The Internal Revenue Service has sent dozens of questionnaires to Tea Party organizations applying for nonprofit tax status, inquiring about their political activities, and in coming weeks it plans to press a number of overtly political nonprofits to justify their status as "social welfare" organizations, the New York Times reports.
While Democrats in the Senate prepare legislation that would require such groups to disclose the names of their donors and attach disclaimers to their political advertising, tax experts are raising concerns that corporate donors to so-called "super PACs" may be deducting their contributions as business expenses. Nevertheless, the pushback by the organizations in question is expected to be fierce.
At issue are groups formed as 501(c)(4) organizations, the designation under the Internal Revenue Code for social welfare groups but one that also includes groups like American Crossroads and Priorities USA. According to the IRS, to qualify for (c)(4) status an organization must be engaged in the promotion of social welfare, which doesn't include unrelated business activities or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Under the code, such groups are allowed to engage in some political activity "so long as, in the aggregate, these nonexempt activities are not its primary activities" — a clause that has yet to be adequately defined for the public.
Tax professionals suspect — but cannot prove — that some donors are tucking their contributions to these groups into their marketing or advertising budgets and deducting them from their taxes. Recent Supreme Court rulings have further heightened concern about the way the (c)(4) section of the code is being used, with companies now able to donate unlimited amounts to super PACs as long as the groups do not coordinate their activities directly with candidates. "I think the story here," said Frances R. Hill, a tax law professor at the University of Miami, "is that we have a system in which this is happening, and there's absolutely no way we can find out legally."