The Washington Post has a nice post on the subject aptly titled, What is a 501(c)(4), anyway? I wanted some examples of 501(c)4 corporations so I investigated the typical organization classifications a little bit further. Most churches and charitable organizations like Habitat for Humanity get their tax exemption under section 501(c)3. Labor unions get their their tax exemption under section 501(c)5 and Chambers of Commerce get their their tax exemption under section 501(c)6. I thought the section 501(c)4 might cover the Knights of Columbus but they are covered under section 501(c)10. The most prominent group besides a few political groups to register under section 501(c)4 appears to be volunteer fire departments.
The crux of the problem is that according to OpenSecrets.org is that the 501(c)4 nonprofits outspent super PACs in 2010 and three conservative nonprofits accounted for over half of those expenditures. If this money was spent on valid political speech, I am not sure what the problem is other than the Democratic party is irked with the three conservative nonprofits who accepted large, anonymous donations. I have mixed feelings on the anonymous donations issue. In theory I agree with Democrats who want to restrict anonymous donations. However in the real world I understand that some big donors who are expressing their right to free speech are concerned that elected officials will use their position in the government to illegally harass and intimidate them. Their concerns sounded like paranoia until the IRS admitted that they targeted organizations with “Tea Party” and “patriot” in their applications to additional scrutiny that violated IRS policies. To make things even worse, the Administration denials over the IRS actions are sounding just like they did during the Watergate years. With people starting to compare the IRS actions to Nixon’s enemies list, who can we trust in government to do the right thing with hot button political issues like campaign finance reform and anonymous donations? The trust is gone. It is not surprising that several lawyers on MotherJones think that this debacle has seriously hurt the IRS efforts to restrict anonymous donations to 501(c)4 corporations. Both campaign finance reform and the war against “dark money” contributions have been severely impaired by these actions and the Democratic party has no one to blame but themselves. With great power comes great irresponsibility.