A battle is brewing between politically-oriented nonprofit organizations and the Internal Revenue Service (IRS) about whether the groups deserve tax-protected status. Although such groups support both major political parties, it is the wealthier conservative groups, such American Crossroads and those affiliated with the Tea Party, that are up in arms.

 

Under the U.S. tax code, 501(c)(4) groups are tax-exempt because their purpose is “social welfare.” They are allowed to engage in a certain amount of political activity, but politics cannot be their primary focus. American Crossroads, co-founded by Karl Rove, and Priorities USA, backed by President Barack Obama, claim that they are apolitical social welfare organizations, a description that elicits snickers—at best—from independent observers. The IRS believes that these faux-social welfare groups should pay taxes.

 

According to the IRS, “The promotion of social welfare does not include any unrelated business activities or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”

 

Also at issue is the suspicion that corporations are donating to political super PACs and then deducting their contributions as business expenses.

-David Wallechinsky

 

Scrutiny of Political Nonprofits Sets Off Claim of Harassment (by Jonathan Weisman, New York Times)