That tax status, which is offered to so-called social welfare organizations, is sought by many groups on both sides of the political spectrum because it allows organizations to engage in some political activity while not disclosing their donors.
The problem for the IRS arises in attempting to determine whether an organization is primarily involved in political activity or not. The original law as passed by Congress, as several Democratic senators noted on Tuesday, says 501(c)(4) organizations must be “exclusively” devoted to charitable, educational or recreational purposes.
When the IRS began implementing that rule half a century ago, however, they decided that exclusively really meant not “primarily” engaged in political activity, leaving the door open for groups like the Sierra Club or the AARP to claim the status but devote less than half their activities to politics.
But figuring out just what counts as political activity and what’s an educational offering tied to social welfare is often in the eye of the regulator rather than a definitive science.
Because the IRS, along with the Treasury Department, handles the regulations that spring from the tax code, “the IRS should be able to fix it on their own,” says Annette Nellen, a professor of accounting at San Jose State University. “The language in the statute does say ‘exclusively.’ ”
Members of Congress look at the original law and say, like Sen. Ben Cardin (D) of Maryland, “I don’t know what else we can do.”
“When you say ‘exclusively’ … What stronger word do you want us to use?” Senator Cardin says.
Citizens for Responsibility and Ethics in Washington (CREW), a government watchdog group, is even suing the IRS, asking a court to require the organization to reconcile the differences between what the law says and what the IRS does.