Q&A: Details of the IRS Controversy
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Why do groups apply for 501(c)(4) status?
The designation means groups don't have to pay taxes on their revenue nor publicly disclose their donors' identities. The number of applications rose sharply after the 2010 Supreme Court ruling in the case of Citizens United v. Federal Election Commission, which held that corporations, labor unions and others could make unlimited campaign donations. The ruling meant the 501(c)(4) groups could spend money to try to influence elections, such as by running ads.
What types of groups does the 501(c)(4) category include?
The groups are typically civic leagues, social-welfare organizations and local associations of employees. Examples include the Sierra Club, the National Rifle Association and neighborhood beautification groups. But some 501(c)(4)s are politically tilted, such as Priorities USA, formed by former aides to President Barack Obama, and Crossroads GPS, formed by Karl Rove to support conservative causes. These are different from the largest category, 501(c)(3), which includes religious, educational and charitable groups eligible to receive tax-deductible donations.
Are 501(c)(4)s allowed to engage in political activity?
Yes. As part of their mission to promote social welfare, they are allowed to lobby without limit and participate in campaigns—so long as that is not their primary activity.
How clear is the definition of permitted activities?
Experts say it is very blurry and largely depends on facts and circumstances. According to Ellen Aprill, an expert in non-profit law who teaches at Loyola Law School in Los Angeles, $100,000 used to fund an advertisement might be allowable or not depending on the ad's timing and the importance of the issue. Ms. Aprill and others believe such vague definitions leave the 501(c)(4) format open to abuse by groups that gather funds from anonymous donors on the left or right to fund hard-hitting political ads or give money to other political groups.
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http://online.wsj.com/article/SB10001424127887324031404578481451628392008.html
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