofit groups representing powerful interests across the political spectrum are watching closely to be sure they can continue to serve their mission under any proposed regulatory changes.—Michael Wyland