Beyond this, however, the proposed rules have a number of fatal flaws.
First, because the proposed rules apply only to social welfare groups, donors could move money for issue ads and other activities deemed “political” under the rules to other types of nonprofits, such as trade associations. Under current law, social welfare groups can spend on political activity a little less than half of the money they raise. If the IRS were to follow up with additional rules limiting the amount of permissible political activity or requiring donor disclosure — as we think it should — donors are likely to shift their contributions to trade associations, where these IRS rules would not apply. In short, Whack-a-Mole does not solve the problem.
Second, the proposal defines political activity in troubling ways. The rules would no longer differentiate between partisan and nonpartisan efforts to register voters, educate voters or get out the vote. Our laws have long permitted nonprofit organizations to urge all eligible people to vote, and such organizations have provided nonpartisan resources to help people make informed judgments about public policies and candidates. Traditionally, we believe in more civic engagement, not less.
The Treasury-IRS proposal undermines this approach. Nonpartisan candidate forums that take place 30 days before a primary and 60 days before an election would be defined as partisan political activity. Yet as elections near, these vehicles educate voters, help them cut through campaign ads and better understand what candidates stand for. Government should encourage, not discourage, such initiatives.
Other consequences are likely. The proposed rules do not apply to charities, which make up the largest segment of the nonprofit sector. Charities are already — appropriately — prohibited from political activity. They are, however, permitted to participate in many nonpartisan civic engagement activities, including voter registration, get-out-the-vote efforts and voter education. Risk-averse charities and their funders may become hesitant to engage in activities the IRS defines as political, even if that definition is not intended to apply to them.
Using bright lines to define political activity is a step in the right direction, but the government’s proposed lines are in the wrong places. Fortunately, a team of highly respected nonprofit tax lawyers has been working on this problem for more than four years. Their alternative, published under the Bright Lines Project, calls for uniform rules to apply across all tax categories.
Their proposal defines as political speech express advocacy and communications that reflect a view about a candidate, but it also carves out four exceptions that permit nonpartisan civic engagement as long as paid mass media are not used. The exceptions are: legitimate advocacy on current, specific actions an officeholder can take; nonpartisan efforts to educate the public on candidates’ policy positions; measured responses to statements by a candidate about an organization or its core issues; and oral remarks made at an organization’s non-broadcast, in-person meeting where the comments are clearly identified as personal and do not expressly call for the election or defeat of a candidate.
This approach would provide predictability and ease understanding of what constitutes political activity. It would protect free speech and encourage civic engagement while preventing abuse of the system such as through large-scale advertising expenditures.
Ultimately, the proposed Treasury-IRS rules would further chill nonprofit civic engagement and send a message to funders and groups that even long-standing and widely accepted nonpartisan behavior is “political.” Such limitations are unacceptable in a democracy and raise troubling constitutional issues in their ambiguity and uneven treatment of charities, social welfare groups and other tax-exempt organizations. The Obama administration should look to the ideas generated by the Bright Lines Project to modify its proposal.