The Section 501(c)(4) Story

I was intrigued by all of the news in the few weeks about review of 501(c)(4) applications by the IRS and some related issues.  As I dug into the topic, I was struck by the use of "exclusive" in the statute, but "primary purpose" in the regulations that date back to 1959.  Exclusive sounds like 100% of the organizations efforts would need to be for social welfare. On the other hand, "primary purpose" sounds like half or more. But the regulation has on odd way of defining "exclusively" - "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."

The 501(c)(4) regulations also state: "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."

So, this all means that the organization can't spend most of its efforts on political activities. But it can still spend a decent portion of its efforts on it.

A few questions then arise - what exactly is political campaign activity?  For example, we always hear that as soon as a legislator is elected, they have to start campaigning for their re-election. So, would inviting a newly elected legislator to speak at a conference sponsored by a 501(c)(4) entity be political activity? Or could it be for the social welfare (finding out what is going on in the legislature)? Or does it depend?

I believe there are four controversies in this recent 501(c)(4) drama that continues to unfold.  I've got a short article in the AICPA Tax Insider today (6/13/13) - The Sec. 501(c)(4) Story: Program notes.  I do my best to lay it all out as if I was describing a novel or play - seems to work. I hope you'll take a look and post some comments here.  I also have a link at the end of the article to a website I created with lots of links on the topic including the text of the proposed and final regulations from the 1950s.