Recent efforts by the Internal Revenue Service to create a bright-line test for determining how much political activity by tax-exempt groups is too much has the attention of many associations that view such rules as infringing on free speech rights.

The purpose of the proposed rules, which the IRS put out for comment last fall, is to create clear-cut definitions of political activity by 501(c)(4) social welfare organizations. The administration has left the door open to start viewing political activity by trade associations and unions through the same lens.

Treasury said last fall that it wanted public comments about whether similar standards “should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.”

The proposed guidance would also expand the definition of “candidate-related political activity” to include not only communications expressly advocating for or against a candidate but also activities like voter registration and get-out-the-vote drives. ASAE submitted comments to the IRS in February asserting that this would constitute a major shift in what the federal government views to be permissible political activity by nonprofit groups.

Given the significant public interest in the issue, Treasury and the IRS have committed to proceeding carefully with this rulemaking.

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax exemption are clear and can be applied consistently.”

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