Encouraging signs on new rules for nonprofit political activity

Nonprofits of many stripes have spent time reading the tea leaves in the year-plus that the Treasury Department and the IRS have been revising a rule that will guide them in conducting political activity. At last, they may have something solid to rely on.

{mosads}Last month, the Office of Information and Regulatory Affairs (OIRA) released its spring 2015 regulatory agenda. This document provides approximate dates for upcoming regulations across the government, and this agenda noted that a new draft of rules designed to more clearly define political activity for nonprofits could be released as soon as June.

While OIRA postings are not always reliable predictors of when a rule will be issued, the public declaration of a June release date is a hopeful sign for nonprofits, which have been waiting for news since the IRS announced in May 2014 that it would revise a previous draft rule. The OIRA listing demonstrates that the IRS and Treasury remain committed to better defining political intervention and replacing the vague “facts and circumstances” approach that currently governs what counts as political activity for nonprofits. (Whether an activity is political is based on all the “facts and circumstances” surrounding the case.) It shows they have been undaunted by critics in Congress who would cast aside this important exercise in careful line-drawing as an infringement on free speech.

With the revised rule will come another opportunity to advance the public conversation on how to distinguish nonpartisan promotion of voter engagement in our democracy from its opposite: abusive manipulation of the tax system to obtain campaign advantage with undisclosed tax-exempt funding.

The current vague rules leave small nonprofits in the dark about what they can and can’t do to participate in our democracy. If a local homeless shelter wants to provide information about an upcoming city election to its clients and supporters, it shouldn’t have to spend its scarce resources on high-priced lawyers to tell it what it can and can’t do. Public Citizen’s Bright Lines Project has been working for years to create clear, fair rules for all nonprofits that would allow full nonprofit participation in democracy while ending abuses of the tax system for political gain. With clearer, easier to enforce rules, nonprofits will be able to stay within the law and follow their core missions without fear of losing their nonprofit status.

The potential June date isn’t the only good sign about a proposed new draft. The IRS has indicated before, and again in the ORIA posting, that new rules are likely to apply across the 501(c) spectrum. The previous draft would only have applied to 501(c)(4)s (advocacy organizations), creating an even more confusing system where 501(c)(3)s (straightforward charities) would be left with no guidance as to how the new definition would affect them. Even more strangely, a rule that only defined political activity for 501(c)(4)s could create a situation where 501(c)(3)s, charities that are not permitted to do any political activity, would be allowed to do activities deemed “political” for 501(c)(4)s. The best way to protect the integrity of our charities and other nonprofits is to make them all play by the same set of rules.

The sooner the IRS and Treasury publish a new draft, the better. Eighteen months have passed since the first draft of new rules came out. The Treasury Department and the IRS have received lots of good ideas from across the political spectrum on how to improve the rules. Now it is time to let the public know what they have learned from the input so far.

The release of the regulatory agenda provides both valuable clues that the IRS and Treasury are moving in the right direction, and we hope that soon, nonprofits can quit gazing into their teacups when they need to know what does and does not count as political.

Gilbert is director of Public Citizen’s Congress Watch division and manager of the Bright Lines Project. Colvin is chair of the board of Adler & Colvin in San Francisco and serves as chair of the Drafting Committee of the Bright Lines Project.