In 1959, under the Dwight Eisenhower administration, the meaning of Section 501(c)4 of the Internal Revenue Code was changed dramatically. SECTION 501(c)4, Civil Leagues or Organizations not organized for profit but operated exclusively for the promotion of Social Welfare. The IRS decided the word exclusively could, in effect, be read as primarily.
According to Laurence O’Donnell for 54 years the IRS has gotten away with changing the word exclusively to primarily. The IRS took a hard, clear word exclusively and turned it into a soft word primarily and it left it to the IRS agents to determine if your organization was primarily concerned with promoting Social Welfare.
According to Ezra Klein the IRS does need some kind of test that helps them weed out political organizations attempting to register as tax exempt 501(c)4 Social Welfare groups. But the test has to be studiously and unquestionably neutral.
Despite the outrage over the IRS targeting Tea Party groups, they do need to crack down on political groups masquerading as Social Welfare groups. Many non-profit groups who claim tax exempt status either flout tax laws or flirt with the murky line between electioneering and issue advocacy, all while using their tax exempt status to conceal their donors. The problem isn’t that the IRS flagged non-profit groups for additional review. The problem is that they did so poorly, instead of targeting one group, the IRS should be scrutinizing all groups, or at least, the most outlandish offenders.
After the Citizens United decision in 2010, donors flocked to the 501(c)4 as a vehichle to pump cash into elections without disclosing the source of their contributions. Tie number of groups applying for Social Welfare status has doubled since the decision. ProPublica has examined 72 501(c)4 applications from groups, that claimed to have no plans to spend money on elections. They compared those documents against tax returns. Nearly half the groups plans had changed.
In last years election 501(c)4 groups spent more than $300 million in dark money. All because the determination of one word this problem exists. If the wording remained as it was these political groups would not be able to claim Social Welfare status and we wouldn’t have this issue. For Campaign Finance Watchdogs, the fear is that the backlash will spook the IRS out of pursuing major players who are using the loophole to influence elections.
President Obama said he would find put what happened and correct it. Fix the interpretation of the law and it us done. No political organization should receive tax exempt status as Social Welfare groups, they are only their to further their own agendas. It doesn’t matter if they are Republican, Democrat, conservative, liberal or Tea Party groups. Any found breaking the the law and participating in any political issue should be fined and lose their tax exempt status. Republicans abuse this law and have pumped at least 3 times the amount of money through these groups then Democrats. Either way both are wrong and should be prosecuted. Make them pay taxes for all the years they claimed tax exempt status and fine them heavily. You break a law you get punished, the amount of money you have shouldn’t matter.
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