p. 218. Insert as second complete paragraph:
The Treasury Inspector General for Tax Administration found that, between July 2015 and August 2016, 19 “high‐profile” referrals were forwarded to the PARC. The PARC evaluated these referrals, then recommended 10 of them for examination. More than one‐half of these recommended referrals involved exempt social welfare organizations. As of January 2018, five of the 10 examinations had not been initiated; there have not been any revocations or “other negative findings” as a result of examinations. TIGTA determined that the IRS “did not adequately document research related to the allegation[s], tax‐exempt laws evaluated, or the rationale behind decisions made.” This documentation was said to be “vital because the referrals are high profile, involve extremely sensitive allegations of impermissible political activity, and require a subjective analysis of often unique facts and circumstances of unverified information from the allegations.” TIGTA also reviewed a statistical sample of referrals from more than 6,500 referrals concerning tax‐exempt organizations received by the IRS between July 2015 and August 2016. It estimates that more than 1,000 referrals related to allegations of impermissible political activity were not forwarded to the PARC, although they met the IRS criteria for doing so.186
p. 218. Insert as third complete paragraph, before heading:
The IRS announced, on May 22, 2014, that the agency had begun work on a regulation project concerning the conduct of political campaign activities by public charities and other categories of exempt organizations. This development occurred in the aftermath of a proposal regarding political campaign activities by social welfare organizations,186.1 which attracted intense criticism and was withdrawn.
p. 218. Insert following first complete paragraph, before heading:
(h) “Religious Liberty” Executive Order
The White House, on May 4, 2017, issued an executive order containing guidance for the executive branch of the federal government “in formulating and implementing policies with implications for the religious liberty of persons and organizations in America,” and “to further compliance with the Constitution and with applicable statutes and Presidential Directives.”186.2
The overarching policy of the executive branch is said in this order to be “to vigorously enforce Federal law's robust protections for religious freedom.” Thus, the order states, “[a]ll executive departments and agencies (agencies) shall, to the greatest extent practicable and to the extent permitted by law, respect and protect the freedom of persons and organizations to engage in religious and political speech.”
From the standpoint of the law of tax‐exempt organizations, here is the operative sentence: “In particular, the Secretary of the Treasury shall ensure, to the extent permitted by law, that the Department of the Treasury does not take any adverse action against any individual, house of worship, or other religious organization on the basis that such individual or organization speaks or has spoken about moral or political issues from a religious perspective, where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office by the Department of the Treasury.”
For these purposes, the term adverse action means the “imposition of any tax or tax penalty; the delay or denial of [recognition of] tax‐exempt status; the disallowance of tax deductions for contribution made to entities exempted from taxation under section 501(c)(3) of title 26, United States Code; or any other action that makes unavailable or denies any tax deduction, exemption, credit, or benefit.”
The order states that it shall be implemented “consistent with applicable law.” It concludes with the observation that it “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.”186.3
§ 7.5 BUSINESS EXPENSE DEDUCTION RULES AND POLITICAL ACTIVITIES
p. 218, note 188. Insert following existing text:
Citing this IRC provision, the IRS ruled that a business corporation maintaining a political action committee may not deduct as a business expense charitable contributions made to match its employees’ charitable gifts, inasmuch as its charitable gifts are intended to incentivize political contributions by its employees to the PAC; the agency stated that the corporation's gifts to its PAC and its matching charitable gifts are “inextricably linked,” so that the latter types of gifts are being made in connection with political campaigns (Priv. Ltr. Rul. 201616002).
§ 7.7 PUBLIC POLICY ADVOCACY ACTIVITIES
p. 222, note 210. Insert following existing text:
A court ruled that this revenue procedure is not unconstitutionally vague and/or overbroad in violation of the First Amendment or void for vagueness in violation of the due process clause of the Fifth Amendment (Freedom Path, Inc. v. IRS, 2017 BL 234957 (N.D. Tex. 2017)).
§ 7.8 POLITICAL ACTIVITIES OF SOCIAL WELFARE ORGANIZATIONS
*p. 224. Insert as last paragraph:
The Department of the Treasury and the IRS, in 2013, issued proposed regulations concerning political campaign activities conducted by tax‐exempt social welfare organizations.220.1 The Department of the Treasury and the IRS planned, in its stead, to develop proposed regulations regarding political campaign activities conducted by all categories of exempt entities. This plan was thwarted when Congress, in the fiscal year 2016 appropriations bill, prohibited issuance of tax‐law guidance concerning candidate‐related political activity.220.2 This prohibition is in the fiscal year 2017 appropriations legislation,220.3 fiscal year 2018 appropriations legislation,220.4 fiscal year 2019 appropriations legislation,220.5 fiscal year 2020 appropriations legislation,220.6 and fiscal year 2021 legislation.220.7
NOTES
1 26.1 Priv. Ltr. Rul. 201505042.
2 26.2 Priv. Ltr. Rul. 201932017.
3 30.1 Parks v. Commissioner, 145 T.C. 278, 309 (2015), aff'd, 717 Fed. Appx. 712 (9th Cir. 2017).
