Immediately upon the Treasury and IRS’s publication of proposed rules on 501(c)(4) activity, the political jockeying began. Reformers said high time; critics replied that the suppression of free speech was at hand. The IRS Notice is not all that dramatic because what the Service may eventually do is up in the air: the IRS invites comments on all aspects of the definition of (c)(4) political activity. There is no way of knowing how this will all end up many months from now. But the IRS appears to be doing what both sides had demanded that it do for different reasons—improve on current rules—and its notice of proposed rulemaking simply calls for comment on a baseline proposal, which is fairly normal for this type of agency rulemaking setting. This is a reasonable place to begin.

Moreover, the goal of clarity the IRS is emphasizing is a sound one. The tax authorities should not be called upon to make nuanced political judgments about what does or does not constitute political activity. And the IRS should not be asked to bear the full burden of disappointments over the enforcement of the campaign finance laws. To the extent that the Service has in mind simplifying its task and keeping quite limited its presence in political activity, it seems to be marching in the right direction.

Of course, it is possible to embrace the Service’s general approach—the emphasis on definitive rules and clarity—and not agree with some of the directions suggested in its first cut at proposed rules. Some of the proposals seem to sweep too widely, and others pull up short of addressing significant questions of campaign activity by (c)(4)s. The Service admits as much, but then it does not explain, or in the design of the rules reveal, how it wound up going too far in some respects and not far in enough in others. As a result, the proposed rules do not distinguish between partisan and nonpartisan activity, or between issues and campaign speech.

The rules have this effect because of an apparent ambiguity in its core enforcement theory that in the coming rounds of comments will need to be brought clearly to light and sensibly addressed. Are the proposed rules a means of enforcing the campaign finance rules by limiting certain social welfare activity during election periods, or are they intended to clarify key terms in the application of the tax code to the conduct of social welfare activity even on campaign issues? The questions are related, but not the same, and whether the one concern or the other predominates will have a decisive impact on the shape and coherence of final rules.

The uncertainty on this point is reflected in the way the proposed rules draw on federal campaign finance law. Key concepts are drawn from these laws, but only in modified form, and the result on certain major issues is a more restrictive application of these concepts, treating as “political” a broader range of speech. This greater rigor—the more stringent limitations—seem motivated by a concern more with campaign finance than tax law enforcement. This means that organizations dedicated to policy promotion and advocacy would be denied forms of “candidate-related” speech on issues not because the speech is inconsistent with the Internal Revenue Code standards for (c)(4) activity, but because of the fear that permitting it would cause erosion in the campaign finance laws.

For example, the proposed rules would borrow from the definition of “electioneering communication” to capture, by defining them as candidate-related, advertisements that refer to a candidate by name within 30 days of a primary and 60 days of a general election. The proposed rules do not, however, apply them as they are applied in federal campaign finance laws: the IRS recasts them more restrictively. See Guidance for Tax-Exempt Social Welfare Organizations, 78 Fed. Reg. 71,535 (Proposed Nov. 29, 2013). An organization complaining about, say, Senator McConnell or Senator Reid could not name them in an ad within 60 days of a general election even if the ad does not run in their states. This is not how Congress defined “electioneering communications”: it included within the definition of those communications a “targeting” requirement—that they be directed to the candidate’s electorate.

The tighter IRS proposal is clear, yes, but so is the narrower electioneering communication standard under FECA. By adopting the absolute restriction, the proposed rule would characterize as “candidate-related” and hence “political” a range of communications on public policy and legislative topics within weeks before an election that an organization formed for public policy advocacy would naturally engage in. This is what these organizations do—they argue for civic betterment and social improvement. The IRS suggests that the 30/60 day framework usefully takes account of the “greater potential” for communications within those periods “to affect the outcome of an election.” Id. at 71,538. But this is a concern with campaign effects and not so much a consideration of whether the activity in question is issues-based and consistent with the social welfare purposes of the organization.

To get to this place, the proposed rules disregard what the Supreme Court has had to say about the boundary line between the “candidate-speech” that may be regulated and the kind that may not be. The Court has spoken directly to this point in Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007) where it determined that not all corporate or union speech naming a candidate within 30 or 60 days of an election could be prohibited (as the law then provided): some was necessarily protected as grassroots lobbying on issues, regardless of either its intent or its possible effect on the election. Id. at 469-470. Writing for the majority, Justice Roberts declared the same concern as the IRS’s in crafting the proposed rules: establishing bright-line tests and avoiding fact-intensive determinations. The line the Court drew protects speech that is focused on a current legislative issue and that, when discussing the stance of elected officials, makes no reference to their candidacy, elections, parties, opponents, or their personal qualifications, fitness or character. The Court thought that this took care of matters—clarity without infringement of speech. The IRS proposal ignores WRTL, essentially incorporating a version of the electioneering communication standard that is cut loose from key, established constitutional considerations.

This objective, “bright-line” test of election proximity cuts both ways, giving the (c)(4)s a free pass outside the 30- and 60-day periods in referring to candidates in issue advertising. Under the proposed rule, organizations may generally name candidates up to the 30th and 60th days before an election without fear of stepping into restricted political territory. Once again, a rule constructed this way is clear and easily administrable, but it doesn’t comport with common sense to provide that a reference to the candidate 61 days out generally cannot be political while a day or two later, it always is. The campaign finance regulatory framework, when built around the quest for an objective test, forces the proposed rules into this awkward position. (The proposed rules do give the agency some flexibility to reach beyond the 30th and 60th day if a message lends itself to no reasonable interpretation other than as a political appeal. But this puts the agency back into the position that it trying to escape under these rules of judging under uncertain standards what is political in intent or effect.)

Another example of the key question of emphasis or objective raised by the proposal is the disallowance of any candidate appearances at a forum sponsored by (c)(4)s. See Guidance for Tax-Exempt Social Welfare Organizations at 71,540. This seems to go too far for candidates engaged in public policy development. The Federal Election Campaign Act provides in its candidate debate regulations for more flexibility to underwrite the costs of candidate forums or debates at any time, including during these pre-election periods. See 11 C.F.R 110.13(a)(1). Once again, faced with the choice, the IRS has elected an alternative that succeeds in being clear but shuts off entirely an avenue for (c)(4) engagement with issues when, in a campaign season, the public might be most keenly attentive to them.

The Service’s commentary accompanying the proposed rule invites suggestions for allowing these and other “candidate-related” activities provided they can be conducted in an unbiased manner and do not draw the IRS into fact-intensive determinations. Guidance for Tax-Exempt Social Welfare Organizations at 71,539-40. Again: the IRS cannot be faulted—it should be commended—for striving to stay out of complicated political determinations. There still remains the question of which regulatory objective will guide the Service’s determination of how best the rules would steer clear of bias or fact-intensive involvement. The final rules could serve the goal of enforcing the tax laws by clarifying for (c)(4)s what political activity it must limit (to less than its primary purpose), while still allowing these organizations to fulfill their public policy advocacy purposes at all times, including election seasons. Or they could meet the demand of critics that it put tax law regulation to work in strengthening the campaign finance laws at a time when neither the FEC or Congress seem able or willing to do the job.

Depending on the choice made, the rules will look quite different.