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In the midst of continuing and highly politicized Congressional inquiries into Internal Revenue Service scrutiny of political activities of Code §501(c)(4) tax-exempt social welfare organization, the Treasury Department has released a proposed regulation defining what constitutes “candidate-related political activity” and taking the position that the promotion of social welfare does not include this type of activity. (See Federal Register, p.71535-71542, November 29, 2013.)

The proposed regulation comes six months after a scandal erupted over alleged unfair targeting by the IRS of exemption applications filed by conservative organizations thought to be involved in supporting candidates in the 2012 elections. The alleged targeting took place against a backdrop of exponentially increased spending on campaign issues beginning with the 2008 elections by organizations claiming tax exempt status under Code §501(c)(4). (See Wall Street Journal, IRS Moves to Restrict Nonprofits’ Politicking, November 27, 2013.)

The comment period concerning the newly issued proposed regulation runs until February 27, 2014. Comments are also being sought concerning how much of a Code §501(c)(4) organization’s activities must promote social welfare and whether the candidate-related political activity definition ought to be used in other contexts (such as to define political activities that do not further the tax-exempt purposes of other types of tax exempt organizations). In this regard, the Treasury Department is hoping to craft regulations that will have more clear cut, objective rules that will reduce the need for fact-intensive inquiries into an organization’s activities.

Outlined below are the current standards for political activity by Code §501(c)(4) organizations, a summary of the new proposed regulation and a brief discussion of the comments sought on related topics.