Many political tax-exempts no longer required to report donors

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Many tax-exempt groups that participate in politics will no longer be required to disclose their donors to the Internal Revenue Service, the Treasury Department said.

The change means that so-called Section 501(c)4 groups, known as “social-welfare” organizations, no longer have to tell the IRS who gave them donations. The groups can be engaged in politics, so long as they don’t spend more than half of their money on campaign advertisements or activities to sway an election. Donors do not have to be disclosed to the public.

“Americans shouldn’t be required to send the IRS information that it doesn’t need to effectively enforce our tax laws, and the IRS simply does not need tax returns with donor names and addresses to do its job in this area,” U.S. Treasury Secretary Steven Mnuchin said in a statement Monday.

Organizations still need to maintain the names and addresses of their donors and the IRS could request that information, according to guidance from the agency. Charities organized under section 501(c)3, donations to which are tax deductible, are still required to report their donors. Those groups are barred from spending money to influence elections.

Among the organizations with 501(c)4 status are the National Rifle Association, the Democratic Socialists of America, the AARP and Americans for Prosperity, the conservative group backed by the billionaire brothers Charles and David Koch.

The shift “deprives the IRS of an important tool to make sure these nonprofits are complying with the laws,” said Larry Noble, a former general counsel with the Federal Election Commission. “It will also make it easier for large contributors to hide money that is being used to influence elections, including money given by foreign interests.”

$746 Million

Since the 2010 U.S. Supreme Court ruling that allowed corporations to spend unlimited sums to influence elections, nonprofit groups that don’t disclose their donors have spent $746 million on federal races, according to the Center for Responsive Politics, a research organization.

Under the Citizens United ruling, almost any organization can spend unlimited amounts of money to support or oppose candidates for office, provided they don’t coordinate with a campaign. Federal contractors, national banks and foreign nationals are still barred from spending, though current disclosure rules can make it nearly impossible for regulatory bodies to find out who contributes to outside groups.

“It is important to emphasize that this change will in no way limit transparency,” Mnuchin said. “The same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected.”

Bloomberg News
Tax exemptions Non-profits Tax regulations Steven Mnuchin Treasury Department IRS