In light of the tax exemption determination process becoming national news, Congress has begun looking at fixes. In response, leaders in the Bright Lines Project have worked to convert the regulatory proposal developed over four years into legislative language.
We have done this in two parts. First, we would amend the Internal Revenue Code (Chapter 42 of Title 26, US Code) by adding a new Section 4956 on political intervention that tracks the regulatory proposal developed by the BLP. This establishes clear definitions for political intervention across all tax exempt categories and sets out exactly the safe harbors in the regulatory proposal.
Second, we have proposed parallel modifications to Section 527 of the Internal Revenue Code. This is needed so that it is easier for tax-exempt groups that may engage in too much political activity to move those activities to a 527 organization. Currently, the segregation rule in section 527(c)(3) requires that non-political activity must be no more than insubstantial (at most 15%), which creates a barrier for a social welfare group or trade association that wants to engage in more political activity that is allowed under Section 501(c). We think that these groups should have the option of housing all their activities in a 527 organizations where donors are fully disclosed.
Please note that these are living documents and will be further developed as discussions continue on crafting legislation to meet the goals of the BLP. You are invited to provide comments at the bottom of this page.