The tax code contains at least 30 different categories of nonprofits. What we think of as “charities” are typically organized under Section 501(c)(3). That section exists for “charitable” and “religious” organizations, and it is where one finds organizations such as churches, the Red Cross, the American Cancer Society and so on. Section 501(c)(4) is traditionally reserved for advocacy organizations. The National Rifle Association, the Sierra Club, Planned Parenthood Action Fund, and the Brady Campaign to Prevent Gun Violence are 501(c)(4)s.
While Section 501(c)(3) of the tax code specifically bars those organizations from engaging in political activity, no such statutory prohibition exists in Section 501(c)(4). Furthermore, while Section 501(c)(4) states that it applies to organizations operating exclusively for the promotion of “social welfare,” the statute does not define “social welfare.” Since when, in a democratic society, are nonpartisan get-out-the-vote drives, voter registration, voter education, and meet-the-candidates nights—all of which will be limited by the IRS’s proposed rules—not activities in support of social welfare?
The statute leaves it to the IRS to define “social welfare” in that context, and for half a century the agency has defined it to include political-campaign activity. The 501(c)(4) category has always been the home of political-advocacy groups.
There are no tax breaks for 501(c)(4) groups. Contributions to these organizations are not tax deductible, and the tax liability of the 501(c)(4)s wouldn’t change if they were reclassified as political committees.