While the Treasury and the IRS seek greater clarity by further restricting the types of permissible political activity of tax-exempt organizations, the commission would achieve greater clarity by allowing more freedom for tax-exempt organizations to engage in political speech ”“ while simultaneously preserving the long-held public policy of not allowing tax-exempt funds to be expended for political purposes.
Dan Busby, president of ECFA, offered four key comments on the proposed guidance:
“The Treasury and the IRS should proceed with great caution in applying the proposed ”˜candidate-related political activity’ test to 501(c)(3) organizations.”
“Replacing the ”˜facts and circumstances’ approach with a clear-cut definition of political activity would benefit charities and the IRS.”
“The proposed ”˜candidate-related political activity’ test would silence charities from speaking out on issues with political significance.”
“The Commission’s recommendations strike a necessary balance of permitting charities to engage in communications that are relevant to their exempt purposes while ensuring that they expend funds in a manner consistent with their tax-exempt purposes.”
Most concerning to ECFA is the further chilling effect that the proposed “candidate-related political activity” test would have on issue-oriented communications from churches and nonprofits. While this has been a problem for some time even under existing rules and the IRS’s approach to administering the law, the proposed regulations would compound the concern.