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Beginning in the 1990s and continuing today, many of the legal and psychological barriers to nonprofits becoming involved in electoral politics have fallen. At the same time, political divisions have sharpened, causing candidates, political parties, and their supporters to scramble more aggressively for any possible edge in winner-take-all political contests. In the face of these developments, many nonprofits have violated the remaining legal rules applicable to their political activity with little fear of negative consequences, especially given vague rules and a paucity of enforcement resources. Such violations include under reporting of political activity in government filings, fly-by-night organizations that exist only for one election cycle in order to avoid penalties, and even organized campaigns that encourage nonprofits to break these rules. The increasingly visible disregard of these rules threatens not only to damage the public reputation of the nonprofit sector as a whole, but also to undermine public respect for the rule of law more generally. Many scholars, journalists, and others have documented the increasing involvement of nonprofits in politics, including numerous apparent violations of the remaining rules governing such activity. Commentators have proposed a variety of piecemeal solutions, ranging from overhauling the existing rules to repealing those rules in part or completely, sometimes with a focus on tax laws, sometimes with a focus on election laws, and sometimes with a focus on state nonprofit laws. However, what is needed is a comprehensive approach that considers the various ways nonprofits can be involved in politics, the positive as well as negative effects of such involvement, and the interaction between these different bodies of law at both the federal and state level that relate to such involvement.

This Article takes such a comprehensive approach. Drawing on the now extensive information regarding nonprofit political involvement, and where such involvement appears to have repeatedly violated the existing legal rules, this Article will first provide a roadmap of such involvement, and the points where political pressures are overwhelming the existing legal rules and the agencies charged with enforcing them. Next, this Article will describe the various solutions proposed by commentators, highlighting the incomplete nature of those solutions but also the insights they provide regarding the strengths and weaknesses of the various legal approaches for addressing such involvement. These insights include those relating to the historical reasons for why the legal rules have developed in the manner they have, as well as ones relating to the relative institutional competencies of the agencies charged with interpreting and enforcing those rules.

Finally, this Article will propose an overall approach to modifying the existing legal rules that relieves the identified pressure points without compromising the important public policies underlying the current legal rules, including ensuring the continuing ability of nonprofits to contribute to political debates in the United States. This approach involves revising the federal tax rules for tax-exempt nonprofits to clarify what constitutes prohibited political activity for charities, to loosen the unnecessary (from a tax policy perspective) restrictions on political activity by non-charitable, tax-exempt nonprofits, and, most controversially, to permit churches and other houses of worship to engage in political activity in the context of internal, in-person communications to members. It also involves shifting public disclosure rules relating to political activity from federal tax law to federal and state election law, refocusing such public disclosure on a broader range of such activity, and increasing the donation amounts that trigger such disclosure with respect to donor identities.

This comprehensive approach recognizes the importance of maintaining the current tax policy of not subsidizing efforts to support or oppose candidates for elected office, while at the same time not unduly burdening the free speech, free association, and free exercise of religion rights of individuals who collectively engage in political activity through nonprofits. It also recognizes the institutional limitations of the Internal Revenue Service when it comes to enforcing tax rules relating to political activity, particularly given the breakneck pace of electoral politics, by placing greater emphasis on the federal and state laws, and their related agencies that specifically regulate elections. By doing so, this approach recognizes and anticipates the dynamic nature of political involvement by nonprofits and so seeks not to prohibit, but instead to channel that involvement in a manner that furthers overall democratic participation goals.



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