The Internal Revenue Service (IRS) will be holding a free phone forum on Rules for Tax-Exempt Organizations During An Election Year. The Forum is scheduled for June 9, 2008, and will be repeated the following day. Space is limited and will be reserved on a first-come basis, and organizations may register as a group. According to the IRS, the forum will discuss the distinctions between political activity, lobbying and general advocacy, and which activities are permissible by 501(c)(3) charities, 501(c)(4) social welfare organizations, 501(c)(5), 501(c)(6), and 527 political organizations. Participants can submit questions, in advance, to be answered during the sessions.

The session on June 9 is scheduled for 10:00-11:00 a.m. (EST) and on June 10 for 1:00-2:00 p.m. (EST). For information on how to participate and to reserve a spot, click here.

BNA Money and Politics ($$) reports that the Internal Revenue Service (IRS) is considering a project to look at 501(c)(4) organizations. During the American Bar Association Section of Taxation conference session on election issues for tax-exempt organizations, Judith Kindell, a tax law specialist in IRS's rulings and agreements section, addressed the issue of 501(c)(4)s. "Immediate contact does not work well for 501(c)(4)s, she said, because the issue for them is 'are they paying the appropriate amount of tax?; do they have an activity that is their primary activity that is in furtherance [of their tax-exempt purposes?] You can't just look at one activity, you have to look at the full scope of their activities, so we do have some plans to do that look-back.' she said." Kindell recommended that lawyers report to the IRS if they witness (c)(4)s that exceed their permitted activity. 501(c)(4) organizations may engage in partisan political activities, as long as it is not their primary purpose.

Greg Colvin of Adler & Colvin, who moderated the panel on election issues, said reporting on political candidate campaign activity includes describing the activities, indicating the amount of money spent, and reporting volunteer hours. Now that the information must be revealed, it could be the basis for IRS determining that some organizations, such as 501(c)(4)s, have violated the prohibition on political activity not being their primary purpose, he said. The reporting will be intense if you are a 501(c)(4), 501(c)(5), or 501(c)(6) and engaged in some political activities, he said. Organizations will have to jump through hoops involving a separate segregated fund or political action committee and the Section 162 nondeductible business tax, to name a few.

The Alliance Defense Fund (ADF), an Arizona nonprofit, has started an effort to encourage ministers to "use their pulpits to preach about election candidates this September." 501(c)(3) nonprofits, including churches, are prohibited from endorsing or publicly opposing political candidates or intervening in candidates' elections. The group would like if one sermon prompts an Internal Revenue Service (IRS) investigation that becomes a court battle, leading towards an outcome ruling the tax provision unconstitutional.

The ADF press release states; "The new initiative will equip, protect, and defend pastors who wish to exercise their First Amendment right to openly discuss the positions of political candidates and other moral and social issues from the pulpit. Participating pastors across the country will deliver a sermon along these lines in their own churches Sept. 28."

The Wall Street Journal reports; "Alliance fund staff hopes 40 or 50 houses of worship will take part in the action, including clerics from liberal-leaning congregations. About 80 ministers have expressed interest, including one Catholic priest, says Erik Stanley, the Alliance's senior legal counsel."

Americans United for Separation of Church and State (AU) responded with a press release denouncing the initiative, saying the "Religious Right group's plan to ask churches to violate federal tax law on electioneering is deplorable."

"Yet, the congressional officials in charge of implementing the new disclosure system have provided no guidance, forms, or even computer passwords that thousands of lobbyists will need to comply with the new disclosure system required by the Honest Leadership and Open Government Act of 2007."

This reporting will apply not only to lobbying firms and organizations with in-house lobbyists; individual lobbyists also will have to report their campaign contributions and payments to charities linked to officials. Lobbying organizations and individual lobbyists will use the new forms to report their contributions, as well as payments for events honoring government officials, or charitable contributions to entities linked to members of Congress.

An article in the Washington Post shows an interesting connection; campaign spending and influence on policy. The National Association of Home Builders, one of the biggest corporate donors to politicians, stopped its campaign contributions "as a protest" until they considered that Congress was adequately regarding the weak housing market. "The decision showed how closely interest groups tie their donations to the actions they hope lawmakers will take on their behalf — a connection lobbyists do not want to flaunt for fear of legal and political repercussions."

According to the Center for Responsive Politics, the top ten Political Action Committees' (PACs) campaign contributions increased 9.3% from the 2001-2002 cycle to the 2005-2006 cycle. Unfortunately, to get favorable legislative results, withholding campaign contributions could be an effective strategy for the privileged. If only the less wealthy or even groups that do not make contributions, and perhaps even voters, can have such an influence.

On May 1, 2008, in a 2-1 decision the Court of Appeals for the Fourth Circuit ruled a North Carolina law prohibiting political action committees from accepting individual contributions of more than $4,000 to be unconstitutional.

In North Carolina Right to Life v. Leake, the Court of Appeals found that the contribution limit as applied to committees making only independent expenditures did not further the state's interest in preventing corruption, therefore burdening the right of political association. As in the Supreme Court's Wisconsin Right to Life decision, the Fourth Circuit Court also found that it was unconstitutional to rely on contextual factors to determine whether a communication "supported" or "opposed" a candidate. The opinion states such "standards typically lead to disputes over their meaning and therefore litigation."

[A]ny attempt to identify communications as election-related without focusing on words that explicitly label them as such threatens to infringe on protected First Amendment liberties. . . . Therefore, . . . a communication can be deemed the "functional equivalent of express advocacy only if [it] is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate." The purpose of this requirement is to avoid chilling political expression by forcing a speaker to have to defend his communication from regulation.

Some consider the case to be an "issue that is surely headed to the Supreme Court either in this case or in another case, such as the SpeechNow.org case." SpeechNow.org is challenging federal campaign finance law as too restrictive of independent political groups and as a violation of the First Amendment.

An article in BNA Money and Politics ($$) reports that the new Form 990 requires organizations to provide more information to the Internal Revenue Service (IRS) on their political activities.

Referencing a recent court decision that determined that the IRS should not have revoked the tax exempt status of a 501(c)(4), Craig Engle of the law firm Arent Fox, commented that the "IRS has a mixed record in being able to back up its efforts in court. . . . [the decision] might encourage similar [501(c)(4)]groups to increase their political involvement."

The four-page Schedule C of the new Form 990 requires filers to describe their "direct and indirect political campaign activities." It also asks for detailed information about Section 527 political organizations to which a filer has contributed. Another part of the schedule asks for detailed information about a filer's lobbying activities, including direct lobbying to influence legislation, as well as "grass roots" lobbying to influence public opinion.

When the draft Form 990 was released OMB Watch submitted comments on the political activities section, Schedule C.

Despite their continued appeal, the National Association of Manufacturers (NAM) revealed the names of 65 members on its website. Originally NAM filed a lobbying report that cited the pending case. NAM is opposed to a provision in the Honest Leadership and Open Government Act that requires groups to disclose those that contributed at least $5,000 each during the first quarter of the year and actively participated "in the planning, supervision or control of such lobbying activities." NAM argues that the requirement violates their First Amendment rights.

NAM continues to challenge the requirement in a case pending at the U.S. Court of Appeals for the D.C. Circuit. According to BNA Money and Politics ($$); "NAM said at that time that it would continue to pursue an appeal of the court decisions upholding HLOGA. The U.S. Court of Appeals for the District of Columbia Circuit granted April 28 NAM's request for an expedited appeal process . . . The move by the D.C. Circuit to allow an expedited appeal could permit a decision before the next lobbying-disclosure filing deadline date of July 21, according to a NAM lawyer."

For more background; from the latest OMB Watcher, "Court Upholds Stealth Lobbying Disclosure".