In 1939, the Internal Revenue Service granted tax-exempt status to a group that had been active in New York City politics for years. The agency determined that The Citizens Union of the City of New York earned its status as a social welfare organization, because its primary purpose was furthering the common good.
Over the next seven decades, the IRS would grant tax-exempt status to 1,551 politically active social welfare organizations – hardly a flood of activity among the nearly 1.6 million U.S. charities.
The floodgates opened in 2010, when the U.S. Supreme Court issued its Citizens United ruling, allowing corporations to spend unlimited amounts of money on ads and other efforts to influence voters. More than half of all politically active social welfare organizations – 60 percent — have been created since then, a MapLight analysis found.
Unlike candidate, party, and political action committees, these nonprofits, known as 501(c)(4) groups by their tax code designation, are not required to reveal their donors. They have proliferated – and their role in elections has increased — as Congress has effectively prevented the IRS from regulating their political activity.
In December, the Republican-controlled Congress passed a spending bill prohibiting the tax agency from issuing new rules or enforcing existing regulations pertaining to these groups during the 2016 fiscal year.
These restrictions expire on September 30, making it unlikely the IRS will regulate the political activities of 501(c)(4) groups during the 2016 elections.