New Orleans        Freedom Path is a conservative advocacy organization, but it may have done advocacy groups of all flavors and persuasions a favor by challenging the US Internal Revenue Service on the issue of fuzzy and non-existent standards for what determines political activity by a tax-exempt nonprofit organization.  Freedom Path is classified as a 501(c)(4) organization, which is a category largely for social welfare and advocacy groups.  Freedom Path went to court to try and cut through this fog.

In a recent decision in Freedom Path v. IRS, a Biden-appointed federal judge ruled that the vagueness of the IRS definitions of political activity and political speech were impermissibly crossing the line into unconstitutional.  The judge added in his decision that the inscrutability of the regulations enabled “selective enforcement,” invoking the scandal of fifteen years ago with Tea Party and some former ACORN affiliates were denied c4 and c3 status stemming from this regulatory fog.

Coupling this decision with Trump’s magic wand wave to make religious organizations, able to engage in political speech and endorsements from the pulpit, could throw the doors wide open for nonprofits to speak and act more safely and publicly.  Churches and others are accorded the more favorable 501(c)(3) classification for nonprofits allowing contributions to be tax-deductible, The Freedom Path decision means that any of the instructions around c4 activity are now in limbo.  These two whacks at IRS restrictions leave everything up in the air, I would think, even for c3 organizations.

A former head of the Federal Election Commission believes that the FEC, not the IRS, should be the ones to regulate such speech and that Congress needs to get on the stick and make this happen, as the only ones that can sort this out.  I’m not sure that any of them are really able.

There’s a folk wisdom inherited by many nonprofit managers, that along with extreme funder bias, has pushed self-censorship by exempt nonprofits for decades, because the IRS has never clarified what percentage of support for such political speech and activity would be disqualifying.  This meant that funders were overly cautious and eschewed supporting what they viewed as overly aggressive advocacy and organizing groups in order to protect their own tax exemption and their donors tax benefits.  Many organizations with the same status did the same.  Both essentially grabbed percentages out of the air that they reinterpreted as bright lines that couldn’t be crossed.  What percentage of expenditures of this sort were allowable?  5%?  8%?  Why not 20% or 49%, some might argue, as I can remember the discussion when I was on the board of the Tides Foundation and its family of organizations?  No reason that I could see then or now.

There was an even crazier restriction on something called “grassroots lobbying,” which was theoretically banned by exempt nonprofits.  Who and what might be able to define and draw the line between presenting information, data, or reports and classifying such either as “just the facts, ma’am” versus such nebulously defined lobbying?

This has all been a hot mess, mainly curbing speech and lining the pockets of lawyers charging for advice.  The cows are all out of the barn now, and it’s unclear what it might take to round them up at this point.  Not the IRS, which has hidden behind the barn door, and who would bet on how the Supreme Court might see this, but political speech and money have been left to run wild by them in many decisions in recent years.