IRS denies social welfare exemption for political campaign activity

Plain-English summary

An organization sought exemption as a social welfare organization under Section 501(c)(4). Its activities included advertisements opposing a political candidate, highlighting elected officials and candidates, and a petition urging an elected official to resign. The IRS concluded that these activities primarily constituted political campaign intervention rather than promotion of the common good and general welfare of the community. It also found that the organization was not a community movement designed to accomplish community ends. The organization did not protest the proposed adverse determination within 30 days, so the IRS issued a final denial.

Ruling snapshot

• Question: Did the organization qualify for exemption as a social welfare organization under Section 501(c)(4)?
• Outcome: Denied.
• Key authorities: IRC §§ 501(a), 501(c)(4), 6110, and 7428(b)(2); Treas. Reg. § 1.501(c)(4)-1(a)

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
PO Box 2508
Cincinnati, OH 45201

Date: February 23, 2021

Employer ID number:

Form you must file:

Tax years:

Number: 202120016
Release Date: 5/21/2021

Person to contact:
Name:
ID number:
Telephone:

UIL: 501.04-00, 501.04-03

Dear

This letter is our final determination that you don’t qualify for exemption from federal income tax
under Internal Revenue Code (IRC) Section 501(a) as an organization described in IRC Section
501(c)(4). Recently, we sent you a proposed adverse determination in response to your
application. The proposed adverse determination explained the facts, law, and basis for our
conclusion, and it gave you 30 days to file a protest. Because we didn’t receive a protest within
the required 30 days, the proposed determination is now final.

You must file the federal income tax forms for the tax years shown above within 30 days from
the date of this letter unless you request an extension of time to file. For further instructions,
forms, and information, visit www.irs.gov.

We'll make this final adverse determination letter and the proposed adverse determination letter
available for public inspection after deleting certain identifying information, as required by IRC
Section 6110. Read the enclosed Notice 437, Notice of Intention to Disclose, and review the two
attached letters that show our proposed deletions. If you disagree with our proposed deletions,
follow the instructions in the Notice 437 on how to notify us. If you agree with our deletions, you
don’t need to take any further action.

If you have questions about this letter, you can call the contact person shown above. If you have
questions about your federal income tax status and responsibilities, call our customer service
number at 800 829 1040 (TTY 800-829-4933 for deaf or hard of hearing) or customer service for
businesses at 800 829 4933.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4038 (Rev. 5-2020)
Catalog Number 47632S

Enclosures:
Notice 437
Redacted Letter 4034
Redacted Letter 4038

Letter 4038 (Rev. 5-2020)
Catalog Number 47632S

Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45201

Date: January 5, 2021

Employer ID number:

Contact person/ID number:

Contact telephone number:

Contact fax number:

Legend:
B = Date
C = State
D = Date
E = Name
F = Person
G = Person
H = Persons
J = Action
K = Year

t percent = Number
u percent = Number
v percent = Number

UIL:
501.04-00
501.04-03

Dear

We considered your application for recognition of exemption from federal income tax under Internal Revenue
Code (IRC) Section 501(a). We determined that you don’t qualify for exemption under IRC Section 501(c)(4).
This letter explains the reasons for our conclusion. Please keep it for your records.

Issues

Do you qualify for exemption under IRC Section 501(c)(4)? No, for the reasons stated below.

Facts

You were incorporated on B in the state of C as a [redacted]. You restated your Articles of
Incorporation on D under the C [redacted]. According to your restated Articles of Incorporation,
your specific purpose is to [redacted].

You further explained that E is primarily composed of H. The majority of H are also political candidates.

Your bylaws indicate your specific purposes include to: [redacted].

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

Your 1024A indicates in part the following percentage breakdown for your activities:

• In the range of t percent of your activities will be spent on advertising.

• In the range of u percent of your activities will be devoted to social media; you explained that you will
maintain an active social media presence so as to highlight issues and share your perspective for consideration
by the public.

• In the range of u percent of your activities will involve online engagement.

This includes the use of emails, online posts, online petitions and articles.

To date you have produced three advertisements that went live in early K; the primary focus of two of the
advertisements was the opposition H has to F, a political candidate and the role that H had in J as well as what
would happen if J had been successful. The third advertisement focused on other elected officials including G
who supported H. You later started a petition urging G to resign. The advertisements could be viewed on your
website. A link was also sent out to potential donors, but none were aired on any broadcast, digital, streaming
services.

Per your bylaws, your governing body will have three to seven elected directors. Currently, there are three
directors from various locations in the United States. You are currently operated by volunteers, but you may
contract for the services of a President for advising you on strategies, tactics and plans to pursue your mission.

For funding, you are seeking contributions from the public to support airing and distribution your messaging
through advertising, social media and related activities. Your expenses have consisted of items needed to create
the commercials. You used the company of one of your founders free of charge to produce the advertisements.

The breakdown of your other activities is as follows:

• In the range of v percent of your activities is spent on grassroots education. This consists of approaching
like-minded allies with tools they can use to educate their supporters about the issues and come to understand
the critical importance these issues play for the future direction of the United States.

• In the range of v percent of your activities consists of launching a media relations component of your
work. This may include media interviews, placement of opinion articles, guest appearances on television, radio

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

3

and online programs, and participation in press conferences at the national level and in select states. The goal of
this component is to highlight the extreme nature of the policies and proposals advanced by C's political
leadership as well to expose the direction they would take the country in should they convince Americans to
follow their lead.

Law

IRC Section 501(c)(4) provides for the exemption from federal income tax of organizations not organized for
profit but operated exclusively for the promotion of social welfare. Further, exemption shall not apply to an
entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or
individual.

Treasury Regulation Section 1.501(c)(4)-1(a)(1) states a civic league or organization may be exempt as an
organization described in IRC Section 501(c)(4) if it is not organized or operated for profit and it is operated
exclusively for the promotion of social welfare.

Treas. Reg. Section 1.501(c)(4)-1(a)(2)(i) provides that an organization is operated exclusively for the
promotion of social welfare if it is primarily engaged in promoting in some way the common good and general
welfare of the people of the community. An organization embraced within this Section is one that is operated
primarily for the purpose of bringing about civic betterments and social improvements.

Treas. Reg. Section 1.501(c)(4)-1(a)(2)(ii) provides that the promotion of social welfare does not include direct
or indirect participation in political campaigns on behalf of or in opposition to any candidate for public office.
Thus, an organization exempt under IRC Section 501(c)(4) may engage in political campaign activities if those
activities are not the organization's primary activity.

Rev. Rul. 67-368, 1967-2 C.B. 194, held that an organization, which was formed to promote an enlightened
electorate and whose primary activity was rating candidates for public office, was not exempt under IRC
Section 501(c)(4) because it did not promote social welfare. The ruling stated that the comparative rating of
candidates, even on a non-partisan basis, constitutes the participation or intervention on behalf of candidates
favorably rated and in opposition to those less favorably rated.

In Erie Endowment v. United States, 316 F.2d 151 (1963), the court, in defining a civic organization, summed
up the matter by stating that "the organization must be a community movement designed to accomplish
community ends."

Rev. Rul. 67-368, 1967-2 C.B. 194, held that an organization, which was formed to promote an enlightened
electorate and whose primary activity was rating candidates for public office, was not exempt under IRC
Section 501(c)(4) because it did not promote social welfare. The ruling stated that the comparative rating of
candidates, even on a non-partisan basis, constitutes the participation or intervention on behalf of candidates
favorably rated and in opposition to those less favorably rated.

Application of law

You are not described in IRC Section 501(c)(4) and Treas. Reg. Section 1.501(c)(4)-1(a)(1). Your past and
present activities are focused on how the policies of H who are elected officials and political candidates are
harmful to America as well as their role in as well as their role in J. Further, you have primarily created
advertisements whose content highlight the position of those elected officials/political candidates opposed to F,

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

4

a political candidate and your policies. This shows that you are not primarily engaged in promoting in some
way the common good and general welfare of the people of the community.

You are not described in Treasury Regulation Section 1.501(c)(4)-1(a)(2)(ii) because your activities primarily
constitute indirect participation in political campaigns on behalf of or in opposition to any candidate for public
office. For example, your activities have primarily focused on the policies of H who consist of elected officials/
political candidates and their opposition to F, a political candidate.

Your activities are similar to those in Rev. Rul. 67-368. Your primary activities bring to the public’s attention
those political candidates who do not support your programs and policies and oppose F who is also a political
candidate. This constitutes political campaign intervention and precludes exemption under IRC Section
501(c)(4).

You are not a civic organization within the meaning of IRC Section 501(c)(4) as defined in Erie Endowment v.
United States, 316 F.2d 151 (1963). Your primary activities are not a community movement designed to
accomplish community ends.

Conclusion

You are not operated primarily to promote social welfare because your activities do not benefit the community
as a whole. Your activities have primarily consisted of producing advertisements focusing on H and other
elected officials who are opposed to F, a political candidate and had instrumental roles in J. This demonstrates
that your activities primarily constitute political campaign intervention. Accordingly, you do not qualify for
exemption as an organization described in IRC Section 501(c)(4).

If you agree

If you agree with our proposed adverse determination, you don’t need to do anything. If we don’t hear from
you within 30 days, we'll issue a final adverse determination letter. That letter will provide information on
your income tax filing requirements.

If you don't agree

You have a right to protest if you don’t agree with our proposed adverse determination. To do so, send us a
protest within 30 days of the date of this letter. You must include:

• Your name, address, employer identification number (EIN), and a daytime phone number

• A statement of the facts, law, and arguments supporting your position

• A statement indicating whether you are requesting an Appeals Office conference

• The signature of an officer, director, trustee, or other official who is authorized to sign for the
organization or your authorized representative

• The following declaration:

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

5

For an officer, director, trustee, or other official who is authorized to sign for the organization:

Under penalties of perjury, I declare that I have examined this request, or this modification to the
request, including accompanying documents, and to the best of my knowledge and belief, the request
or the modification contains all relevant facts relating to the request, and such facts are true, correct,
and complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the
IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if they haven’t
already done so. You can find more information about representation in Publication 947, Practice Before the
IRS and Power of Attorney.

We'll review your protest statement and decide if you gave us a basis to reconsider our determination. If so,
we'll continue to process your case considering the information you provided. If you haven’t given us a basis
for reconsideration, we'll send your case to the Appeals Office and notify you. You can find more information
in Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status.

If you don’t file a protest within 30 days, you can’t seek a declaratory judgment in court later because the
law requires that you use the IRC administrative process first (IRC Section 7428(b)(2)).

Where to send your protest

Send your protest, Form 2848, if applicable, and any supporting documents to the applicable address:

U.S. mail: Street address for delivery service:
Internal Revenue Service Internal Revenue Service

EO Determinations Quality Assurance EO Determinations Quality Assurance
Mail Stop 6403 550 Main Street, Mail Stop 6403

P.O. Box 2508 Cincinnati, OH 45202

Cincinnati, OH 45201

You can also fax your protest and supporting documents to the fax number listed at the top of this letter. If you
fax your statement, please contact the person listed at the top of this letter to confirm that they received it.

You can get the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-
pubs or by calling 800-TAX-FORM (800-829-3676). If you have questions, you can contact the person listed at
the top of this letter.

Contacting the Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your
taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or if you’ve tried but haven’t
been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS
will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K