Febiuaiy 24, 2u14

Ns. Amy F. uiuliano

0ffice of the Associate Chief Counsel (Tax Exempt anu uoveinment Entities)
CC:PA:LPB:PR (REu-1S4417-1S)
Room S2uS
Inteinal Revenue Seivice
P.0. Box 76u4, Ben Fianklin Station
Washington, BC 2uu44

SENT vIA FEBERAL E-R0LENAKINu P0RTAL

RE: PR0P0SEB u0IBANCE F0R TAX-EXENPT S0CIAL WELFARE 0RuANIZATI0NS 0N
CANBIBATE-RELATEB P0LITICAL ACTIvITIES

Beai Ns. uiuliano:

The Inteinal Revenue Seivice's (IRS) iulemaking on Pioposeu uuiuance foi Tax-
Exempt Social Welfaie 0iganizations on Canuiuate Relateu Political Activities is an
impoitant step towaiu cieating bettei iules to uefine political campaign activity foi
nonpiofits. The Sunlight Founuation applauus the intent of the pioposal. The IRS must
cieate cleai iules about political activities by nonpiofits, both to guiue the agency as it
enfoices the law, anu to pioviue claiity to oiganizations as to which activities aie
peimissible unuei theii tax-exempt status. Bowevei, significant mouifications to the
substance of the pioposeu iules aie in oiuei, so as not to unnecessaiily hinuei gioups like
the Sunlight Founuation anu otheis fiom engaging in non-election-ielateu activities, anu to
ensuie tianspaiency of political contiibutions. We uige the IRS anu Tieasuiy to iewoik the
uiaft iegulations, with objective uefinitions anu safe haiboi exceptions that caiefully
uistinguish paitisan anu nonpaitisan activities in oiuei to cieate the ieliable iegulations
that aie wiuely iecognizeu as necessaiy to piomote integiity anu accountability in non-
piofits' involvement in politics. A new set of iules that univeisally applies to all nonpiofits
will oveicome uecaues of confusion anu unceitainty unuei the olu "facts anu
ciicumstances" appioach that has been useu to juuge tax-exempt oiganizations.
The Sunlight Founuation is a nonpaitisan nonpiofit founueu in 2uu6 that uses the
powei of the Inteinet to catalyze gieatei goveinment openness anu tianspaiency. We uo so
by cieating tools, open uata, policy iecommenuations, jouinalism anu giant oppoitunities
to uiamatically expanu access to vital goveinment infoimation to cieate accountability of
oui public officials. 0ui oveiaiching goal is to achieve changes in the law to iequiie ieal-
time, online tianspaiency foi all goveinment infoimation, with a special focus on the
political money flow anu who tiies to influence goveinment anu how goveinment
iesponus. We aie conceineu that oui woik woulu be cuitaileu if the pioposeu iules weie
enacteu.
Special tax benefits foi nonpiofit oiganizations weie cieateu by Congiess to
encouiage the woik of oiganizations like ouis, but those tax auvantages weie not intenueu
to subsiuize inteivention in political campaigns. Noieovei, long-establisheu pieceuent anu
policy have establisheu the impoitance of ensuiing that election ielateu contiibutions anu
expenuituies aie tianspaient, to uetei coiiuption anu the appeaiance of coiiuption.
Biight-line iules about what is oi isn't political activity, applicable to eveiyone, woulu give
non-paitisan oiganizations such as ouis the confiuence to continue oui woik while
ensuiing that oiganizations engageu in political activities aie subject to iules iequiiing
tianspaiency of uonois. The Sunlight Founuation's woik coulu be seveiely cuitaileu if, as
the iegulations piopose, any mention of a lawmakei who is iunning foi office, anu any use
of the name Bemociat oi Republican, on oui web pages within 6u uays of a geneial election
oi Su uays of a piimaiy election weie ueemeu "political." At the same time, by failing to
incluue communications (shoit of expiess auvocacy) in the uefinition of canuiuate-ielateu
activity outsiue the 6uSu-uay winuow, the IRS opens the uooi to vast tax-exempt
spenuing by unuiscloseu uonois on sham issue aus that piaise oi uispaiage canuiuates
eailiei in the campaign season.
The IRS must apply cleai anu unequivocally neutial iules to its ueteiminations
about whethei a gioup is entitleu to tax exempt status but not iequiieu to uisclose its
uonois, oi whethei it is a political oiganization, also entitleu to tax exempt status but not
alloweu to keep its uonois seciet. Pioposeu iules shoulu iecognize that moie than the
"magic woius" of expiess auvocacy (vote foi oi against the canuiuate) must be tieateu as
political. The iegulations neeu to auuiess all communications that ieflect positively oi
negatively on a canuiuate. Paiu mass meuia aus that piaise oi uispaiage canuiuates anu aie
uiiecteu at contesteu elections shoulu be ueemeu political. Nessages that uo not mention a
canuiuate geneially shoulu not be tieateu as political, although instiuctions to voteis to use
a "litmus test" in ueciuing who to vote foi shoulu be consiueieu political. votei
engagement piogiams that taiget an oiganization's natuial constituency oi infiequent
voteis with neutial motivational messages shoulu fall within the scope of an oiganization's
tax-exempt social-welfaie oi chaiitable puiposes, while activating voteis baseu on
canuiuate oi paity piefeience shoulu be political. With such biight lines, the neeu to use
"facts anu ciicumstances" to evaluate the iemaining cases shoulu be gieatly lesseneu, anu
in all close cases, the tie-bieakei shoulu be a tax policy favoiing fieeuom of speech.
In auuition, the pioposeu iules must apply beyonu gioups oiganizeu unuei section
Su1(c)(4) of the IRC. If it uoes not apply to all types of exempt oiganizations, the
iulemaking may meiely shift the pioblem to a uiffeient aiena: those piefeiiing the vague
"facts anu ciicumstances" test may choose to oiganize anu funuiaise unuei othei tax-
exempt categoiies wheie they have moie latituue. Noieovei, it is ciitical that iules close
the loophole that allows those engageu in paitisan political activities to avoiu uisclosuie.
Such gioups shoulu be iequiieu to oiganize under 527 of the IRC in order to ensure donors
to such groups are disclosed.
The IRS must move foiwaiu with the iulemaking piocess. It has nevei been moie
impoitant, since the Supieme Couit ueclaieu in !"#"$%&' )&"#%* that election laws cannot
piohibit coipoiations fiom inuepenuent political spenuing, foi oui tax laws to plainly
iuentify what may anu may not be funueu with tax-fiee money. We neeu objective, biight-
line uefinitions of political inteivention that apply consistently acioss the tax coue anu that
aie compiehensible both to those insiue the IRS who must enfoice the law anu to those in
the nonpiofit sectoi who must comply with the law. The Sunlight Founuation stiongly
suppoits the continuation of constiuctive iulemaking by the IRS but woulu auvocate foi
impiovements in the next iounu of uiafting. Cleai, sensible guiuelines anu safe haibois
woulu encouiage moie nonpaitisan public engagement by nonpiofits anu help pievent
abusive exploitation of the tax-exempt system by political opeiatives. With faii, pieuictable
iules, eveiy one of us will benefit, iegaiuless of iueology. We uige the IRS anu Tieasuiy to
piouuce a new, impioveu set of pioposeu iules foi public comment.
Sinceiely,
The Sunlight Founuation