The law states that 501c groups are allowed to participate in politics so long as 51% of their money goes towards social welfare. For example, [1]. Would you say the same thing if planned parenthood was denied non-profit status because it is a liberal organization.
If a group could be considered a "tea party" group, that pretty much indicates that it's primarily a political group; the term "party" specifically refers to a political institution. If a tea party group does some form of social welfare, that doesn't change the fact that it's primarily a political institution.
Planned Parenthood, on the other hand, is unquestionably a social welfare organization. It has offices which have doctors who provide a wide range of sexual and reproductive medical services to many women who would otherwise be unable to obtain them. If you look at their budge, 70% goes directly towards medical services. Less than 10% goes towards public policy; and what does, is advocating for policies to be able to continue the social welfare services that they provide, nothing else. Those figures you linked to for donations to political candidates represent less than 0.05% of their budget.
Where are the tea party offices that provide medical services to low income residents? Or heck, if you want to be fair to them, where are the tea party offices that provide tax advice to people who want to lower their tax burden? Of course, it's kind of hard to come up with examples of social welfare services that tea party groups could provide, because as far as I can tell, the tea party movement is primarily about opposition to social welfare, and a variety of political goals involving the reduction of the federal government. Even trying to stretch my imagination, I can't think of any social welfare programs that tea party groups would actually provide. I suppose they could qualify for tax exempt status if they shipped 51% of their revenues to other social welfare organizations that they supported, but that seems more like a tax dodge than an honest assessment of the purpose of the organizations.
Now, back on topic, I think that the software groups are sometimes more of a grey area. While there is a lot of open source software that is developed solely for social welfare reasons, there's also a good deal that is developed primarily by for-profit corporations. If there will be more than one for-profit company working on a joint project, it is common to set up a non-profit foundation that organizes the collaboration, or use an existing one. On the one hand, this can sound an awful lot like for profit companies trying to claim that their joint venture is actually a social welfare organization. On the other hand, due to the fact that the code is shared publicly and available for anyone to study and modify, it is arguably promoting social welfare and thus should be eligible.
If you check the actual recommendation, you will see that they have no specific recommendation for this type of situation; all it advises is "The [sic] is no specific guidance at this point. If you see a case, elevate it to your manager."
The entire point is that you really can't separate politics and social well-being. Often the most effective way to improve some groups life is through politics. Killing separate but equal for example.
No, the entire point is that political contributions shouldn't be tax deductible, no matter the goals.
I make lots of political contributions with the intent of improving social well-being. I just don't expect to also be able to deduct those contributions from my taxes.
The IRS wasn't preventing these groups from collecting money in support of a cause. It was preventing those donations from being deducted from your taxes.
I'm willing to take that tax hit to help people. It's the Tea Party supporters who hate taxes so much that are making a big deal of the fact that they can't get a deduction on their taxes on contributions made to elect people who will then try to reduce their taxes.
They want to double dip. Screw that. Make sure that the rules are fair in preventing any such political organization from being considered a "social welfare" organization, by all means. But don't let political contributions become deductible, no matter the politics.
So spending 10% of your budget on public policy is okay, but 49% is too much? You have to draw the line somewhere, they've chosen 49%. You can't just have IRS agents going "oh that sounds too political." You need actual enforceable rules.
He said that he couldn't come up with ANYTHING that a "Tea Party" group could do outside of politics with the 51% of their money, other than launder it by giving it to other groups.
Why don't YOU come up with something OTHER than changing public policy that a Tea Party group would do with that 51%? Any Tea Party group is a political group by definition, and shouldn't qualify as a charitable group. Period. It's just a tax dodge, plain and simple. Heck, that's pretty much the point of the party is they don't like taxes, so it's a blatantly obvious tax dodge.
My point was that it doesn't matter that HE can't come up with anything. The IRS agent can't just be like, "well I don't think there's any way that a tea party group could be doing social welfare. Denied!" They have to use actual facts. They look at where their money was spent. They look at the rules and regulation for what is considered social welfare and what isn't. Then they determine whether or not 51% of that money was spent on social welfare.
If I understand the process, it DOES involve judgement of IRS agents. The IRS requires that applicants describe what social welfare activities they're going to take part in. If they didn't put something in that blank that was reasonable, then of course they weren't rubber stamped.
The Tea Party is pretty much all about reducing government size and spending and reducing taxes, with a few other standard conservative (guns, military) and libertarian (privacy, intrusive government) positions thrown in [1]; what could a "Tea Party" organization do that would promote the social welfare? Looking at teaparty.org, there's nothing in their set of 15 core beliefs that fall under "social welfare", [2] except arguably "Traditional family values are encouraged." Pretty much a stretch to expect 51% of their money to be spent "encouraging family values" and only 49% on politics.
The actual law passed by Congress says "exclusively for social welfare". IRS interpretation changed that to "primarily social welfare" a few decades ago which is actually wrong since IRS cannot make laws, only implement them as written. There was a huge ruckus in congress over this matter. Can't find the video now but here's an article:
So there's a law that states "exclusively for social welfare" and there's a law that says its okay to participate in non-social welfare activities? The laws sound contradictory to me and it seems like the IRS has a pretty good justification for their interpretation. Either way, whatever they rules are they should apply equally to all people/organizations.
As an aside, I wonder if you could make the legal argument that political donations are considered social welfare? If planned parenthood can call giving out birth control social welfare, then why can't it call advocating for the availability of free birth control social welfare? If advocating for the availability of free birth control is social welfare and political donations are covered by free speech, then why isn't giving political donations to candidates that support the availability of free birth control considered social welfare?
> Spurred by such concerns over unfair competition and lost revenue, Congress enacted the UBIT. It taxed any trade or business regularly carried on by Section 501(c) organizations if the activity is not related—aside from the need for funding—to the organization’s exempt purpose.
Law is not static. Congress or Parliament makes its legislation, ambiguity arises in corner cases, Courts are asked to sort it out. Courts try to divine the intention of Congress or Parliament. If Congress or Parliament disagree with that interpretation then yes: it's up to them to change the law. Otherwise, by failure to further Act, they conceptually support the Court's interpretation of their intent.
To be fair, the original wording was pretty bad. If a non-profit had someone pay $1 into a political fund (potentially without approval) they could lose their nonprofit status.
This is obviously not the intent of the law, but would be the 0% everyone throws around.
You could say <1% or something, but now you are arbitrarily drawing a line. Thus I would point out that not drawing a line is by extension impossible.
[1] http://www.opensecrets.org/pacs/pacgot.php?cmte=C00314617&cy...