IRS 101: Seven questions about the tea party scandal
The Internal Revenue Service is under the microscope now, as revelations have emerged that the agency wrongly targeted conservative groups seeking nonprofit status. Here’s an accounting of what has happened, along with the ramifications.
3. What is a 501(c)(4), anyway?
The groups that were targeted by the IRS were applying for 501(c)(4) status, a designation under the tax code for nonprofit groups promoting social welfare causes. Such groups are allowed to participate in politics and can even influence elections through advertising, but their primary focus must be social welfare – which, confusingly, can include advocating legislation and issues.
As such, 501(c)(4)s are restricted to spend less than 50 percent of their money for political purposes.