IRS considering new regulations on chamber of commerce groups

Patrick Howley Political Reporter
Font Size:

The Obama administration is considering imposing new regulations restricting the political activity of chambers of commerce.

Acting IRS commissioner Danny Werfel and the Treasury Department rolled out 32 pages of new guidance last week with proposals to govern 501(c)(4) nonprofit groups. Their guidance calls for strict new rules that prohibit nonprofits from engaging in “candidate-related activity,” which is relatively vague, according to the documents.

But here’s a takeaway: the IRS and Treasury Department noted that they’re considering new regulations to prohibit 501(c)(5)’s and also 501(c)(6)’s from engaging in political activity. C5’s are mostly labor unions, and C6’s are mostly chambers of commerce.

501(c)(6) groups have a “common business interest” as defined by a fiscal year 2003 technical instruction program co-authored by Washington-based IRS targeting scandal figure Carter C. Hull. C6’s, such as the anti-Obamacare U.S. Chamber of Commerce, have typically been afforded more leeway when it comes to political activity. Local chambers of commerce have existed in this country since 1825, thanks to Daniel Webster, who inspired the first chamber of commerce in Boston.

The labor union bit is not a big surprise, considering the work of certain Republican lawmakers who have used their IRS targeting scandal oversight roles to properly point out blatant political activity by labor unions that pay no taxes.

Republican Sen. Orrin Hatch said in a statement last week that “the uptick in applications over recent years was not just isolated to 501(c)(4)s, but to union tax-exempt 501(c)(5) organizations as well. I hope the Administration understands that what’s good for the goose is good for the gander and looks at these union groups moving forward.”

Hatch, who sits on the Senate Finance Committee, can smirk at Werfel for getting that union language into Werfel’s guidance. But Hatch certainly didn’t say anything about chambers of commerce. The IRS and Treasury Department slipped the “501(c)(6)” language in there themselves.

“The Treasury Department and the IRS are considering whether to amend the current regulations under sections 501(c)(5) and 501(c)(6) to provide that exempt purposes under those regulations (which include “the betterment of the conditions of those engaged in [labor, agricultural, or horticultural] pursuits” in the case of a section 501(c)(5) organization and promoting a “common business interest” in the case of a section 501(c)(6) organization) do not include candidate-related political activity as defined in these proposed regulations,” according to the IRS and Treasury Department guidance.

“The Treasury Department and the IRS request comments on the advisability of adopting this approach in defining activities that do not further exempt purposes under section 501 (c)(5) and 501 (c)(6). Any such change would be introduced in the form of proposed regulations to allow an additional opportunity for public comment,” according to the IRS and Treasury Department guidance.

Follow Patrick on Twitter

Patrick Howley