In an April 17 letter, the Internal Revenue Service (IRS) announced that its enforcement program on partisan activities by charities and religious organizations will remain in effect for the 2008 election season. The IRS announcement provided some helpful information on how the agency will consider cases involving charities' websites, but it muddied the waters for organizations that publish voter guides. The announcement does little to mitigate the vagueness of the standard, a problem Rep. Adam Schiff (D-CA) addressed in a hearing where he called for a bright-line rule defining what is and is not allowed.

The tax code prohibits 501(c)(3) organizations, including charities and churches, from intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. In 2004, the IRS created new procedures, now referred to as the Political Activities Compliance Initiative (PACI), to review and fast-track enforcement action on allegations of improper intervention in elections. The new IRS letter said the goals of the program are to "educate the public and relevant community, and provide guidance, on the prohibition…" and to "maintain a meaningful enforcement presence in this area."

To meet its goal of increased awareness of the ban, the IRS said it will target education efforts to segments of the charitable community that may not be fully aware of it. The IRS did not provide examples of what organizations the agency believes "may not have been reached with past efforts." The IRS also plans to employ newer outreach methods, such as web-based technology, to circulate its educational messages. In a press release accompanying the letter, the IRS said it is sending correspondence to the national political party committees explaining the prohibition of political intervention by charities and churches. The IRS stated that it will "concentrate on allegations of more egregious violations and the cases that result from them." Because the IRS relies heavily on complaints from the public as a means for discovering potential violations, this policy could encourage retaliatory or harassing complaints.

Issue advocacy
The IRS letter commented on cases involving issue advocacy and potential campaign intervention but only added to the confusion surrounding this difficult issue. Although charities can legally take positions on public policy issues, including issues that divide candidates in an election for public office, issue advocacy cannot be used as a guise for intervention in an election. IRS guidance on this topic has been extremely vague, and the commentary in question did little to mitigate confusion. Lois Lerner, Director of the IRS Exempt Organizations Division, said the agency "must be prepared to face taxpayer challenges, which may lead to court, regarding IRS published position on issue advocacy…" She acknowledged that the IRS has encountered "a number of cases with varied fact patterns" that differ from its guidance in Rev. Rul. 2007-41.

Using the example of voter guides, the IRS letter said these may or may not be considered campaign intervention, depending on the context. The IRS states, "Distribution of a communication that on its face appears to satisfy the requirements of a permitted issue advocacy communication may become impermissible campaign intervention if it is accompanied by a statement, or an action, that ties a position articulated in the communication to a particular candidate or election." Unfortunately for charities concerned with matters of public policy that legally advocate on issues, the IRS provides no further details or examples as to what type of "statement" or "action" would create the connections that the IRS deems to be in violation of the ban.

Websites of 501(c)(3) organizations with links to other websites
In its letter, the IRS also provided details on how it views links on the websites of 501(c)(3) organizations, drawing a distinction between links on an organization's website to related organizations (i.e., an affiliated 501(c)(4)) versus links to unrelated sites. In the case of links to unrelated organizations, the IRS said it "will pursue the case if the facts and circumstances indicate that the 501(c)(3) organization is promoting, encouraging, recommending, or otherwise urging viewers to use the link to get information about specific candidates and their positions on specific issues."

In the case of links to related organizations, the IRS said the agency will "not pursue, at this time, cases involving a link between the Web site of a section 501(c)(3) organization and the home page of a Web site operated by a related section 501(c)(4) organization." In its discussion of these situations, the IRS referred to the 1983 U.S. Supreme Court decision in Regan v. Taxation with Representation of Washington, where Justice Harry Blackmun's concurring opinion stressed the importance of formal separation between 501(c)(3) and 501(c)(4) affiliates.

Rep. Schiff calls for bright-line rule
The widespread confusion in the charitable community caused by the IRS' vague facts and circumstances test and uneven enforcement (see OMB Watch's report Overcaution and Confusion: The Impact of Ambiguous IRS Regulation of Political Activities by Charities and the Potential for Change) has led to calls for the IRS to implement a bright-line rule on political intervention. Rep. Adam Schiff (D-CA) endorsed this idea during an April 15 hearing of the House Appropriations Financial Services Subcommittee that centered on testimony by new IRS Commissioner Douglas Shulman. According to BNA, Schiff told Shulman that a bright-line test is needed. He also asked the IRS to respond within 30 days to a Sept. 21, 2007, letter from All Saints Episcopal Church to the IRS, in which the church requests information about the two-year IRS investigation into the church's activities.