On November 26, 2013, the U.S. Department of the Treasury and the Internal Revenue Service issued initial guidance in regards to proposed qualification requirements for organizations exempt under Section 501(c)(4) of the Internal Revenue Code. The proposed regulations seek to replace the existing "facts and circumstances" test with more definitive "bright-line" rules to determine if an organization is engaged in political campaign activities that do not promote social welfare. The proposed guidance would define the term "candidate-related political activity" and would clarify that the promotion of social welfare does not include this type of activity.
Under the proposed guidelines, "candidate-related political activity" would include certain communications, grants and contributions, and activities closely related to elections and candidates.
Communications would include those activities that:
Grants and contributions would include:
Activities closely related to elections or candidates would include:
As currently drafted, the proposed regulations offer a stricter standard for what is permissible conduct for a social welfare organization. The U.S. Department of the Treasury is currently accepting comments on the proposed regulations. Comments must be submitted by February 27, 2014.
By Mike West, CPA, JD, Senior Manager mwest@legacycpas.com and Nathan Lipton, CPA, Staff Accountant nlipton@legacycpas.com