Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities, 71535-71542 [2013-28492]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 230 (Friday, November 29, 2013)]
[Proposed Rules]
[Pages 71535-71542]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28492]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-134417-13]
RIN 1545-BL81


Guidance for Tax-Exempt Social Welfare Organizations on 
Candidate-Related Political Activities

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations that provide 
guidance to tax-exempt social welfare organizations on political 
activities related to candidates that will not be considered to promote 
social welfare. These regulations will affect tax-exempt social welfare 
organizations and organizations seeking such status. This document 
requests comments from the public regarding these proposed regulations. 
This document also requests comments from the public regarding the 
standard under current regulations that considers a tax-exempt social 
welfare organization to be operated exclusively for the promotion of 
social welfare if it is ``primarily'' engaged in activities that 
promote the common good and general welfare of the people of the 
community, including how this standard should be measured and whether 
this standard should be changed.

DATES: Written or electronic comments and requests for a public hearing 
must be received by February 27, 2014.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-134417-13), Room 
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
134417-13), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at https://www.regulations.gov (IRS REG-134417-13).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Amy F. Giuliano at (202) 317-5800; concerning submission of comments 
and requests for a public hearing, Oluwafunmilayo Taylor at (202) 317-
6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by January 28, 2014.
    Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced; and
    How the burden of complying with the proposed collection of 
information may be minimized, including through forms of information 
technology.
    The collection of information in these proposed regulations is in 
Sec.  1.501(c)(4)-1(a)(2)(iii)(D), which provides a special rule for 
contributions by an organization described in section 501(c)(4) of the 
Internal Revenue Code (Code) to an organization described in section 
501(c). Generally, a contribution by a section 501(c)(4) organization 
to a section 501(c) organization that engages in candidate-related 
political activity will be considered candidate-related political 
activity by the section 501(c)(4) organization. The special rule in 
Sec.  1.501(c)(4)-1(a)(2)(iii)(D) provides that a contribution to a 
section 501(c) organization will not be treated as a contribution to an 
organization engaged in candidate-related political activity if the 
contributor organization obtains a written representation from an 
authorized officer of the recipient organization stating that the 
recipient organization does not engage in any such activity and the 
contribution is subject to a written restriction that it not be used 
for candidate-related political activity. This special provision would 
not apply if the contributor organization knows or has reason to know 
that the representation is inaccurate or unreliable. The expected 
recordkeepers are section 501(c)(4) organizations that choose to 
contribute to, and to seek a written representation from, a section 
501(c) organization.
    Estimated number of recordkeepers: 2,000.
    Estimated average annual burden hours per recordkeeper: 2 hours.
    Estimated total annual recordkeeping burden: 4,000 hours.
    A particular section 501(c)(4) organization may require more or 
less time, depending on the number of contributions for which a 
representation is sought.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by section 6103.

Background

    Section 501(c)(4) of the Code provides a Federal income tax 
exemption, in part, for ``[c]ivic leagues or organizations not 
organized for profit but operated exclusively for the promotion of 
social welfare.'' This exemption dates back to the enactment of the 
federal income tax in 1913. See Tariff Act of 1913, 38 Stat. 114 
(1913). The statutory provision was largely unchanged until 1996, when 
section 501(c)(4) was amended to prohibit inurement of an 
organization's net earnings to private shareholders or individuals.
    Prior to 1924, the accompanying Treasury regulations did not 
elaborate on the meaning of ``promotion of social welfare.'' See 
Regulations 33 (Rev.), art. 67 (1918). Treasury regulations promulgated 
in 1924 explained that civic leagues qualifying for exemption under 
section 231(8) of the Revenue Act of 1924, the predecessor to section 
501(c)(4) of the 1986 Code, are ``those not organized for profit but 
operated exclusively for purposes beneficial to the community as a 
whole,'' and generally include ``organizations engaged in promoting the 
welfare of mankind, other than organizations comprehended within 
[section 231(6) of the Revenue Act of 1924, the predecessor to section 
501(c)(3) of the 1986 Code].'' See Regulations 65, art. 519 (1924). The 
regulations remained substantially the same until 1959.

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    The current regulations under section 501(c)(4) were proposed and 
finalized in 1959. They provide that ``[a]n 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.'' Treas. Reg. Sec.  1.501(c)(4)-
1(a)(2)(i). An organization ``embraced'' within section 501(c)(4) is 
one that is ``operated primarily for the purpose of bringing about 
civic betterments and social improvements.'' Id. The regulations 
further provide that ``[t]he 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.'' Treas. Reg. Sec.  1.501(c)(4)-1(a)(2)(ii). This language is 
similar to language that appears in section 501(c)(3) requiring section 
501(c)(3) organizations not to ``participate in, or intervene in 
(including the publishing or distributing of statements), any political 
campaign on behalf of (or in opposition to) any candidate for public 
office'' (``political campaign intervention''). However, unlike the 
absolute prohibition that applies to charitable organizations described 
in section 501(c)(3), an organization that primarily engages in 
activities that promote social welfare will be considered under the 
current regulations to be operating exclusively for the promotion of 
social welfare, and may qualify for tax-exempt status under section 
501(c)(4), even though it engages in some political campaign 
intervention.
    The section 501(c)(4) regulations have not been amended since 1959, 
although Congress took steps in the intervening years to address 
further the relationship of political campaign activities to tax-exempt 
status. In particular, section 527, which governs the tax treatment of 
political organizations, was enacted in 1975 and provides generally 
that amounts received as contributions and other funds raised for 
political purposes (section 527 exempt function income) are not subject 
to tax. Section 527(e)(1) defines a ``political organization'' as ``a 
party, committee, association, fund, or other organization (whether or 
not incorporated) organized and operated primarily for the purpose of 
directly or indirectly accepting contributions or making expenditures, 
or both, for an exempt function.'' Section 527(f) also imposes a tax on 
exempt organizations described in section 501(c), including section 
501(c)(4) social welfare organizations, that make an expenditure 
furthering a section 527 exempt function. The tax is imposed on the 
lesser of the organization's net investment income or section 527 
exempt function expenditures. Section 527(e)(2) defines ``exempt 
function'' as ``the function of influencing or attempting to influence 
the selection, nomination, election, or appointment of any individual 
to any federal, state, or local public office or office in a political 
organization, or the election of Presidential or Vice-Presidential 
electors'' (referred to in this document as ``section 527 exempt 
function'').\1\
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    \1\ In 2000 and 2002, section 527 was amended to require 
political organizations (with some exceptions) to file a notice with 
the IRS when first organized and to periodically disclose publicly 
certain information regarding their expenditures and contributions. 
See sections 527(i) and 527(j).
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    Unlike the section 501(c)(3) standard of political campaign 
intervention, and the similar standard currently applied under section 
501(c)(4), both of which focus solely on candidates for elective public 
office, a section 527 exempt function encompasses activities related to 
a broader range of officials, including those who are appointed or 
nominated, such as executive branch officials and certain judges. Thus, 
while there is currently significant overlap in the activities that 
constitute political campaign intervention under sections 501(c)(3) and 
501(c)(4) and those that further a section 527 exempt function, the 
concepts are not synonymous.
    Over the years, the IRS has stated that whether an organization is 
engaged in political campaign intervention depends upon all of the 
facts and circumstances of each case. See Rev. Rul. 78-248 (1978-1 CB 
154) (illustrating application of the facts and circumstances analysis 
to voter education activities conducted by section 501(c)(3) 
organizations); Rev. Rul. 80-282 (1980-2 CB 178) (amplifying Rev. Rul. 
78-248 regarding the timing and distribution of voter education 
materials); Rev. Rul. 86-95 (1986-2 CB 73) (holding a public forum for 
the purpose of educating and informing the voters, which provides fair 
and impartial treatment of candidates, and which does not promote or 
advance one candidate over another, does not constitute political 
campaign intervention under section 501(c)(3)). More recently, the IRS 
released Rev. Rul. 2007-41 (2007-1 CB 1421), providing 21 examples 
illustrating facts and circumstances to be considered in determining 
whether a section 501(c)(3) organization's activities (including voter 
education, voter registration, and get-out-the-vote drives; individual 
activity by organization leaders; candidate appearances; business 
activities; and Web sites) result in political campaign intervention. 
The IRS generally applies the same facts and circumstances analysis 
under section 501(c)(4). See Rev. Rul. 81-95 (1981-1 CB 332) (citing 
revenue rulings under section 501(c)(3) for examples of what 
constitutes participation or intervention in political campaigns for 
purposes of section 501(c)(4)).
    Similarly, Rev. Rul. 2004-6 (2004-1 CB 328) provides six examples 
illustrating facts and circumstances to be considered in determining 
whether a section 501(c) organization (such as a section 501(c)(4) 
social welfare organization) that engages in public policy advocacy has 
expended funds for a section 527 exempt function. The analysis 
reflected in these revenue rulings for determining whether an 
organization has engaged in political campaign intervention, or has 
expended funds for a section 527 exempt function, is fact-intensive.
    Recently, increased attention has been focused on potential 
political campaign intervention by section 501(c)(4) organizations. A 
recent IRS report relating to IRS review of applications for tax-exempt 
status states that ``[o]ne of the significant challenges with the 
501(c)(4) [application] review process has been the lack of a clear and 
concise definition of `political campaign intervention.' '' Internal 
Revenue Service, ``Charting a Path Forward at the IRS: Initial 
Assessment and Plan of Action'' at 20 (June 24, 2013). In addition, 
``[t]he distinction between campaign intervention and social welfare 
activity, and the measurement of the organization's social welfare 
activities relative to its total activities, have created considerable 
confusion for both the public and the IRS in making appropriate section 
501(c)(4) determinations.'' Id. at 28. The Treasury Department and the 
IRS recognize that both the public and the IRS would benefit from 
clearer definitions of these concepts.

Explanation of Provisions

1. Overview

    The Treasury Department and the IRS recognize that more definitive 
rules with respect to political activities related to candidates--
rather than the existing, fact-intensive analysis--would be helpful in 
applying the rules regarding qualification for tax-exempt status under 
section 501(c)(4). Although more definitive rules might fail to capture 
(or might sweep in) activities that would (or would not) be captured 
under the IRS' traditional facts and circumstances approach, adopting 
rules with sharper distinctions in this area

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would provide greater certainty and reduce the need for detailed 
factual analysis in determining whether an organization is described in 
section 501(c)(4). Accordingly, the Treasury Department and the IRS 
propose to amend Treas. Reg. Sec.  1.501(c)(4)-1(a)(2) to identify 
specific political activities that would be considered candidate-
related political activities that do not promote social welfare.
    To distinguish the proposed rules under section 501(c)(4) from the 
section 501(c)(3) standard and the similar standard currently applied 
under section 501(c)(4), the proposed regulations would amend Treas. 
Reg. Sec.  1.501(c)(4)-1(a)(2)(ii) to delete the current reference to 
``direct or indirect participation or intervention in political 
campaigns on behalf of or in opposition to any candidate for public 
office,'' which is similar to language in the section 501(c)(3) statute 
and regulations. Instead the proposed regulations would revise Treas. 
Reg. Sec.  1.501(c)(4)-1(a)(2)(ii) to state that ``[t]he promotion of 
social welfare does not include direct or indirect candidate-related 
political activity.'' As explained in more detail in section 2 of this 
preamble, the proposed rules draw upon existing definitions of 
political campaign activity, both in the Code and in federal election 
law, to define candidate-related political activity that would not be 
considered to promote social welfare. The proposed rules draw in 
particular from certain statutory provisions of section 527, which 
specifically deals with political organizations and taxes section 
501(c) organizations, including section 501(c)(4) organizations, on 
certain types of political campaign activities. Recognizing that it may 
be beneficial to have a more uniform set of rules relating to political 
campaign activity for tax-exempt organizations, the Treasury Department 
and the IRS request comments in subparagraphs a through c of this 
section of the preamble regarding whether the same or a similar 
approach should be adopted in addressing political campaign activities 
of other section 501(c) organizations, as well as whether the 
regulations under section 527 should be revised to adopt the same or a 
similar approach in defining section 527 exempt function activity.
a. Interaction With Section 501(c)(3)
    These proposed regulations do not address the definition of 
political campaign intervention under section 501(c)(3). The Treasury 
Department and the IRS recognize that, because such intervention is 
absolutely prohibited under section 501(c)(3), a more nuanced 
consideration of the totality of facts and circumstances may be 
appropriate in that context. The Treasury Department and the IRS 
request comments on the advisability of adopting an approach to 
defining political campaign intervention under section 501(c)(3) 
similar to the approach set forth in these regulations, either in lieu 
of the facts and circumstances approach reflected in Rev. Rul. 2007-41 
or in addition to that approach (for example, by creating a clearly 
defined presumption or safe harbor). The Treasury Department and the 
IRS also request comments on whether any modifications or exceptions 
would be needed in the section 501(c)(3) context and, if so, how to 
ensure that any such modifications or exceptions are clearly defined 
and administrable. Any such change would be introduced in the form of 
proposed regulations to allow an additional opportunity for public 
comment.
b. Interaction With Section 527
    As noted in the ``Background'' section of this preamble, a section 
501(c)(4) organization is subject to tax under section 527(f) if it 
makes expenditures for a section 527 exempt function. Consistent with 
section 527, the proposed regulations provide that ``candidate-related 
political activity'' for purposes of section 501(c)(4) includes 
activities relating to selection, nomination, election, or appointment 
of individuals to serve as public officials, officers in a political 
organization, or Presidential or Vice Presidential electors. These 
proposed regulations do not, however, address the definition of 
``exempt function'' activity under section 527 or the application of 
section 527(f). The Treasury Department and the IRS request comments on 
the advisability of adopting rules that are the same as or similar to 
these proposed regulations for purposes of defining section 527 exempt 
function activity in lieu of the facts and circumstances approach 
reflected in Rev. Rul. 2004-6. Any such change would be introduced in 
the form of proposed regulations to allow an additional opportunity for 
public comment.
c. Interaction With Sections 501(c)(5) and 501(c)(6)
    The proposed regulations define candidate-related political 
activity for social welfare organizations described in section 
501(c)(4). The Treasury Department and the IRS are considering whether 
to amend the current regulations under sections 501(c)(5) and 501(c)(6) 
to provide that exempt purposes under those regulations (which include 
``the betterment of the conditions of those engaged in [labor, 
agricultural, or horticultural] pursuits'' in the case of a section 
501(c)(5) organization and promoting a ``common business interest'' in 
the case of a section 501(c)(6) organization) do not include candidate-
related political activity as defined in these proposed regulations. 
The Treasury Department and the IRS request comments on the 
advisability of adopting this approach in defining activities that do 
not further exempt purposes under sections 501(c)(5) and 501(c)(6). Any 
such change would be introduced in the form of proposed regulations to 
allow an additional opportunity for public comment.
d. Additional Guidance on the Meaning of ``Operated Exclusively for the 
Promotion of Social Welfare''
    The Treasury Department and the IRS have received requests for 
guidance on the meaning of ``primarily'' as used in the current 
regulations under section 501(c)(4). The current regulations provide, 
in part, that an organization is operated exclusively for the promotion 
of social welfare within the meaning of section 501(c)(4) if it is 
``primarily engaged'' in promoting in some way the common good and 
general welfare of the people of the community. Treas. Reg. Sec.  
1.501(c)(4)-1(a)(2)(i). As part of the same 1959 Treasury decision 
promulgating the current section 501(c)(4) regulations, regulations 
under section 501(c)(3) were adopted containing similar language: 
``[a]n organization will be regarded as `operated exclusively' for one 
or more exempt purposes only if it engages primarily in activities 
which accomplish one or more of such exempt purposes specified in 
section 501(c)(3).'' Treas. Reg. Sec.  1.501(c)(3)-1(c)(1). Unlike the 
section 501(c)(4) regulations, however, the section 501(c)(3) 
regulations also provide that ``[a]n organization will not be so 
regarded if more than an insubstantial part of its activities is not in 
furtherance of an exempt purpose.'' Id.
    Some have questioned the use of the ``primarily'' standard in the 
section 501(c)(4) regulations and suggested that this standard should 
be changed. The Treasury Department and the IRS are considering whether 
the current section 501(c)(4) regulations should be modified in this 
regard and, if the ``primarily'' standard is retained, whether the 
standard should be defined with more precision or revised to mirror the 
standard under the section 501(c)(3) regulations. Given the potential 
impact on organizations currently recognized as described in section 
501(c)(4) of any change in the ``primarily'' standard, the

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Treasury Department and the IRS wish to receive comments from a broad 
range of organizations before deciding how to proceed. Accordingly, the 
Treasury Department and the IRS invite comments from the public on what 
proportion of an organization's activities must promote social welfare 
for an organization to qualify under section 501(c)(4) and whether 
additional limits should be imposed on any or all activities that do 
not further social welfare. The Treasury Department and the IRS also 
request comments on how to measure the activities of organizations 
seeking to qualify as section 501(c)(4) social welfare organizations 
for these purposes.

2. Definition of Candidate-Related Political Activity

    These proposed regulations provide guidance on which activities 
will be considered candidate-related political activity for purposes of 
the regulations under section 501(c)(4). These proposed regulations 
would replace the language in the existing final regulation under 
section 501(c)(4)--``participation or intervention in political 
campaigns on behalf of or in opposition to any candidate for public 
office''--with a new term--``candidate-related political activity''--to 
differentiate the proposed section 501(c)(4) rule from the standard 
employed under section 501(c)(3) (and currently employed under section 
501(c)(4)). The proposed rule is intended to help organizations and the 
IRS more readily identify activities that constitute candidate-related 
political activity and, therefore, do not promote social welfare within 
the meaning of section 501(c)(4). These proposed regulations do not 
otherwise define the promotion of social welfare under section 
501(c)(4). The Treasury Department and the IRS note that the fact that 
an activity is not candidate-related political activity under these 
proposed regulations does not mean that the activity promotes social 
welfare. Whether such an activity promotes social welfare is an 
independent determination.
    In defining candidate-related political activity for purposes of 
section 501(c)(4), these proposed regulations draw key concepts from 
the federal election campaign laws, with appropriate modifications 
reflecting the purpose of these regulations to define which 
organizations may receive the benefits of section 501(c)(4) tax-exempt 
status and to promote tax compliance (as opposed to campaign finance 
regulation). In addition, the concepts drawn from the federal election 
campaign laws have been modified to reflect that section 501(c)(4) 
organizations may be involved in activities related to local or state 
elections (in addition to federal elections), as well as the broader 
scope of the proposed definition of candidate (which is not limited to 
candidates for federal elective office).
    The proposed regulations provide that candidate-related political 
activity includes activities that the IRS has traditionally considered 
to be political campaign activity per se, such as contributions to 
candidates and communications that expressly advocate for the election 
or defeat of a candidate. The proposed regulations also would treat as 
candidate-related political activity certain activities that, because 
they occur close in time to an election or are election-related, have a 
greater potential to affect the outcome of an election. Currently, such 
activities are subject to a facts and circumstances analysis before a 
determination can be made as to whether the activity furthers social 
welfare within the meaning of section 501(c)(4). Under the approach in 
these proposed regulations, such activities instead would be subject to 
a more definitive rule. In addition, consistent with the goal of 
providing greater clarity, the proposed regulations would identify 
certain specific activities as candidate-related political activity. 
The Treasury Department and the IRS acknowledge that the approach taken 
in these proposed regulations, while clearer, may be both more 
restrictive and more permissive than the current approach, but believe 
the proposed approach is justified by the need to provide greater 
certainty to section 501(c)(4) organizations regarding their activities 
and reduce the need for fact-intensive determinations.
    The Treasury Department and the IRS note that a particular activity 
may fit within one or more categories of candidate-related political 
activity described in subsections b through e of this section 2 of the 
preamble; the categories are not mutually exclusive. For example, the 
category of express advocacy communications may overlap with the 
category of certain communications close in time to an election.
a. Definition of ``Candidate''
    These proposed regulations provide that, consistent with the scope 
of section 527, ``candidate'' means an individual who identifies 
himself or is proposed by another for selection, nomination, election, 
or appointment to any public office or office in a political 
organization, or to be a Presidential or Vice-Presidential elector, 
whether or not the individual is ultimately selected, nominated, 
elected, or appointed. In addition, the proposed regulations clarify 
that for these purposes the term ``candidate'' also includes any 
officeholder who is the subject of a recall election. The Treasury 
Department and the IRS note that defining ``candidate-related political 
activity'' in these proposed regulations to include activities related 
to candidates for a broader range of offices (such as activities 
relating to the appointment or confirmation of executive branch 
officials and judicial nominees) is a change from the historical 
application in the section 501(c)(4) context of the section 501(c)(3) 
standard of political campaign intervention, which focuses on 
candidates for elective public office only. See Treas. Reg. Sec.  
1.501(c)(3)-1(c)(3)(iii). These proposed regulations instead would 
apply a definition that reflects the broader scope of section 527 and 
that is already applied to a section 501(c)(4) organization engaged in 
section 527 exempt function activity through section 527(f).
b. Express Advocacy Communications
    These proposed regulations provide that candidate-related political 
activity includes communications that expressly advocate for or against 
a candidate. These proposed regulations draw from Federal Election 
Commission rules in defining ``expressly advocate,'' but expand the 
concept to include communications expressing a view on the selection, 
nomination, or appointment of individuals, or on the election or defeat 
of one or more candidates or of candidates of a political party. These 
proposed regulations make clear that all communications--including 
written, printed, electronic (including Internet), video, and oral 
communications--that express a view, whether for or against, on a 
clearly identified candidate (or on candidates of a political party) 
would constitute candidate-related political activity. A candidate can 
be ``clearly identified'' in a communication by name, photograph, or 
reference (such as ``the incumbent'' or a reference to a particular 
issue or characteristic distinguishing the candidate from others). The 
proposed regulations also provide that candidate-related political 
activity includes any express advocacy communication the expenditures 
for which an organization reports to the Federal Election Commission 
under the Federal Election Campaign Act as an independent expenditure.

[[Page 71539]]

c. Public Communications Close in Time to an Election
    Under current guidance, the timing of a communication about a 
candidate that is made shortly before an election is a factor tending 
to indicate a greater risk of political campaign intervention or 
section 527 exempt function activity. In the interest of greater 
clarity, these proposed regulations would move away from the facts and 
circumstances approach that the IRS has traditionally applied in 
analyzing certain activities conducted close in time to an election. 
These proposed regulations draw from provisions of federal election 
campaign laws that treat certain communications that are close in time 
to an election and that refer to a clearly identified candidate as 
electioneering communications, but make certain modifications. The 
proposed regulations expand the types of candidates and communications 
that are covered to reflect the types of activities an organization 
might conduct related to local and state, as well as federal, contests, 
including any election or ballot measure to recall an individual who 
holds state or local elective public office. In addition, the expansion 
of the types of communications covered in the proposed regulations 
reflects the fact that an organization's tax exempt status is 
determined based on all of its activities, even low cost and volunteer 
activities, not just its large expenditures.
    Under the proposed definition, any public communication that is 
made within 60 days before a general election or 30 days before a 
primary election and that clearly identifies a candidate for public 
office (or, in the case of a general election, refers to a political 
party represented in that election) would be considered candidate-
related political activity. These timeframes are the same as those 
appearing in the Federal Election Campaign Act definition of 
electioneering communications. The definition of ``election,'' 
including what would be treated as a primary or a general election, is 
consistent with section 527(j) and the federal election campaign laws.
    A communication is ``public'' if it is made using certain mass 
media (specifically, by broadcast, in a newspaper, or on the Internet), 
constitutes paid advertising, or reaches or is intended to reach at 
least 500 people (including mass mailings or telephone banks). The 
Treasury Department and the IRS intend that content previously posted 
by an organization on its Web site that clearly identifies a candidate 
and remains on the Web site during the specified pre-election period 
would be treated as candidate-related political activity.
    The proposed regulations also provide that candidate-related 
political activity includes any communication the expenditures for 
which an organization reports to the Federal Election Commission under 
the Federal Election Campaign Act, including electioneering 
communications.
    The approach taken in the proposed definition of candidate-related 
political activity would avoid the need to consider potential 
mitigating or aggravating circumstances in particular cases (such as 
whether an issue-oriented communication is ``neutral'' or ``biased'' 
with respect to a candidate). Thus, this definition would apply without 
regard to whether a public communication is intended to influence the 
election or some other, non-electoral action (such as a vote on pending 
legislation) and without regard to whether such communication was part 
of a series of similar communications. Moreover, a public communication 
made outside the 60-day or 30-day period would not be candidate-related 
political activity if it does not fall within the ambit of express 
advocacy communications or another specific provision of the 
definition. The Treasury Department and the IRS request comments on 
whether the length of the period should be longer (or shorter) and 
whether there are particular communications that (regardless of timing) 
should be excluded from the definition because they can be presumed to 
neither influence nor constitute an attempt to influence the outcome of 
an election. Any comments should specifically address how the proposed 
exclusion is consistent with the goal of providing clear rules that 
avoid fact-intensive determinations.
    The Treasury Department and the IRS also note that this rule 
regarding public communications close in time to an election would not 
apply to public communications identifying a candidate for a state or 
federal appointive office that are made within a specified number of 
days before a scheduled appointment, confirmation hearing or vote, or 
other selection event. The Treasury Department and the IRS request 
comments on whether a similar rule should apply with respect to 
communications within a specified period of time before such a 
scheduled appointment, confirmation hearing or vote, or other selection 
event.
d. Contributions to a Candidate, Political Organization, or any Section 
501(c) Entity Engaged in Candidate-Related Political Activity
    The proposed definition of candidate-related political activity 
would include contributions of money or anything of value to or the 
solicitation of contributions on behalf of (1) any person if such 
contribution is recognized under applicable federal, state, or local 
campaign finance law as a reportable contribution; (2) any political 
party, political committee, or other section 527 organization; or (3) 
any organization described in section 501(c) that engages in candidate-
related political activity within the meaning of this proposed rule. 
This definition of contribution is similar to the definition of 
contribution that applies for purposes of section 527. The Treasury 
Department and the IRS intend that the term ``anything of value'' would 
include both in-kind donations and other support (for example, 
volunteer hours and free or discounted rentals of facilities or mailing 
lists). The Treasury Department and the IRS request comments on whether 
other transfers, such as indirect contributions described in section 
276 to political parties or political candidates, should be treated as 
candidate-related political activity.
    The Treasury Department and the IRS recognize that a section 
501(c)(4) organization making a contribution may not know whether a 
recipient section 501(c) organization engages in candidate-related 
political activity. The proposed regulations provide that, for purposes 
of this definition, a recipient organization would not be treated as a 
section 501(c) organization engaged in candidate-related political 
activity if the contributor organization obtains a written 
representation from an authorized officer of the recipient organization 
stating that the recipient organization does not engage in any such 
activity and the contribution is subject to a written restriction that 
it not be used for candidate-related political activity. This special 
provision would apply only if the contributor organization does not 
know or have reason to know that the representation is inaccurate or 
unreliable.
e. Election-Related Activities
    The proposed definition of candidate-related political activity 
would include certain specified election-related activities, including 
the conduct of voter registration and get-out-the-vote drives, 
distribution of material prepared by or on behalf of a candidate or 
section 527 organization, and preparation or

[[Page 71540]]

distribution of a voter guide and accompanying material that refers to 
a candidate or a political party. In addition, an organization that 
hosts an event on its premises or conducts an event off-site within 30 
days of a primary election or 60 days of a general election at which 
one or more candidates in such election appear as part of the program 
(whether or not such appearance was previously scheduled) would be 
engaged in candidate-related political activity under the proposed 
definition.
    The Treasury Department and the IRS acknowledge that under the 
facts and circumstances analysis currently used for section 501(c)(4) 
organizations as well as for section 501(c)(3) organizations, these 
election-related activities may not be considered political campaign 
intervention if conducted in a non-partisan and unbiased manner. 
However, these determinations are highly fact-intensive. The Treasury 
Department and the IRS request comments on whether any particular 
activities conducted by section 501(c)(4) organizations should be 
excepted from the definition of candidate-related political activity as 
voter education activity and, if so, a description of how the proposed 
exception will both ensure that excepted activities are conducted in a 
non-partisan and unbiased manner and avoid a fact-intensive analysis.
f. Attribution to a Section 501(c)(4) Organization of Certain 
Activities and Communications
    These proposed regulations provide that activities conducted by an 
organization include, but are not limited to, (1) activities paid for 
by the organization or conducted by the organization's officers, 
directors, or employees acting in that capacity, or by volunteers 
acting under the organization's direction or supervision; (2) 
communications made (whether or not such communications were previously 
scheduled) as part of the program at an official function of the 
organization or in an official publication of the organization; and (3) 
other communications (such as television advertisements) the creation 
or distribution of which is paid for by the organization. These 
proposed regulations also provide that an organization's Web site is an 
official publication of the organization, so that material posted by 
the organization on its Web site may constitute candidate-related 
political activity. The proposed regulations do not specifically 
address material posted by third parties on an organization's Web site. 
The Treasury Department and the IRS request comments on whether, and 
under what circumstances, material posted by a third party on an 
interactive part of the organization's Web site should be attributed to 
the organization for purposes of this rule. In addition, the Treasury 
Department and the IRS have stated in guidance under section 501(c)(3) 
regarding political campaign intervention that when a charitable 
organization chooses to establish a link to another Web site, the 
organization is responsible for the consequences of establishing and 
maintaining that link, even if it does not have control over the 
content of the linked site. See Rev. Rul. 2007-41. The Treasury 
Department and the IRS request comments on whether the consequences of 
establishing and maintaining a link to another Web site should be the 
same or different for purposes of the proposed definition of candidate-
related political activity.

Proposed Effective/Applicability Date

    These regulations are proposed to be effective the date of 
publication of the Treasury decision adopting these rules as final 
regulations in the Federal Register. For proposed date of 
applicability, see Sec.  1.501(c)(4)-1(c).

Statement of Availability for IRS Documents

    For copies of recently issued Revenue Procedures, Revenue Rulings, 
Notices, and other guidance published in the Internal Revenue Bulletin 
or Cumulative Bulletin, please visit the IRS Web site at https://www.irs.gov or the Superintendent of Documents, U.S. Government 
Printing Office, Washington, DC 20402.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations. It is hereby certified that this 
rule will not have a significant economic impact on a substantial 
number of small entities. This certification is based on the fact that 
only a minimal burden would be imposed by the rule, if adopted. Under 
the proposal, if a section 501(c)(4) organization chooses to contribute 
to a section 501(c) organization and wants assurance that the 
contribution will not be treated as candidate-related political 
activity, it may seek a written representation that the recipient does 
not engage in candidate-related political activity within the meaning 
of these regulations. Therefore, a regulatory flexibility analysis 
under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not 
required. Pursuant to section 7805(f) of the Code, this notice of 
proposed rulemaking has been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The Treasury Department and the IRS generally request 
comments on all aspects of the proposed rules. In particular, the 
Treasury Department and the IRS request comments on whether there are 
other specific activities that should be included in, or excepted from, 
the definition of candidate-related political activity for purposes of 
section 501(c)(4). Such comments should address how the proposed 
addition or exception is consistent with the goals of providing more 
definitive rules and reducing the need for fact-intensive analysis of 
the activity. All comments submitted by the public will be made 
available for public inspection and copying at www.regulations.gov or 
upon request.
    A public hearing will be scheduled if requested in writing by any 
person who timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place for the public hearing 
will be published in the Federal Register.

Drafting Information

    The principal author of these regulations is Amy F. Giuliano, 
Office of Associate Chief Counsel (Tax Exempt and Government Entities). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

[[Page 71541]]

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

0
Par. 2. Section 1.501(c)(4)-1 is proposed to be amended by revising the 
first sentence of paragraph (a)(2)(ii) and adding paragraphs 
(a)(2)(iii) and (c) to read as follows:


Sec.  1.501(c)(4)-1  Civic organizations and local associations of 
employees.

    (a) * * *
    (2) * * *
    (ii) * * * The promotion of social welfare does not include direct 
or indirect candidate-related political activity, as defined in 
paragraph (a)(2)(iii) of this section. * * *
    (iii) Definition of candidate-related political activity--(A) In 
general. For purposes of this section, candidate-related political 
activity means:
    (1) Any communication (as defined in paragraph (a)(2)(iii)(B)(3) of 
this section) expressing a view on, whether for or against, the 
selection, nomination, election, or appointment of one or more clearly 
identified candidates or of candidates of a political party that--
    (i) Contains words that expressly advocate, such as ``vote,'' 
``oppose,'' ``support,'' ``elect,'' ``defeat,'' or ``reject;'' or
    (ii) Is susceptible of no reasonable interpretation other than a 
call for or against the selection, nomination, election, or appointment 
of one or more candidates or of candidates of a political party;
    (2) Any public communication (defined in paragraph 
(a)(2)(iii)(B)(5) of this section) within 30 days of a primary election 
or 60 days of a general election that refers to one or more clearly 
identified candidates in that election or, in the case of a general 
election, refers to one or more political parties represented in that 
election;
    (3) Any communication the expenditures for which are reported to 
the Federal Election Commission, including independent expenditures and 
electioneering communications;
    (4) A contribution (including a gift, grant, subscription, loan, 
advance, or deposit) of money or anything of value to or the 
solicitation of contributions on behalf of--
    (i) Any person, if the transfer is recognized under applicable 
federal, state, or local campaign finance law as a reportable 
contribution to a candidate for elective office;
    (ii) Any section 527 organization; or
    (iii) Any organization described in section 501(c) that engages in 
candidate-related political activity within the meaning of this 
paragraph (a)(2)(iii) (see special rule in paragraph (a)(2)(iii)(D) of 
this section);
    (5) Conduct of a voter registration drive or ``get-out-the-vote'' 
drive;
    (6) Distribution of any material prepared by or on behalf of a 
candidate or by a section 527 organization including, without 
limitation, written materials, and audio and video recordings;
    (7) Preparation or distribution of a voter guide that refers to one 
or more clearly identified candidates or, in the case of a general 
election, to one or more political parties (including material 
accompanying the voter guide); or
    (8) Hosting or conducting an event within 30 days of a primary 
election or 60 days of a general election at which one or more 
candidates in such election appear as part of the program.
    (B) Related definitions. The following terms are defined for 
purposes of this paragraph (a)(2)(iii) only:
    (1) ``Candidate'' means an individual who publicly offers himself, 
or is proposed by another, for selection, nomination, election, or 
appointment to any federal, state, or local public office or office in 
a political organization, or to be a Presidential or Vice-Presidential 
elector, whether or not such individual is ultimately selected, 
nominated, elected, or appointed. Any officeholder who is the subject 
of a recall election shall be treated as a candidate in the recall 
election.
    (2) ``Clearly identified'' means the name of the candidate involved 
appears, a photograph or drawing of the candidate appears, or the 
identity of the candidate is apparent by reference, such as by use of 
the candidate's recorded voice or of terms such as ``the Mayor,'' 
``your Congressman,'' ``the incumbent,'' ``the Democratic nominee,'' or 
``the Republican candidate for County Supervisor.'' In addition, a 
candidate may be ``clearly identified'' by reference to an issue or 
characteristic used to distinguish the candidate from other candidates.
    (3) ``Communication'' means any communication by whatever means, 
including written, printed, electronic (including Internet), video, or 
oral communications.
    (4) ``Election'' means a general, special, primary, or runoff 
election for federal, state, or local office; a convention or caucus of 
a political party that has authority to nominate a candidate for 
federal, state or local office; a primary election held for the 
selection of delegates to a national nominating convention of a 
political party; or a primary election held for the expression of a 
preference for the nomination of individuals for election to the office 
of President. A special election or a runoff election is treated as a 
primary election if held to nominate a candidate. A convention or 
caucus of a political party that has authority to nominate a candidate 
is also treated as a primary election. A special election or a runoff 
election is treated as a general election if held to elect a candidate. 
Any election or ballot measure to recall an individual who holds state 
or local elective public office is also treated as a general election.
    (5) ``Public communication'' means any communication (as defined in 
paragraph (a)(2)(iii)(B)(3) of this section)--
    (i) By broadcast, cable, or satellite;
    (ii) On an Internet Web site;
    (iii) In a newspaper, magazine, or other periodical;
    (iv) In the form of paid advertising; or
    (v) That otherwise reaches, or is intended to reach, more than 500 
persons.
    (6) ``Section 527 organization'' means an organization described in 
section 527(e)(1) (including a separate segregated fund described in 
section 527(f)(3)), whether or not the organization has filed notice 
under section 527(i).
    (C) Attribution. For purposes of this section, activities conducted 
by an organization include activities paid for by the organization or 
conducted by an officer, director, or employee acting in that capacity 
or by volunteers acting under the organization's direction or 
supervision. Communications made by an organization include 
communications the creation or distribution of which is paid for by the 
organization or that are made in an official publication of the 
organization (including statements or material posted by the 
organization on its Web site), as part of the program at an official 
function of the organization, by an officer or director acting in that 
capacity, or by an employee, volunteer, or other representative 
authorized to communicate on behalf of the organization and acting in 
that capacity.
    (D) Special rule regarding contributions to section 501(c) 
organizations. For purposes of paragraph (a)(2)(iii)(A)(4) of this 
section, a contribution to an organization described in section 501(c) 
will not be treated as a contribution to an organization engaged in 
candidate-related political activity if--
    (1) The contributor organization obtains a written representation 
from an authorized officer of the recipient organization stating that 
the recipient

[[Page 71542]]

organization does not engage in such activity (and the contributor 
organization does not know or have reason to know that the 
representation is inaccurate or unreliable); and
    (2) The contribution is subject to a written restriction that it 
not be used for candidate-related political activity within the meaning 
of this paragraph (a)(2)(iii).
    (c) Effective/applicability date. Paragraphs (a)(2)(ii) and (iii) 
of this section apply on and after the date of publication of the 
Treasury decision adopting these rules as final regulations in the 
Federal Register.

 John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2013-28492 Filed 11-26-13; 4:15 pm]
BILLING CODE 4830-01-P