12/08/2023

House Ways & Means Subcommittee to Hold Hearing on Impact of Tax-exempt Sector on Politics

It will be held Dec. 13, 2023

On Dec. 13, 2023, the House Ways and Means Oversight Subcommittee will hold a hearing to examine the tax-exempt sector and its impact on American politics.

Earlier this year, House Ways and Means Chairman Jason Smith (R-MO) and Oversight Subcommittee Chairman David Schweikert (R-AZ) signaled an interest in scrutinizing the role that 501(c)(3) and 501(c)(4) tax-exempt organizations play in influencing elections. Over the summer, Smith and Schweikert requested information and input on existing rules and regulations governing tax-exempt organizations and what, if any, policy changes Congress should consider.

At the time, Smith and Schweikert suggested there is confusion in the tax-exempt sector about what is allowable political activity and expressed concern about “significant amounts” of foreign money flowing through 501(c)(3) and (c)(4) groups to influence elections. In response to the lawmakers’ information request, the American Society of Association Executives (ASAE) sent comments in September expressing its concern about the potential for unintended consequences for 501(c)(3) and (c)(4) associations should Congress revisit existing law in this area. ASAE will also be submitting comments for the record for the hearing next week.

Existing law prohibits 501(c)(3) organizations from engaging in political activity to influence elections, though they can conduct certain nonpartisan voter education activities. So-called "social welfare" organizations exempt under Section 501(c)(4) can engage in political activity so long as it is not their primary purpose.

The interest in nonprofit political activity from Republican tax-writers stands in notable contrast to Treasury regulations updated in 2018 during the Trump administration that stopped the requirement for 501(c)(4) and 501(c)(6) organizations to disclose donors on Schedule B of their Form 990 returns. The IRS defended the change at the time because it said it did not need the information to enforce the tax code and it protects donor information from inadvertently being disclosed for public inspection.

This article was provided to OSAP by ASAE's Power of Associations and Inroads.