Comments on the Political Activities of Tax Exempt Organizations

September 7, 2023   •  By David Keating   •    •  

On September 4, 2023, the Institute for Free Speech submitted comments to the House Ways and Means Committee on defects in nonprofit tax laws, nonprofit tax regulations, and IRS guidance that abridge the fundamental freedoms guaranteed by the First Amendment. Institute for Free Speech President David Keating authored the letter responding to the Committee’s request for information as it considers whether there is a “potential need for legislative action” in these areas. Read a PDF of the comments here.


September 4, 2023

Via Email

The Honorable Jason Smith
Chairman Committee on Ways & Means
U.S. House of Representatives
1139 Longworth House Office Building
Washington, DC 20515

The Honorable David Schweikert
Chairman Subcommittee on Oversight Committee on Ways & Means
1139 Longworth House Office Building
Washington, DC 20515

RE: Request for Information: Understanding and Examining the Political Activities of Tax Exempt Organizations under Section 501 of the Internal Revenue Code

Dear Chairman Smith and Chairman Schweikert:

The Institute for Free Speech[1] welcomes the opportunity to respond to your request for information (RFI). As the Committee considers whether there is a “potential need for legislative action,” we urge that you take this opportunity to remedy the many defects in the nonprofit tax laws, nonprofit tax regulations, and IRS guidance that abridge the fundamental freedoms guaranteed by the First Amendment.


Before addressing the ten questions posed by the RFI, we want to provide some perspective on the topic and discuss how the laws on campaign intervention by nonprofits other than charities should be enforced.

The collection of trillions of dollars in taxes each year is based on what the IRS calls the self-assessment feature of the tax laws, where citizens and businesses calculate and pay their taxes. If the agency develops a reputation as a partisan tool of the party in power, that could lead to more citizens cheating on their taxes or simply failing to file, with potentially disastrous implications for the budget deficit. If compliance with the individual income tax laws alone were to drop just one percentage point due to a decline in the Service’s reputation for fairness, that could cost the government $315 billion in tax collections over ten years.

The Internal Revenue Code conceptualizes three “buckets” of activity for nonprofits, imposing appropriate tax status on organizations based on their category. Section 501(c)(3) organizations work to educate and engage in other charitable purposes, with limited lobbying and no political activity. This is the only nonprofit status, other than veterans’ organizations, with an income tax deduction for donations. Advocacy nonprofits, such as Section 501(c)(4) groups, work for various interests, including groups promoting social welfare, labor organizations, farm groups, and trade associations. Such nonprofits may engage in activities encompassing education, lobbying, and politics as long as candidate campaign intervention does not become their primary activity. Section 527 organizations advocate for or against political candidates. These three categories allow groups to organize appropriately to support their mission and provide for the corresponding nonprofit tax status.

Since contributions to 501(c)(4) organizations are not tax deductible, the tax liability of existing 501(c)(4)s wouldn’t significantly change if they were reclassified as political committees (or Section 527 organizations). Because the IRS’s regulation of these groups has essentially nothing to do with tax collection, tasking the IRS with more duties to regulate political speech makes little sense and is unrelated to the Service’s fundamental mission of impartial revenue collection.

In Buckley v. Valeo, the Supreme Court noted that “a major purpose of…[the First] Amendment was to protect the free discussion of governmental affairs,…of course includ[ing] discussions of candidates.”[2]

In that decision, the Court expressed concern about how vague laws affect the freedom of speech. A vague law may be applied inconsistently or arbitrarily and might also “operate to inhibit protected expression by inducing citizens to steer far wider of the unlawful zone.”[3] Thus, a speaker may “hedge and trim” before speaking.[4] The First Amendment needs “‘breathing space to survive, [and so] government may regulate in the area only with narrow specificity.’”[5] The specificity requirement is essential in the political arena because discussion of public policy issues often overlaps with discussion of political candidates. As the Court noted:

[T]he distinction between discussion of issues and candidates and advocacy of election or defeat of candidates may often dissolve in practical application. Candidates, especially incumbents, are intimately tied to public issues involving legislative proposals and governmental actions. Not only do candidates campaign on the basis of their positions on various public issues, but campaigns themselves generate issues of public interest.[6]

The Federal Election Campaign Act (FECA) attempted to address this distinction, but the Buckley Court found that it failed to avoid the vagueness problem.

To avoid vagueness, the Court construed FECA “to apply only to expenditures for communications that in express terms advocate the election or defeat of a clearly identified candidate for federal office.”[7] To provide clarity to this phrase, the Court dropped the highly influential footnote 52 in the opinion, which limited regulable speech to “express words of advocacy of election or defeat, such as ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ [and] ‘reject.’”[8] In a 2007 opinion, the Court further described “the functional equivalent of express advocacy” in part as a communication “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”[9]

The key, then, is recognizing that the line between discussion of issues and discussion of candidates often is blurry. The harm of vague regulation is its potential to cause a would-be speaker to keep silent due to uncertainty about how the law will be applied. Thus, to remain within the bounds of the Buckley decision, regulation of political speech should err on the side of avoiding such chill by providing objective rules that can be uniformly applied and clarity in a manner that maximizes the free exchange of ideas guaranteed by the First Amendment. As Chief Justice Roberts has noted, in such cases, “the tie goes to the speaker, not the censor.”[10]

Rather than construing the Internal Revenue Code in this way, by providing clear guidance and erring on the side of expression, IRS guidance is vague and errs toward regulating speech. This is the opposite of what the Buckley decision and the First Amendment require. And it increases the potential for abuse where IRS auditors can punish speech based on viewpoint.

The Internal Revenue Service knows little about First Amendment protections for free political speech. This is understandable, even if it’s inexcusable. The agency’s mission “is to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and to enforce the law with integrity and fairness to all.” Regulating political speech is far afield of its mission.

This incompetence has been evident for decades because the guidance on political campaign intervention is vague and violates the First Amendment. In our response to question 1, we explain the constitutional defects in much of the current IRS guidance in more detail.

The ineptness emerged again in spectacular fashion when the IRS proposed regulations in November 2013 after the Lois Lerner scandal. The proposal attempted to define political activity and generated over 150,000 public comments. Organizations and citizens across the political spectrum were nearly unanimous in criticizing the proposal for seeking to regulate too much activity and violating our free speech rights.[11]

The Service has learned that it is impossible to avoid politics when it regulates overtly political activity. Politicians from both parties often pressure the agency on its disclosure and enforcement policies on nonprofits.

This dual regulatory scheme between the Federal Election Commission (FEC), which enforces FECA, and the IRS is, in most applications, unnecessary and unwise. It has created confusion among nonprofit groups and the public. It has embroiled the Service in political battles so that it cannot address substantial areas of its core mission because its actions are so suspect in Congress. Especially given the IRS Lois Lerner scandal in 2013, it would be a mistake to continue asking the IRS to play any role—let alone an even greater role—in enforcing laws related to campaign finance.

End the IRS’s Role As the “Speech Police”

We question whether the IRS should be engaged in regulating election campaign speech at all, and certainly not to the extent it is today. If a nonprofit entity with a social welfare purpose (or any other nonprofit purpose) is a political committee (“PAC”) under federal law, it ought to be regulated as a Section 527 organization. If it is not a political committee under federal law, it should not be regulated under Section 527 but under the appropriate part of 26 U.S.C. Section 501(c).

This straightforward approach would harmonize the IRS’s rules with those of the FEC, the body entrusted by Congress with “exclusive jurisdiction” for civil enforcement of the nation’s campaign finance laws.[12]

This approach would also recognize that in a democracy, political education and persuasion aimed at the public not only should but must fall within the definition of “social welfare” and “educational” activities that constitute exempt activities under Section 501(c)(4). Electing qualified candidates to public office promotes social welfare. Unlike Section 501(c)(3), nothing in Section 501(c)(4) requires excluding candidate campaign intervention from the definition of social welfare. Finally, and most importantly, this straightforward approach offers clarity without dragging the IRS further into the thicket of political regulation, a tangle from which it—and the Service’s reputation for neutral, nonpartisan revenue collection—may never recover.

When Nina Olson was the IRS National Taxpayer Advocate in 2013, her report to Congress recommended getting the IRS out of political regulation. She wrote that “[t]he IRS, a tax agency, is assigned to make an inherently controversial determination about political activity that another agency may be more qualified to make.” From her report:

“It may be advisable to separate political determinations from the function of revenue collection. Under several existing provisions that require non-tax expertise, the IRS relies on substantive determinations from an agency with programmatic knowledge.

Potentially, legislation could authorize the IRS to rely on a determination of political activity from the Federal Election Commission (FEC) or other programmatic agency. Specifically, the FEC would have to determine that proposed activity would not or does not constitute excessive political campaign activity.”[13]

No legislation is needed to make this change. The FEC already decides whether a group conducts “excessive political activity” and can force (and has forced) such groups to register and report as political committees. Through a rulemaking or even a revenue ruling, the IRS could announce that it will classify under Section 527 any organization the FEC or equivalent state authority considers a major purpose political committee but in most circumstances will not initiate any reclassification on its own.

The Role of the FEC in Preventing the Weaponization of Government

When Congress established the FEC, it designed the Commission so that no one party could control it and use the policing of speech as a partisan weapon. Over decades, the FEC has developed expertise in campaign speech regulation and, sometimes with the prodding of the courts, in the limits the First Amendment places on such regulation.

Campaign finance law has become one of the most complex areas of constitutional law imaginable.[14] The IRS faces far fewer issues about campaigns and elections in its everyday business than the FEC. Therefore, its culture and expertise are quite different from that of the FEC, which regularly faces these issues. Indeed, one reason for the frustration with the FEC among those who support more speech regulations has been the unwillingness of these advocates to accept the constitutional restraints under which the FEC operates. Those who push regulation onto other agencies often do so precisely because they seek to bypass constitutional sensitivities that are, and ought to be, a hallmark of the FEC.

The FEC is different from other federal agencies. “Unique among federal administrative agencies, the Commission has as its sole purpose the regulation of core constitutionally protected activity—‘the behavior of individuals and groups only insofar as they act, speak and associate for political purposes.’”[15]

By law, no more than three of six Commissioners can be from the same political party. While many independent agencies have some level of statutorily mandated bipartisanship, the FEC is one of only two federal agencies—along with the U.S. International Trade Commission—with an equal number of commissioners from each major party. Moreover, by law, the Commission cannot investigate or sanction political actors without the approval of four or more Commissioners.

The benefit of this structure is obvious: requiring four votes on a Commission equally divided between Republicans and Democrats guarantees that there is some minimal level of bipartisan or nonpartisan support before embarking on enforcement proceedings against political speakers.

This bipartisanship is indispensable in an agency whose core function is regulating political speech, particularly in the context of federal elections. After all, a partisan structure would risk the reality or appearance of a referee with its thumb on the scale of the contest, using its immense regulatory power for partisan gain.

The FEC is Uniquely Situated to Limit the Risk of Partisan Enforcement of Campaign Finance Law

Because of its unique structure, the FEC helps prevent the weaponization of government against unpopular speakers or political opponents.

In the case of the IRS, the result is a long and inglorious history of actual or alleged partisan or ideological abuses long before Lois Lerner. President Franklin Roosevelt purportedly used the IRS to harass political opponents, including Huey Long, Father Coughlin, and former Treasury Secretary Andrew Mellon, as well as newspaper publishers like William Randolph Hearst and Moses Annenberg. President John Kennedy’s IRS Commissioner established an “Ideological Organizations Audit Project” to audit and harass conservative opponents of the Administration. The Nixon Administration gave the IRS a list of the President’s enemies and targeted thousands of groups. See John A. Andrew, The Power to Destroy: Political Uses of the IRS from Kennedy to Nixon, (Ivan R. Dee 2002); John A. Andrew, The Other Side of the Sixties (Rutgers Univ. Press 1997); David Burnham, A Law Unto Itself: The IRS and the Abuse of Power (Random House 1990). And in the late 1970s, the IRS refused to grant a tax exemption unless the group would “abstain from advocating that homosexuality is a mere preference, orientation, or propensity on par with heterosexuality and which should otherwise be regarded as normal.”[16]

As long as political speech is regulated, such regulation might be abused for partisan purposes. The structure of the FEC makes this far less likely than in other agencies.

Questions and Responses

  1. Would it be helpful to 501(c)(3) and 501(c)(4) organizations for the Internal Revenue Service (IRS) to issue updated guidance on how to define “political campaign intervention” and the extent to which 501(c)(4) organizations can engage in “political campaign intervention” be helpful to 501(c)(3) and 501(c)(4) organizations? If yes, why?

Yes, the current IRS guidance on political activity is unconstitutionally vague. That lack of clarity creates an environment ripe for abuse. The vague guidelines also make it difficult for many organizations to understand what activities are limited by the laws and regulations, forcing many to hire expensive counsel to navigate the rules.

Yet for over eight years, Congress has prohibited the IRS from working on such guidance by enacting the following rider on appropriations bills funding the agency:

[N]one of the funds made available in this or any other Act may be used by the Department of the Treasury, including the Internal Revenue Service, to issue, revise, or finalize any regulation, revenue ruling, or other guidance not limited to a particular taxpayer relating to the standard which is used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4) of the Internal Revenue Code of 1986 (including the proposed regulations published at 78 Fed. Reg. 71535 (November 29, 2013)). . . .[17]

While we understand the rationale for this rider immediately after the Lerner scandal, Congress maintained the funding ban during the Trump and Biden Administrations. When there is an administration that is sensitive to the First Amendment defects of the current guidance, Congress should discontinue adding this rider to appropriations for the Treasury Department.

The IRS is not alone at fault for its poor guidance. Congress has failed to repair the First Amendment defects in the laws. For example, the Johnson Amendment, which is part of 26 U.S.C. Sec. 501(c)(3), is unconstitutionally vague. It commands that 501(c)(3) organizations must “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”

The IRS guidance attempting to clarify the Johnson Amendment is of little use. Revenue Ruling 2007-41 states in part:

[S]ection 501(c)(3) organizations must avoid any issue advocacy that functions as political campaign intervention. Even if a statement does not expressly tell an audience to vote for or against a specific candidate, an organization delivering the statement is at risk of violating the political campaign intervention prohibition if there is any message favoring or opposing a candidate…. All the facts and circumstances need to be considered to determine if the advocacy is political campaign intervention.

What type of “statements” are prohibited? For many statements, it’s impossible to say whether the ban applies as it depends on the “facts and circumstances” interpreted by an IRS auditor.

There is similar defective “facts and circumstances” guidance for 501(c)(4) organizations under Revenue Ruling 2004-6.

Even the IRS agrees that its guidance would benefit from additional clarity. Then Acting IRS Commissioner Daniel Werfel (and now the current IRS Commissioner) wrote in a June 2013 report that the present “distinction between campaign intervention and social welfare activity, and the measurement of an organization’s social welfare activities relative to its total activities, have created considerable confusion for both the public and the IRS in making appropriate 501(c)(4) determinations. Both the taxpayer and the IRS would benefit greatly from clear definitions of these concepts.”[18]

Edward Zelinsky, a professor at Cardozo Law, makes a compelling case that the IRS guidance on political campaign intervention is unconstitutional in the wake of the Supreme Court’s ruling in Minnesota Voters Alliance v. Mansky.[19] He explains the constitutional defects in his excellent article, “Applying the First Amendment to the Internal Revenue Code: Minnesota Voters Alliance and the Tax Law’s Regulation of Nonprofit Organizations’ Political Speech.” In the introduction to his article, he summarizes the infirmities in the current guidance and offers a solution:

In Minnesota Voters Alliance v. Mansky, the U.S. Supreme Court struck on First Amendment grounds Minnesota’s “political apparel ban.” This law prohibits individuals from wearing “political badges, political buttons, or other political insignia . . . at or about [any] polling place.” The Minnesota statute, the Court held, unreasonably restricts constitutionally protected expression at the polls. The statute’s “expansive” term political is “unmoored,” proscribing in “indeterminate” fashion not just buttons and clothing mentioning the candidates, parties, and ballot questions being voted upon, but also forbidding apparel referring to issues and groups extrinsic to the election. As it lacks “objective, workable standards,” the Court held, the Minnesota law banning “political” apparel in polling places violates the First Amendment in light of “the potential for erratic application”. . . .

On its face, Minnesota Voters Alliance is about which t-shirts, hats, and buttons voters can wear at the polls. However, the Court’s First Amendment analysis in Minnesota Voters Alliance extends beyond apparel at polling places. That decision impacts the ongoing debate about the Johnson Amendment, the now controversial provision of the Internal Revenue Code (“Code”) that forbids organizations listed in section 501(c)(3) from intervening in political campaigns. Minnesota Voters Alliance also affects … other provisions of the tax law taxing and precluding campaign intervention by tax-exempt organizations.

Minnesota Voters Alliance requires that these provisions of the tax law be construed to comply with the First Amendment mandate that restrictions on speech be reasonable, objective, workable and determinate. . . .

As currently understood by the IRS and the Treasury, the Code’s restrictions on the political expression of tax-exempt entities sweep too broadly and too vaguely to satisfy these constitutional standards. According to the IRS’s current administrative interpretation of the Johnson Amendment, that provision of the Code proscribes “issue advocacy that functions as political campaign intervention.” This expansive test is, like the Minnesota apparel statute struck in Minnesota Voters Alliance, unmoored and indeterminate and is, thus, unreasonable for First Amendment purposes. . .

[F]or purposes of applying Minnesota Voters Alliance to the Johnson Amendment, the applicable test should be the standard articulated by Chief Justice Roberts in FEC v. Wisconsin Right to Life, Inc. Under this test, the Johnson Amendment would be understood as precluding the express advocacy of specific candidates, parties, or ballot questions and “the functional equivalent of express advocacy.” Tax-exempt entities and their personnel could mention public officials but could not articulate explicit support for, or opposition to, such officials’ re-election. For these purposes, the functional equivalence of express advocacy would be defined restrictively as the Chief Justice did in Wisconsin Right to Life, namely, a statement “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”

Likewise, the tax imposed by section 527(f) on the political activity of tax-exempt institutions and the 501(c)(4) regulations that prevent civic leagues from engaging in campaigning should only tax and preclude explicit endorsements of and opposition to particular candidates, parties, and ballot questions and the functional equivalent of such explicit support or opposition. Again, functional equivalence should be construed narrowly as the Chief Justice did in Wisconsin Right to Life, that is, as “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate,” party, or ballot question. . . .

The Code need not be amended to fashion these statutory provisions to comply with Minnesota Voters Alliance, though modifying the language of the Code is one way that the Code’s restrictions on the political speech of tax-exempt entities could be brought into compliance with the First Amendment. Alternatively, such compliance could be achieved administratively by revoking the portions of Revenue Ruling 2007-41 pertaining to issue advocacy under the Johnson Amendment and by amending the regulations under section 501(c)(3) to clarify that forbidden lobbying occurs only when a tax-exempt entity explicitly supports or calls for defeat of a particular legislative proposal pending before a public lawmaking body or before the electorate. Similarly, the IRS can modify Revenue Ruling 2004-6 to bring it into compliance with the First Amendment standard of determinacy announced in Minnesota Voters Alliance. Likewise, the Treasury can by regulation clarify that, for purposes of sections 527 and 501(c)(4), campaign intervention means explicit endorsement of, or opposition to, a candidate, not more generalized discussion of issues and legislation. The Treasury would thereby interpret those Code-based restrictions on political activity in a manner that, contrary to current law, satisfies the First Amendment signposts of reasonability and determinacy articulated in Minnesota Voters Alliance.[20]

I have attached a copy of Prof. Zelinsky’s article.

  1. Does the IRS’s current guidance on the definition of “political campaign intervention” properly account for new forms of political advocacy? If not, what should be included in updated guidance from the IRS to account for forms of political advocacy that are currently not covered?

The current guidance does cover new forms of political advocacy, but as explained above, the guidance is vague and unconstitutional. Sensible guidance would account for all forms of political advocacy and do so in a manner that respects our First Amendment freedoms.

If the Committee believes that some forms of nonpartisan activity should not be conducted by 501(c)(3) organizations, such changes should be made only through legislation thoroughly vetted with public input and not by an IRS regulation.

  1. Are there any tax-exempt organizations whose voter education or registration activities you suspect might have had the effect of favoring a candidate or group of candidates which would constitute prohibited participation or intervention? If yes, please describe those activities?

We have no information to provide on this question.

  1. Are there changes to Form 990which is used by tax-exempt organizations to file their tax returnsthat would help clarify how contributions are being used by 501(c) organizations? Especially regarding contributions that are used to fund political activities by 501(c)(4) organizations or nonpartisan voter education activities that 501(c)(3) organizations are allowed to engage in such as voter registration activities, public forums, and publishing voter education guides?

Form 990 is an elaborate form that already takes many hours to complete. According to the IRS, it takes nonprofit groups 72,720,000 hours annually to complete Form 990 and associated forms and schedules, with a total estimated monetary burden of $5.16 billion, including $1.75 billion in out-of-pocket costs. Given this enormous burden, we encourage the Committee to examine ways to decrease it rather than add to it.

The form already provides extensive details on expenditures, including compensation of senior employees and board members, total program expenditures, management and general expenses, fundraising expenses, grants to other organizations, political campaign expenditures, lobbying expenditures, and more. The most recent Form 990 for our organization was nearly 70 pages long. The average organization takes 107 hours to complete the form, with an added out-of-pocket cost of $2,600.

We don’t see a government interest, much less a compelling interest, in forcing organizations to disclose additional contributor information to the IRS. In fact, in 2020, the IRS adopted a regulation[21] ending the disclosure of major contributors by all nonprofit organizations except for 501(c)(3)s.

In its justification for the regulation abolishing the requirement, the IRS noted the following:

[R]eporting the names and addresses of substantial contributors on an annual basis poses a risk of inadvertent disclosure of information that is not open to public inspection because information on Schedule B generally must be redacted from an otherwise disclosable information return. The IRS has experienced incidents of inadvertent disclosure and has taken other steps to reduce future occurrences of such disclosures. By removing the general requirement to report names and addresses of substantial contributors to tax-exempt organizations not described in section 501(c)(3), the final regulations further reduce the risk of inadvertent disclosure of names and addresses of contributors for such organizations. Without a tax administration need to collect this information on an annual basis, the Treasury Department and the IRS have determined this change in affected tax-exempt organizations’ reporting obligations furthers the steps already taken to protect confidential taxpayer information. . . .

By removing the general requirement to report annually names and addresses of substantial contributors to organizations exempt under section 501(a) but not described in section 501(c)(3), the final regulations reduce the risk of inadvertent disclosure of names and addresses of contributors for such organizations and thereby address concerns expressed by some commenters regarding potential adverse consequences of any such public disclosures.[22]

We also note that under the Federal Election Campaign Act and Federal Election Commission regulations, those who earmark contributions over $200 to 501(c)(4) organizations for independent expenditures must be disclosed to the FEC and the public. Nearly all states have similar requirements. Requiring these groups to disclose this information to the IRS provides no more information to the public and increases the burdens on the organizations and the IRS.

We see no need to force 501(c)(3) organizations to disclose donations for nonpartisan voter registration activities, public forums, and publishing voter education guides. We believe such a requirement would be unconstitutional because there is no compelling government interest in obtaining this information.

  1. Should Congress consider policy changes to address money from foreign nationals –who are prohibited from contributing directly to political campaigns, candidates, and super PACs—flowing through 501(c)(3) and 501(c)(4) organizations to influence U.S. elections? If so, what specific policy changes should be considered?

No, substantial civil and criminal penalties exist for making or soliciting such contributions or contributing in the name of another. There is no evidence that this is a significant or growing problem. The Department of Justice has vigorously prosecuted those who have contributed in the name of another.

  1. Does the IRS collect information from 501(c)(3) and 501(c)(4) organizations that would aid the Federal Election Commission (FEC) in enforcing the foreign national prohibition under the Federal Election Campaign Act of 1971 (FECA)?

It is implausible that it collects any useful information. As noted in the response to question 4, the IRS no longer collects major donor information from 501(c)(4) organizations. Since the tax laws bar 501(c)(3) groups from election campaign intervention, such expenditures rarely occur, and it is doubtful that anyone, much less a foreign national, earmarked a donation for such an expenditure. During an investigation of illegal election campaign intervention by a 501(c)(3), it is theoretically possible that an IRS auditor may discover such a contribution.

  1. According to a U.S. Government Accountability Office (GAO) report, IRS examiners “do not review the national origin of sources of donations reported” by tax-exempt organizations on the Form 990, “and do not assess an organization’s compliance with FECA provisions during audits.” Given concerns over foreign influence in our elections, should IRS examiners review the national origin of sources of donations reported by a tax-exempt organization on the agency’s IRS Form 990-series?

No. Again, as noted in the response to question 4, the IRS no longer collects major donor information from 501(c)(4) organizations. There is nothing to review.

As noted in the response to question 6, the tax laws bar 501(c)(3) groups from election campaign intervention; such expenditures rarely occur, and it is doubtful that anyone, much less a foreign national, earmarked a donation for such an expenditure. Regular review of Schedule B information filed by 501(c)(3)s for national origin information would be a poor use of time by IRS examiners.

  1. Are there additional disclosures by 501(c)(3) and 501(c)(4) organizations engaged in “political campaign intervention” that would help prevent illegal contributions made by foreign nationals to influence U.S. elections?

We do not favor any added disclosures by these organizations, and we see no need for any additional disclosures by 501(c)(3) groups, which are barred from election campaign intervention. The penalties for election campaign intervention by such groups are severe and far more effective than any possible additional burdensome disclosures.

Most 501(c)(4) organizations do not engage in any election campaign intervention. Since these organizations no longer disclose major donors to the IRS, we assume the question refers to possible additional disclaimers on solicitations. We do not favor additional disclaimers related to campaigns that the tax laws would mandate. If there is a need for such disclaimers, Congress should amend the Federal Election Campaign Act. Organizations that solicit such donations already regularly place such disclaimers on solicitations for election campaign expenditures due to the substantial legal risk of omitting such disclaimers and, as a result, receiving prohibited contributions.

Adding donor disclosure mandates from such organizations to the IRS would raise serious constitutional concerns. Given the narrow scope of government interests supporting compulsory disclosure, the Supreme Court has limited mandatory disclosure to a narrow category of ads directly related to candidate campaigns. Except when dealing with “political committees”—organizations whose “major purpose” is the election or defeat of candidates (essentially PACs, political parties, and candidate campaigns)—the Court has only upheld compulsory disclosure laws that are closely and directly tied to candidate campaigns. In particular, these are “independent expenditures” (ads made independently from a candidate or political party that “expressly advocate” the election or defeat of a candidate and “electioneering communications,” defined in the relevant case as broadcast ads involving a substantial sum ($10,000 or more) aired in a candidate’s district within 30 days of a primary or 60 days of a general election.[23] So long as they avoid engaging in “express advocacy” and “electioneering communications,” social welfare groups, trade associations, think tanks, and other nonprofits generally cannot be required to disclose their donors, with possible exceptions such as filing Schedule B with the IRS or where specific government investigations show an actual need for contributor information.

  1. Are you aware of organizations under Section 501(c) that are tax-exempt but have the true purpose of influencing elections in favor of one political party? If so, please provide a description of how such organizations achieve that goal.


  1. Are you aware of organizations under Section 501(c) that are tax-exempt but have misused donor funds for the personal benefit of organization executives or have misused donor funds outside the stated purpose of the donor? If so, please provide a description of those organizations and the relevant conduct.


Thank you very much for your consideration of our views.


David Keating


[1] The Institute for Free Speech is a nonpartisan, nonprofit 501(c)(3) organization that promotes and defends the First Amendment rights to freely speak, assemble, publish, and petition the government.

[2] Buckley v. Valeo, 424 U.S. 1, 14 (1976) (quoting Mills v. Alabama, 384 U.S. 214, 218 (1966)).

[3] Id. at 41 n. 8.

[4] Id. at 43.

[5] Id. (quoting NAACP v. Button, 371 U.S. 415, 433 (1963)).

[6] Id. at 42.

[7] Id. at 44.

[8] Id. at 44 n. 52.

[9] FEC v. Wis. Right to Life, Inc., 551 U.S. 449, 469 (2007) (“WRTL II”) (Roberts, C.J., concurring).

[10] Id. at 474.

[11] Matt Nese and Kelsey Drapkin, “Overwhelmingly Opposed: An Analysis of Public and 955 Organization, Expert, and Public Official Comments on the IRS’s 501(c)(4) Rulemaking,” available at

[12] 52 USC 30106 (b)(1).

[13] Nina Olson, “Special Report to Congress:  Political Activity and the Rights of Applicants for Tax-Exempt Status,” Taxpayer Advocate Service. Retrieved on August 29, 2023. Available at: (June 30, 2013), p. 16.

[14] Indeed, at the oral argument in McCutcheon v. FEC, Justice Stephen Breyer offered a series of hypotheticals centered around naming a PAC after a candidate for office, a practice which, via FEC regulation, is illegal. Tr. of Oral Argument, McCutcheon v. FEC, 12-536 at 4 (Oct. 8, 2013); 11 C.F.R. 102.14 (2014). Justice Antonin Scalia noted that he felt that “this campaign finance law is so intricate that I can’t figure it out.” Tr. of Oral Argument, McCutcheon v. FEC at 17.

[15] American Fed’n of Labor and Congress of Indus. Org. v. Fed. Election Comm’n, 333 F.3d 168, 170 (D.C. Cir. 2003) (quoting Fed. Election Comm’n v. Machinists Non-Partisan Political League, 655 F.2d 380, 387 (D.C.Cir.1981)).

[16] Big Mama Rag, Inc. v. United States, 631 F.2d 1030, 1040 (D.C.Cir.1980).

[17] See the Consolidated Appropriations Act, 2022, Pub. L. No. 117–103, 136 Stat. 249, 2022.

[18] Daniel Werfel, Internal Revenue Service, ‘‘Charting a Path Forward at the IRS: Initial Assessment and Plan of Action’’ at 28 (June 24, 2013).

[19] Edward A. Zelinsky, “Applying the First Amendment to the Internal Revenue Code: Minnesota Voters Alliance and the Tax Law’s Regulation of Nonprofit Organizations’ Political Speech,” 83 Albany Law Review (2020).

[20] Zelinsky, pp. 1-9.

[21] Guidance Under Section 6033 Regarding the Reporting Requirements of Exempt Organizations, 85 FR 31959, (final regulation, May 28, 2020) (codified at 26 CFR Part 1 and 26 CFR Part 56).

[22] 85 FR 31963-31964.

[23] McConnell v. Federal Election Commission, 540 U.S. 93, 206 (2003); Citizens United v. Federal Election Commission, 558 U.S. 310, 368 (2010).

David Keating

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