Our Letter to the Treasury Dep’t.: Make Better (c)(3) Rules

Because civic participation is vital and should be protected, we’ve asked the Treasury Department to issue new guidance on the political activity of nonprofit groups organized under section 501(c)(3) of the tax code and put an end to the confusion stemming from the current confusing rules.

In a letter submitted Monday as a comment to the Treasury’s self-imposed to-do list, called the Priority Guidance Plan, we point out that 501(c)(3) organizations are uniquely vulnerable to unclear rules, since doing any political activity, defined by the murky “facts and circumstances” standard, puts their tax-exempt status at risk.

501(c)(3) groups, like churches and charities, end up being prevented from doing political activity because the current vague definition of political activity acts like a speed limit sign that says “don’t go too fast.” Some bad actors will push the boundary, but most careful organizations won’t do things they otherwise could because they’re too afraid of “going too fast.”

“Offering 501(c)(3)s guidance on the rules that apply to them will create a more workable regulatory regime, deter bad actors, and empower well-meaning organizations to engage in the political system in the permissible ways that Congress intended,” says the letter.

The letter points out that while a provision in the 2016 Consolidated Appropriations Act prevents Treasury and the Internal Revenue Service (IRS) from improving the definition as it relates to 501(c)(4) groups, the path for a new definition for (c)(3)s is clear.

The current rules are so unworkable that risk-averse (c)(3)s don’t engage in the kinds of nonpartisan activities they are allowed to do, says the letter. Particularly in an election year, having unclear rules chills the speech of law-abiding organizations while encouraging abuses from those willing to flout the rules.

Charities should be encouraging civic participation; it’s one of their most vital roles. Nonpartisan engagement with our democracy should be easy for nonprofits, but the rules as they stand make it hard. Treasury can take a small step toward clearer rules by putting a fix for (c)(3)s on their to-do list NOW!