Problems with 501(c)(4) Organizations

The recent elections point out how corrupting the influence of 501(C)(4) organizations is.  The organizations are the means of protecting the use of dark money in elections which cannot be traced to any individual or organization.  The IRS was right to investigate applications for 501(c)(4) organizations; almost everyone involved in them is corrupt and is corrupting the American elections process. 

To qualify under 501(c)(4), an organization must be a nonprofit organized exclusively for the promotion of social welfare.  It is not supposed to be a political advocacy organization, except to the extent that something like historical preservation or child welfare might get involved in the political process in order to further its social aims.  It may engage in lobbying for its cause as its primary activity; however, political activities may not be the organizations “primary activities.”  Presumably this means that political activities cannot constitute more than 50% of its activities, probably determined by how it spends its money. 

The OpenSecrets.org web site list the following as the main 501(c)(4) spenders in the 2014 campaign:

Crossroads GPS	$26,015,174
NRA Institute	$10,686,049
Patriot Majority USA	$10,652,302
League of Conservation Voters	$9,472,561
American Action Network	$8,958,129
Kentucky Opportunity Coalition	$7.573,762
Carolina Rising	$6,459,252
Americans for Prosperty	$5,540,280

An Ohio State College of Law article on 501(c)(4)’s states that they must file a Form 990 with the IRS.  While the 990 includes information regarding contributors who give at least $5,000, that information is not made public.  In discussing the IRS controversy pursued by Congressman Issa, the article says: 

When Congress passed the disclosure provisions in § 527, it required disclosure by organizations that intervened in political campaigns. Some organizations that engage in significant political activity have claimed that their activities are not political but are social welfare activities. If organizations primarily engaged in political activity are classified as social welfare organizations, then Congressional intent regarding disclosure will be flouted. Determining the primary purpose of the organization, therefore, requires the IRS to examine the political activities of the organizations seeking status as a social welfare organization and to determine whether those organizations are social welfare organizations or political organizations.

In discussing the IRS investigation, the article goes on to say:

It is very difficult to determine the primary purpose of an organization. The questions asked of these organizations were clearly designed to try to examine the organizations’ activities. Obviously, an organization seeking status as a social welfare organization that is familiar with the legal rules in this area is not going to state that its primary activity is intervention in a political campaign. If it did so, it would be a § 527 political organization. The IRS needs to examine an organization that applies for recognition under § 501(c)(4) to determine its true purpose. To take an extreme example, if the organization spent $10,000 on social welfare activities but had 1,000 volunteers who engaged in campaign intervention activities, the primary purpose of the organization would likely be political, despite the fact that it spent more money on social welfare activities. It is understandable how an agent thinking about investigating an organization would ask these types of questions. It is also understandable that in the aggregate these questions were unduly intrusive. 

The law appears to be designed to facilitate misuse and thereby contribute to the corruption of elections.  My opinion is that anyone who uses a 501(c)(4) organization is probably undermining the American electoral system.  It is a bad law and should be repealed.