The Catholic University of America

CUA Law Professor Roger Colinvaux published a blog post on HistPhil entitled "Policing the Border: A History of IRS Regulation of Political Activity," on August 24, 2018. 

Policing the Border: A History of IRS Regulation of Political Activity

From: HistPhil Blog
By: Roger Colinvaux
Date: August 24, 2018
 

The IRS is a partisan political punching bag, perhaps no more so than in the area of regulation of nonprofit organizations. Over the past five years, there have been unrelenting attacks on IRS personnel and its budget – mainly due to the IRS’s fumbled oversight of nonprofit groups. A key flash point is the political activity of nonprofits. When the IRS gets involved in speech-related issues, it is often unfairly cast as a villain, accused of policing the speech of Americans through harassment and intimidation. Rare is the sober assessment of whether the IRS has a responsibility to regulate political activity, the proper scope of the IRS’s role, and the role of Congress. This post is intended to convey the basis for IRS regulation of nonprofit political activity and explain how it has evolved over time.

At the outset, it is useful to recognize that there are two sources of law that regulate political activity. Campaign finance law imposes limits on how much money individuals and entities may contribute to political candidates or political committees, and requires disclosure of campaign donors. These limits restrain speech but have long been justified as constitutionally permitted restrictions that help prevent corruption or the appearance of corruption. Tax law also regulates political activity, which, as explained below, is an inevitable result of the fact that “tax touches everything,” even politics. The fact that there are two legal avenues for regulation of political activity, each with an administrative agency as overseer (the FEC and the IRS), has complicated the IRS’s role because Congress sometimes uses tax law to fulfill campaign finance purposes.

The starting point for understanding the IRS’s tax-based role in regulating political activity is to acknowledge some basic tenets of the federal income tax relating to income and deductions. Income is a term of art, rooted in economic thought, that describes the tax base. Deductions take certain expenses out of the base, meaning that funds used for deductible expenses are tax exempt. As a general rule, no deductions are allowed for personal consumption. Spending on politics, like spending on food, clothing, or movie tickets is considered a personal expense and no deduction is allowed. As a result, the federal income tax includes within its base the cost of political activity. This is not a controversial point, and roughly translates into: If I donate to a candidate or a PAC, or spend money on a political campaign yard sign, I do not get a deduction for the expenses. At this level of personal direct expenditure on politics, there is not much for the IRS to do – political expenses are just like other nondeductible expenses.

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Roger Colinvaux  

Professor Roger Colinvaux's
Areas of Expertise

Tax-Exempt Organizations

Charitable Deduction

Political Activities of Nonprofits

For additional information about our professors' areas of speciality, see Professor Colinvaux's faculty page.