The Bright Lines Project is a production of experienced tax law specialists seeking a clearer, more predictable test for “political intervention by 501(c)(4) organizations. In a detailed Drafting Committee Explanation, the team (including my partner Ezra Reese) lays out its proposed test and the rationale for it, and additional explanation of their goal appears in an op-ed written by Gary Bass and Beth Kingsley. The Bright Lines Project: Clarifying IRS Rules on Political Intervention (Interim Draft, May 23, 2013). What the Project authors have come up with is constructive and interesting, but this is the key question: does its utility lie in a fruitful application to the tasks the IRS faces, or in showing that even well-reasoned, thoughtful tests will bog the agency down in the political analysis—and therefore political resistance and controversy—that it is or should be trying to escape?
One short evaluation of the Project cannot do justice to its complexity. This is already a problem: turning over a complex standard to the IRS for implementation puts the agency in an impossible position. Complexity means hard judgments; the judgments are about sensitive political matters; and the recent controversy demonstrates, if anything, that the IRS is at risk when making judgments of this nature.
But there is a quick check that can be run on the Bright Lines Project’s prospects for success in moving the IRS to less contested ground in its administration of the (c)(4) exemption. What about the “facts and circumstances” test for determining when a tax-exempt is engaged in “political intervention”? The Project authors acknowledge that this test as it is currently in use is vague and cannot meet the goals of “predictability, simplicity or ease of understanding.” Id. at 2. Under their proposed test, however, the test lives to fight, and be fought, another day. Organizations may still use it to show that a communication that might otherwise appear to the IRS to be election related is nonpartisan and consistent with its exempt purposes.
So the Project in its promotion of “bright lines” leaves the reader with the hope that a new rule has sailed and left the facts and circumstances test to wave good-bye on the dock—only to discover that “facts and circumstances” have snuck into steerage and are ready to be summoned back on deck as needed.
To appreciate the lingering role of “facts and circumstances,” one has to consider the basic structure of the proposed rule as it would deal with communications that criticize the performance in office of elected officials running for re-election or for another office. We are back, in other words, to “issue advertising,” which the Project authors rightly take on directly as central to the problems the IRS (and for that matter, the campaign finance law) has run into.
Full Article: The IRS and the Bright Lines Project.