The real reason outside groups want tax-exempt status

Amid all the brouhaha over the Internal Revenue Service's decision to single out conservative groups for special scrutiny as they sought tax-exempt status, one issue has gotten a little lost: Why these groups sought the status in the first place.


Herman Cain speaks at a Tea Party Patriots rally. Getty Images.

They weren't petitioning to become recognized as "social welfare" groups because they were hoping to save on costs. They wanted to keep the identities of their contributors secret.

"It would have a very chilling effect on our donor base if they thought it would be made public," said Richmond Tea Party president Larry Nordvig, whose group petitioned for tax-exempt status under section 501(c)(4) of the tax code in December 2009, and received it in July 2012.

Under IRS law, 501(c)(4) groups, which is what the IRS' tax-exempt arm was scrutinizing, don't have to disclose their donors or how much they gave.  In exchange for that anonymity, these groups must prove that their primary goal is non-political -- a hazy line that has long concerned campaign finance advocates.  (For more on what 501(c)(4)'s are and do, check out this explainer.)

By contrast, a super PAC can do far more direct political communicating but has to file with the Federal Election Commission and must disclose not only its donors' identity but also how much they gave.

Many major donors -- Republicans and Democrats -- value their anonymity, prizing the fact that they don't have to become public figures if they give to a non-profit that, ostensibly, does voter education rather than direct political advocacy.

(Sidebar: While these groups are tax exempt, donations to them are not. So donors are paying taxes on the money they donate.)

And, many conservative groups argue that keeping their donor list secret to protect their supporters from political retaliation. (That point may have additional saliency in the wake of the IRS story this week.)

All worthy points. And none having anything to do with the tax savings from qualifying as a 501(c)(4) -- which tells you something about why these groups do it.

Juliet Eilperin is a White House correspondent for The Washington Post, covering domestic and foreign policy as well as the culture of 1600 Pennsylvania Avenue. She is the author of two books—one on sharks, and another on Congress, not to be confused with each other—and has worked for the Post since 1998.
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