The IRS is now receiving comments on its Notice of Proposed Rulemaking on (c)(4) activity, and certain of the views so far underscore the choice that the agency faces and does not make in its first set of proposed rules. It is the choice of line, and the “brightness” of that line, distinguishing “candidate-related” from social welfare activity.

The Center for Competitive Politics is troubled that the proposed rules in their current form do not pass the test of clarifying the rules and extricating the IRS from politically tinged decision-making. The Center urges that the IRS stay close to Buckley v. Valeo and generally treat as political activity only contributions to political organizations, communications that expressly advocate the election or defeat of candidates, or other expenditures now subject to the Federal Election Campaign Act as it is “well understood.” Center for Competitive Politics Comments on IRS NPRM at 13.

This is a plausible approach to keeping the IRS as much as possible out of the business of making political judgments. In choosing this course, of course, the Center necessarily passes over the hot issue: advertising that is not quite express in its advocacy but strikes observers—some to the point of apoplexy—as quite obviously funded to influence elections. And it is a point (among others) that the Bright Lines Project picks up on in its first “reaction” to the proposed rules when it refers to the failure of the proposed rules to “apply…to some clearly partisan activity.”

The problem for the IRS is how to reach this disputed activity without engaging in political judgments or usurping the role of the FEC or Congress in the regulation of campaign finance. Under the proposed rules, the Service leaves itself the option at any time to find that an organization’s activity, even without express advocacy, is its functional equivalent—meaning that “candidate-related” or political intent is the only “reasonable interpretation” of the activity. Guidance for Tax-Exempt Social Welfare Organizations, 78 Fed. Reg. 71,535, 71,541 (Proposed Nov. 29, 2013) (a communication is candidate-related if it is “susceptible of no reasonable interpretation other than a call for or against” a candidate or candidates of a political party.)

But the legal standard is vague, and inevitably so: any legal test that probes for what is, by definition, not “express,” is going to suffer from a lack of clear definition. Is it the test that the Supreme Court adopted in Wisconsin Right to Life for the “functional equivalent” of express advocacy, or the one that the FEC has adopted in its own express advocacy regulations set forth in 11 C.F.R. § 100.22(b)? These are similar but not the same. See Electioneering Communications, 72 Fed. Reg. 72,899, 72,912 (Dec. 26, 2007) (leaving open “the issue of the impact, if any, of [Wisconsin Right to Life] on the [FEC’s own] definition of ‘express advocacy’….”). The standard the FEC has adopted is more open-ended, which is not what the IRS professes to be looking for in setting the goal of clear and definitive rules that limit its involvement in political campaigns.

And it would hardly help matters if the IRS fashions its own test for these purposes. For to do so means that the IRS is striking more deeply into political territory and adding to the already plentiful confusion about the boundary line between political and issues speech.

At the same time, if the IRS looks the other way, its critics will complain that the rulemaking is pointless, having failed to address the very problem that inspired the call for new rules. The IRS now faces the problem the FEC has never been able to escape: no one will be happy with what it eventually decides to do. Some argue that Congress should act and spare the IRS the pain; but it is pain for Congress, too, and critics who fear the partisan uses or implications of regulation fear it as much from elected officials as from Executive Branch administrators.

In the end, the IRS cannot, by the very nature of the task, wind up in a place that will be generally accepted to be satisfactory. It will have to decide how much to leave to others—the FEC in particular—by virtue of what it declines, on its own initiative, to do. The question it will have to decide is whether it will favor decision-making discretion, and risk involvement in fact-intensive and controversial determinations, or surrender the authority and steer as clear as it possibly can of political conflict.

If the IRS chooses to retain discretion, and to reserve the authority to judge speech as the “functional equivalent” of express advocacy, then it would be well-advised to spell out the nature of the test it proposes to use. The FEC did this to some degree, in the regulations implementing Wisconsin Right to Life. See 11 C.F.R. § 114.5. The IRS would have to do something like this, rather than simply declare some speech to be political because it “is susceptible of no [other] reasonable interpretation.”

Category: Outside Groups

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