IRS Unsure When PACI Report Will be Released

According to BNA Money and Politics ($$), the Internal Revenue Service (IRS) annual report on the political activity compliance initiative project (PACI) for the 2008 campaign season "is in abeyance." The PACI report details cases that were examined for any possible campaign intervention. "The service had hoped to publish the report by March 31, but Judith Kindell, an IRS exempt organizations senior technical adviser, said she could not say when it would arrive."

This was discussed at a Georgetown Law panel on prohibited political activity by churches. In addition, recent IRS lawsuits were also referenced that challenge tax laws limiting political activity by tax exempt organizations. The James Madison Center for Free Speech on behalf of the Christian Coalition of Florida, a 501(c)(4) organization, and Catholic Answers Inc., a 501(3)organization, is challenging the constitutionality of the IRS definition of political intervention. These cases recognize the vagueness of the facts and circumstances test used by IRS to determine whether an organization has engaged in campaign intervention. 501(c)(3) tax-exempt organizations, including religious organizations, are prohibited from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. The problem is how the IRS determines whether intervention has occurred, relying on the "facts and circumstances" of each individual case as opposed to a clear set of rules that define prohibited activities.

In Catholic Answers, the IRS determined that the group owed $900 in taxes because of two "e-letters" posted by the group's president that might have influenced the 2004 presidential election. Catholic Answers is demanding that this tax be repealed and calls on the court to rule that the group should reimburse Karl Keating. According to Caplin & Drysdale attorney Marcus Owens, "there was a correction to the situation in which the individual donor responsible for political campaign statements on the Web paid the organization to compensate it for its costs. [. . .] It seems more like a contractual dispute between the individual and the charity, not necessarily directly involving the IRS."

Bob Bauer at moresoftmoneyhardlaw.com says, "the text of the email is not especially ambiguous about what brought the author to the topic and what he hoped that his readers would take from it. The issue for Bopp [counsel, Jim Bopp] is not really whether this author, or any other, knew how far to go. His real concern is to let the author go there, into electoral speech: to give him an allowance for it, short of express advocacy. In short, Bopp wishes to move the line which, for him to do it, would have to be somewhat visible. He would like to free his clients to discuss elections and candidates, if more indirectly than indirectly, and he would have them convey their preferences, but without aid of express advocacy."

For more on these two IRS challenges, read this article from the latest Watcher.

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