Urge IRS to Include Supreme Court Approved Standard in Definition to Ensure Coverage of Campaign Attack Ads Posing as “Issue Ads”

Democracy 21 and the Campaign Legal Center joined with Representative Chris Van Hollen (D-MD) today to submit joint comments in an IRS rulemaking that called on the IRS to adopt a new definition of “campaign-related political activity” to replace the existing vague “facts and circumstances” test.   According to the comments, the new test should rely on clear and objective standards to define campaign activities by non-profit groups.

In July 2011, Democracy 21 and the Campaign Legal Center petitioned the IRS to initiate a rulemaking to revise the existing IRS regulations governing eligibility for section 501(c)(4) tax status, which the reform groups challenged as contrary to law.

In August 2013, Democracy 21 and the Campaign Legal Center joined with Representative Van Hollen and Public Citizen as plaintiffs in Van Hollen v. Internal Revenue Service, a lawsuit that challenged the IRS’s failure to commence the rulemaking requested in the  July 2011 petition. The plaintiffs voluntarily dismissed the lawsuit when the IRS initiated the current rulemaking proceeding.

Donald Simon, Counsel to Democracy 21, took the lead role in preparing the comments submitted today.

The comments submitted today applaud the Treasury Department and the IRS for undertaking the rulemaking and for recognizing that problems exist with the current regulations, which were adopted more than a half century ago.

The comments support a proposal made by the IRS to use a test that treats as campaign-related activity any public communication that refers to a candidate in the period 30 days before a primary election or 60 days before a general election.  This test is based on an existing provision of the campaign finance laws which treat as an “electioneering communication,” any broadcast that refers to a candidate within that same time period.

The comments disagree with another key part of the proposed IRS test.  Outside the 30/60 day time frame, the IRS proposes to treat as campaign activity only communications that include “express advocacy” or the functional equivalent of express advocacy — ads that are susceptible of no reasonable understanding other than advocating the election or defeat of candidates.

As the comments explain, this “express advocacy” test is too narrow, and allows sham issue ads to be used to attack candidates without being treated as campaign ads.  Such ads, which skirt words of express advocacy or their functional equivalent, are a common form of campaign attack ads.  Under the proposed IRS rule, social welfare organizations could spend an unlimited amount of their money to run such campaign attack ads without jeopardizing their status under section 501(c)(4).

The comments submitted by Representative Van Hollen and the reform groups urge the IRS to adopt another standard used in the campaign finance laws – and treat as “candidate-related political activity” any public communication that promotes, supports, attacks or opposes a candidate, commonly known as the “PASO” test.

This standard was reviewed by the Supreme Court in the 2003 McConnell case and upheld as satisfying constitutional standards of not being impermissibly vague.  The Supreme Court stated that the PASO words “provide explicit standards for those who apply them” and “give the person of ordinary intelligence a reasonable opportunity to know what is prohibited.”

The comments urge the IRS to adopt this standard in order to include in the definition of “candidate-related political activity” campaign attack ads that are widely used by section 501(c)(4) groups to sharply attack candidates, while posing as issue ads.

According to Democracy 21 President Fred Wertheimer, “The current vague IRS “facts and circumstances” test for determining political activity is being used by 501(c)(4) groups to run multi-million dollar candidate attack ad campaigns, while disingenuously claiming they are “issue ads.” The vague IRS standard for political activity has been difficult for the IRS to enforce and has been widely abused by outside groups to inject “dark money” contributions into federal elections.  Any effective definition of “candidate-related political activity” must include the tens of millions of dollars of candidate attack ads being run by section 501(c)(4) groups.”

According to Campaign Legal Center Executive Director J. Gerald Hebert, “The IRS must not be bullied from this rulemaking or from enforcing the law by those in Congress who want to keep secret the identities of billionaires seeking to buy election results and corrupt our democracy.  This rulemaking is critically important to stem the growth of what is already widespread abuse of this privileged tax status.  Any group that wants to engage in substantial campaign-related spending is free to do so, it would only need to register as a 527 organization and reveal its donors.”

The comments also call on the IRS to revise its proposal to treat all voter registration and get-out-the-vote activity as campaign related activity.  The comments urge the IRS to exclude non-partisan voter drive activities that do not favor any candidate or party in an election. Such non-partisan activities should not be treated as “candidate-related campaign activity” according to the comments.

The comment urge the IRS to adopt a uniform definition of “candidate-related political activity” applicable to all 501(c) groups.

Representative Van Hollen, Democracy 21 and the Campaign Legal Center also joined today with Public Citizen to submit separate comments on the amount of political activity a 501(c)(4) organization is allowed to undertake under the Internal Revenue Code and court decisions interpreting the code.

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