Typically referred to as "social welfare" groups, these are nonprofit organizations including civic leagues or local volunteer fire departments, for example, that in theory are designed to promote, well, social welfare causes. "501(c)" is just the IRS's designation in the tax code for nonprofit groups, and (4) is the subsection of groups we are concerned with here. There are other types of nonprofits that fall under the "501(c)" umbrella, but they are subject to different requirements.
So where is the connection to electoral politics? Aren't we talking about social welfare advocacy?
These groups are allowed to to participate in politics, so long as politics do not become their primary focus. What that means in practice is that they must spend less than 50 percent of their money on politics. So long as they don't run afoul of that threshold, the groups can influence elections, which they typically do through advertising. The above "Colbert Report" segment sheds some more light on the nature 501(c)(4)s.
Give me some examples of 501(c)(4)s.
Crossroads GPS, the conservative group co-founded by Karl Rove is one well-known example. On the other end of the political spectrum is Organizing for Action, which is what President Obama's campaign operation turned into after the 2012 election. Often, organizations will have multiple arms, including a nonprofit and a super PAC. American Crossroads, for example, is a super PAC affiliated with Crossroads GPS.
How much money are they spending?
You mentioned super PACs? What's the difference?
Here's the key difference: Super PACs must disclose their donors while 501(c)(4)s do not. If you are a donor looking to influence election but do not want to reveal your identity, the 501(c)(4) is an attractive option through which to send your cash.
Why has the IRS gotten so many 501(c)(4) applications in recent years?
So which groups did the IRS single out?
In short, conservative ones. The IRS says it flagged groups with "tea party" and "patriot" in their names for extra scrutiny. The agency apologized and said partisanship did not motivate the tactics; rather, it was a misguided effort to come up with an efficient way to deal with the influx of applications. In addition, an inspector general's report set to be released this week says the agency also gave extra scrutiny to groups that criticized the government and sought to educate Americans about the U.S. Constitution.
A lot more questions are going to be asked. Two congressional committees — the House Oversight and Government Reform Committee and the House Ways and Means Committee — are planning further investigations. The IG's report will be released on Wednesday, which will shed more light on who in the IRS knew what and when they knew it.
Congressional Republicans and even some Democrats are up in arms. President Obama called it "outrageous." After a lot of review, look for officials and lawmakers to propose remedies to prevent this kind of thing from happening again.