This week, Politifact Oregon focused on a statement I made during a House Ways and Means Committee Hearing last week that a 100 year old statute prohibited political organizations from claiming tax exempt status.
Under the 1913 statute, social welfare groups were not allowed to participate in political activities. It was this way until 1959 that the IRS changed the interpretation of the law. By allowing groups to engage in political purpose as long as it was “not primarily” engaged in those activities, the IRS started us on a slippery slope we are contending with today.
Politifact Oregon argues that, because political organizations were not explicitly banned, it was inaccurate to say the statute prohibited them. Using Politifact’s analysis, cats and horses could be entered into a dog show unless the show rules explicitly said “yes, it’s a dog show, but cats and horses are prohibited… and rabbits… and parakeets…” Does anybody really think that way?
Roberta Mann, the Frank Nash Professor of Law at the University of Oregon School of Law, said, “The language of the 1913 statute does not directly prohibit anything, but does provide a tax exemption for ‘any civic league or organization not organized for profit, but operated exclusively for the promotion of social welfare.’ The ‘operated exclusively’ language has been interpreted by Treasury as prohibiting activity that is NOT exclusively for the promotion of social welfare. If political contributions are not within the scope of promotion of social welfare, as would reasonably be inferred from other contemporary statutes prohibiting political contributions by corporations, then the statute certainly prohibits them implicitly if not explicitly.”
I invite people to draw their own conclusions from the language of the statute and common sense.
The 1913 statute in question says that tax shall not apply to:
"[L]abor, agricultural, or horticultural organizations, or to mutual savings banks ... nor to cemetery companies, organized and operated exclusively for the mutual benefit of their members, nor to any corporation or association organized and operated exclusively for religious, charitable, scientific, or educational purposes … nor to business leagues, nor to chambers of commerce or boards of trade, not organized for profit or no part of the net income of which inures to the benefit of the private stockholder or individual; nor to any civic league or organization not organized for profit, but operated exclusively for the promotion of social welfare . . . . "