The IRS is finally trying to give greater clarity to the public (and let's be honest, to their own bumfuzzled employees) about what counts as political intervention for nonprofits known as 501(c)(4)s. These social welfare organizations have been the vehicle of choice to slip dark money into politics during the past couple federal election cycles.
Under the current rules, 501(c)(4)s can spend some of their resources on politics so long as politics does not become the entity's primary purpose. Whether a nonprofit has spent too much on politics is determined by a facts and circumstances analysis by the IRS. For critics of the IRS, this leaves too much discretion in the hands of the government to determine what is and isn't political on an ad hoc case by case basis.
For critics of dark money in elections, the ambiguity around the tax rules is an open invitation for moneyed interests to hide their political spending in social welfare groups and wager they won't get caught crossing the impermissible line. So both sides have reasons to be pleased that the IRS is trying to move from the malleable "facts and circumstances" approach to a more bright line approach.
The IRS's proposed rule has run into the bugaboo that has plagued the Supreme Court and election administrators for years: how to define "political" advertisements. Ever since Buckley v. Valeo (1976), the government has had the constitutional power to regulate ads that contain "express advocacy." But Buckley had notoriously limited the definition of express advocacy to what became known as the magic words: "vote for," "elect," "support," "cast your ballot for," "Smith for Congress," "vote against," "defeat," and "reject." It was child's pay to avoid these words and still have an ad that touted or damned a candidate. Hence Congress stepped in to expand what counted as a political ad.
After McConnell v. FEC blessed Congress's expanded definition of political ads, federal law covered so-called "electioneering communications." These are defined by federal statute as broadcast ads that mention a federal candidate 60 days before a general election or 30 days before a primary election, cost at least $10,000 and reach 50,000 viewers. The IRS's rule would cover electioneering communications as "candidate-related political activity." This definition has its limits. It doesn't cover ads on the internet, or print ads, or ads that cost less than ten grand.
The proposed IRS rule covers both state and federal political ads for 501(c)(4)s. One issue this raises is whether the federal definitions of election ads are a constitutional floor or a ceiling for what counts at as an election ad for state purposes. So on one hand, state statutes define what counts as state political ads, but on the other hand, those laws also have to conform with constitutional requirements. And the Supreme Court hasn't had a chance to opine on the contours of the constitutionality of state laws that are more expansive than the federal definitions of what a political ad is. There are differences between state and federal elections that justify state laws being different. For example, constituencies for state assemblies are usually smaller than Congressional constituencies. These state races are therefore more likely to rely on cheap print media.
Federal electioneering communications are defined as only broadcast ads; but some states define electioneering communications to include both broadcast and non-broadcast. The IRS rule would cover non-broadcast ads. Citizens United v. FEC hints that this may be constitutionally O.K. since the Court approved campaign finance disclosures for a video-on-demand film (which was not a classic 30-second broadcast tv commercial).
The comments the IRS receives on this proposal between now and February 27, 2014 are likely to be all over the map ranging from we don't need a new rule, to this rule would make it worse, to this rule doesn't go far enough. If you would like to read my comment it can be found here. And so the interesting thing will be how much the final rule changes from what is proposed now and where the IRS chooses to push the envelope and where they choose to play it safe.