Should Social Welfare Organizations Be Treated More Like Charities?

Currently, the IRS requires 501(c)(4) social welfare organizations to be “primarily engaged” in promoting social welfare. This means social welfare organizations can spend a minority of their total expenditures on political campaign activity without losing their exemption. As these organizations are not required to publicly disclose the sources of their funds, it also means that this is a potential loophole for contributors to support political activity without public knowledge.

Some want 501(c)(4)s to instead be treated like 501(c)(3)s, i.e., to engage in no political activity, or at least to be limited to less political activity. Recently, two new bills were introduced to make this change happen.

The 501(c)(4) Reform Act of 2013, introduced by Rep. Michelle Lujan Grishman (D-N.M.), would be an outright ban against 501(c)(4)s participating in or intervening in political campaigns. Rep. Lujan Grisham explains that this is “common-sense legislation” that would prevent social welfare organizations from acting like political campaign organizations. She wants to ensure that political activity is only carried out by political action committees that are subject to disclosures under federal campaign finance law.

But some aren’t ready to go so far. Rep. Matthew Cartwright (D-Pa.) is proposing a bill that will instead limit the political spending of 501(c)(4)s. The Openness in Political Expenditures Now Act would limit political spending by 501(c)(4)s to the lesser of 10% of the organization’s total yearly spending or $10 million. The bill would also require 501(c)(4)s to disclose certain political activity spending to their members.

What do you think about these new bills? Will limiting political activity be sufficient or is an outright ban needed? Post your comments below.

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