Hearing to Focus on Impact of Tax-Exempt Sector on Politics

December 7, 2023

The House Ways and Means Oversight Subcommittee announced a hearing next week on Dec. 13 to examine the tax-exempt sector and its impact on American politics.

Earlier this year, House Ways and Means Chairman Jason Smith (R-MO) and Oversight Subcommittee Chairman David Schweikert (R-AZ) signaled an interest in scrutinizing the role that 501(c)(3) and 501(c)(4) tax-exempt organizations play in influencing elections. Over the summer, Smith and Schweikert requested information and input on existing rules and regulations governing tax-exempt organizations and what, if any, policy changes Congress should consider.

At the time, Smith and Schweikert suggested there is confusion in the tax-exempt sector about what is allowable political activity and expressed concern about “significant amounts” of foreign money flowing through 501(c)(3) and (c)(4) groups to influence elections. In response to the lawmakers’ information request, ASAE sent comments in September expressing concern about the potential for unintended consequences for 501(c)(3) and (c)(4) associations should Congress revisit existing law in this area. ASAE will also be submitting comments for the record for the hearing next week.

Existing law prohibits 501(c)(3) organizations from engaging in political activity to influence elections, though they can conduct certain nonpartisan voter education activities. So-called social welfare organizations exempt under Section 501(c)(4) can engage in political activity so long as it’s not their primary purpose.

The interest in nonprofit political activity from Republican tax-writers stands in notable contrast to Treasury regulations updated in 2018 during the Trump administration which stopped the requirement for 501(c)(4) and 501(c)(6) organizations to disclose donors on Schedule B of their Form 990 returns. The IRS defended the change at the time because it said it didn’t need the information to enforce the tax code and it protects donor information from inadvertently being disclosed for public inspection.

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