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Advocacy Blog
Wednesday, April 11, 2007
Many Groups May Switch Tax Status
Roll Call ($$) reports that the group Club for Growth has switched its tax status from a 527 to a 501(c)(4), a section of the tax code used by social welfare organizations. In defending the change, the organization's president, former Representative Pat Toomey (R-PA), cited increased scrutiny on 527s by the Federal Election Commission (FEC). The group will now be allowed to spend an unlimited amount on lobbying expenditures. Club for Growth is also waiting for a federal judge's decision on whether or not the group, as a 527, should be required to file with the FEC as a political action committee for their activity in the 2000, 2002, and 2004 campaigns. However, a 501(c)(4) tax status does not eliminate any chances of running into trouble with the FEC. For example, if the group engages in prohibited political activities such as running an ad that "expressly advocates" the election or defeat of a candidate.
Toomey wrote to the club's members in a February e-mail. "Such groups proved so effective at highlighting the harmful policies of Members of Congress and presidential candidates like John Kerry that the political class made it practically impossible to continue in that type of structure. Because of the outrageously anti-First Amendment regulatory schemes of the Federal Election Commission," Toomey continued. "And because the self-serving career politicians in Congress are now on the verge of banning the old Club's structure.
Coinciding with a report released yesterday by the Campaign Finance Institute, "Soft Money in the 2006 Election and the Outlook for 2008 The Changing Nonprofits Landscape," the Club for Growth change reaffirms a prediction that during the upcoming election there will be an increased use of 501(c)'s. "There's a growing recognition that 501(c)'s are the vehicles of choice in this legal and political environment."
Posted by Amanda Adams
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