A top House Democrat plans to file a lawsuit in federal district court Wednesday challenging the Internal Revenue Service’s interpretation of a law that governs whether groups qualify for tax-exempt status as so-called social welfare organizations. Rep. Chris Van Hollen (D-Md.), the ranking member of the House Budget Committee, said Tuesday that he will serve as lead plaintiff in the case, which addresses one of the main concerns that surfaced with the recent IRS targeting controversy: differences between federal law and the IRS rules on eligibility for 501(c)(4) candidates. Current law says the organizations must engage “exclusively” in social welfare activities, but IRS tax code requires only that they are “primarily engaged” in such purposes. That discrepancy has led to confusion for application processors, who have struggled to determine what constitutes political activity and how much should disqualify groups from tax-exemption, according to agency officials.
“I don’t think the IRS should be in the business of determining whether the primary purpose of an organization is political or educational,” Van Hollen said in an interview Tuesday. “The statute is very clear they should not be in that business.”
Dean Patterson, an IRS spokesman, declined to comment on the planned suit but noted that the agency’s 2013-2014 work plan, released on Aug. 9, calls for new guidance on determining of 501(c)(4) eligibility.