I read an article that said the 501(C) 4 or PAC's tax code that Congress passed prior to 1959 stated the PAC exclusively needs to be used for Social Welfare but the IRS in 1959 took upon themselves to apply "Primarily" vs "Exclusively" for Social Welfare and since only Congress can pass tax laws, all current and past PAC's were in violation of the tax code. Am I reading that correctly?
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You are reading it correctly.
There is, in fact, a lawsuit pending to this effect. You might want to call it the "anti-Tea Party" lawsuit!Evan Appelman, EA -
Here is the way the code as passed by Congress reads:
Here is the way the IRS regulations read:§ 501(c)(4)
§ 501(c)(4)(A)Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
§ 501(c)(4)(B)Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.
§ 1.501(c)(4)-1 Civic organizations and local associations of employees.
(a) Civic organizations —(1) In general. A civic league or organization may be exempt as an organization described in section 501(c)(4) if—
(i) It is not organized or operated for profit; and
(ii) It is operated exclusively for the promotion of social welfare.
(2) Promotion of social welfare —(i) In general. An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements. A social welfare organization will qualify for exemption as a charitable organization if it falls within the definition of charitable set forth in paragraph (d)(2) of §1.501(c)(3)–1 and is not an action organization as set forth in paragraph (c)(3) of §1.501(c)(3)–1.
(ii) Political or social activities. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure, or recreation of its members, or is carrying on a business with the general public in a manner similar to organizations which are operated for profit. See, however, section 501(c)(6) and §1.501(c)(6)–1, relating to business leagues and similar organizations. A social welfare organization that is not, at any time after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3) may qualify under section 501(c)(4) even though it is an action organization described in §1.501(c)(3)–1(c)(3)(ii) or (iv), if it otherwise qualifies under this section. For rules relating to an organization that is, after October 4, 1976, exempt from taxation as an organization described in section 501(c)(3), see section 504 and §1.504–1.
(b) Local associations of employees. Local associations of employees described in section 501(c)(4) are expressly entitled to exemption under section 501(a). As conditions to exemption, it is required (1) that the membership of such an association be limited to the employees of a designated person or persons in a particular municipality, and (2) that the net earnings of the association be devoted exclusively to charitable, educational, or recreational purposes. The word local is defined in paragraph (b) of §1.501(c)(12)–1. See paragraph (d) (2) and (3) of §1.501(c)(3)–1 with reference to the meaning of charitable and educational as used in this section.Comment
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My question is if the regulations specifically say social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office, then why wouldn't IRS look more closely at organizations that have political names and descriptions included in their application for exempt status?
In my opinion, if you want tax-exempt status, don't use political buzz words or phrases in your name or application to become a social welfare organization.Comment
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I was hoping you would weigh in Bees Knees
Maybe the new IRS commissioner will start to enforce the "exclusively"Comment
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