IRS Scandal: What Is A 501(c)(4)?
Controversy swirls around the IRS and its scrutiny of Tea Party groups.
The IRS says some of its employees singled out conservative groups for extra scrutiny when they applied for tax-exempt status as 501(c)(4)’s.
So what qualifies as a 501(c)?
Attorney Stephen Wilson explains, “There’s a plethora of subdivisions under 501(c). I think there’s fifteen or twenty of them, and they all deal with separate areas.”
So how do you define the specific 501(c) that these groups say they aimed for?
Wilson says, “501(c)(4) is that section that covers social welfare organizations and local employee associations.”
In the tax code, Wilson explains, these groups must benefit the whole community, “The volunteer fire department would be a 501(c)(4), because its purpose is to benefit the community as a whole, whereas a police benevolent society, which has a purpose of benefitting its members, would not.”
Even if you try to go by the book though, there’s gray area here.
Wilson notes Tea Party groups are likely to claim they’re educating the whole community, and that’s how they claim the status.
Some high-ranking IRS officials have already admitted that these groups faced extra scrutiny, but don’t be fooled into thinking there’s not already a ton that goes into
Pelosi: IRS Scandal "An Opportunity" To Scrutinize 501(c)(4)s And "Overturn Citizens United"
REP. NANCY PELOSI (D-CA): Well, I think it's an opportunity. Let me say it this way, if, in fact, the IRS was targeting people because of their title, that would be wrong. It should be condemned. The whole idea, of 501(c)(4)s being engaged in politics is something we've got to put in a spotlight and maybe this is that opportunity.
The fact is that the law says that as long as the funds, the 501(c)(4)s do not use as the primary purpose politics but instead promoting social well being, welfare. Well, that's what primary purpose means, could be the secondary purpose. And here's what I'm calling for: As we look at this and we should, and I think it's very wrong that they would have targeted them, we should be saying what are these groups? Let's have transparency, disclosure. Who are these contributors, a.? B., Let's have accountability for what it is. This is a very vague law, let's bring a clear definition of what a 501(c)(4) -- is that somebody could give them money and they don't have to pay taxes on it.
We need accountability at the IRS, of course, as to how this happened. But we've really got to overturn Citizens United which has exacerbated the situation. So I've called for DISCLOSE, that's a dare, disclose… I've been calling for it for over a year, disclose, who are these people? Transparency, amend the constitution to overturn Citizens United, reform the political system, let's take money down as far as possible. Public financing of campaigns, clean campaigns and empowerment of people because people feel very left out of the loop. But I do think that some scrutiny has to be placed on what these 501(c)(4)s are. (All In With Chris Hayes, May 13, 2013)
The fact is that the law says that as long as the funds, the 501(c)(4)s do not use as the primary purpose politics but instead promoting social well being, welfare. Well, that's what primary purpose means, could be the secondary purpose. And here's what I'm calling for: As we look at this and we should, and I think it's very wrong that they would have targeted them, we should be saying what are these groups? Let's have transparency, disclosure. Who are these contributors, a.? B., Let's have accountability for what it is. This is a very vague law, let's bring a clear definition of what a 501(c)(4) -- is that somebody could give them money and they don't have to pay taxes on it.
We need accountability at the IRS, of course, as to how this happened. But we've really got to overturn Citizens United which has exacerbated the situation. So I've called for DISCLOSE, that's a dare, disclose… I've been calling for it for over a year, disclose, who are these people? Transparency, amend the constitution to overturn Citizens United, reform the political system, let's take money down as far as possible. Public financing of campaigns, clean campaigns and empowerment of people because people feel very left out of the loop. But I do think that some scrutiny has to be placed on what these 501(c)(4)s are. (All In With Chris Hayes, May 13, 2013)