What exactly can a (c)(4) do in elections?

Good question.  And nobody knows the answer at the moment.

501(c)(4) social welfare organizations, unlike 501(c)(3) charities, may participate in election campaigns.  Because the donor lists of (c)(4) social welfare organizations, like the donor list of (c)(3) charities, are confidential, there has been a huge flood of dark money into politics since the U.S. Supreme Court said in the Citizens United case in 2010 that corporations could participate in election campaigns so long as it was not coordinated with the candidates.

The first question is how much can they do?  The IRS Regulations provide that they must operate “primarily” for social welfare purposes and make clear that electioneering is not a social welfare activity.  But Congress had actually prohibited the IRS from defining what “primarily” means. Does it mean that a bare majority of their activity, the English language definition, must be for non-electioneering social welfare purposes, or does it mean that having any substantial impermissible non-social welfare activity, the tax language for charities, will preclude the classification?

The Fifth Circuit Court of Appeals has recently held in the Memorial Hermann case that “primarily” means for (c)(4)s what it means for (c)(3)s, that no substantial part of the organization’s activity may be for ineligible purposes.  (See Nonprofit Issues^®, Vol. XXXIV, No. 5.) The IRS has not formally adopted this standard, although it may be leaning in that direction.

The second question is what should be considered political activity?  Clearly endorsing a candidate or contributing to a political campaign would be electioneering activity.  But in the pending case involving Freedom Path, the federal District Court in the District of Columbia has said that IRS guidance on the scope of other types of activity that should be considered political is unconstitutional.  (See Nonprofit Issues^®, Vol. XXXV, No. 6.)  The Court has asked the parties to provide guidance on what the rules should be.  We don’t know how that will turn out.

Even if the IRS rules are unconstitutional, it doesn’t mean that they will necessarily be repealed. The courts ruled many years ago that the definition of “educational” was unconstitutionally vague, but it remains on the books as some sort of guidance.

Maybe, if the Freedom Path case is fully litigated through the Court of Appeals, or perhaps even the Supreme Court, we will know more. At the moment, some significant questions are still up in the rarified odiferous air.