The Federal Elections Commission (FEC) is considering changes that could affect the advocacy voice of charities across the country. Currently charities are strictly prohibited from electioneering, and are thus not covered by campaign finance law. However, the FEC is reviewing current rules regarding communications made 30 days prior to primary elections and 60 days before general elections, and weighing whether charities should be limited in mentioning a candidate for federal office during those periods. On August 12, the FEC General Counsel released a proposal on "electioneering communications" -- broadcast, cable or satellite communications that, because they refer to a federal candidate, cannot be aired within 30 days of a primary and 60 days of a general election. The proposal examines the unqualified exemption for 501(c)(3) tax-exempt organizations, seeking information on the level of deterrence current tax laws have to prevent an organization from "promoting, attacking, supporting or opposing" (PASO) a federal candidate. Other information sought in the proposal includes to what extent do grassroots communications result in charities PASO-ing a candidate, as well as input on a proposed rule that would allow the FEC to make its own determinations on whether an ad PASOs a candidate. The proposal is significant, because it involves a wholesale review of the exemption that 501(c)(3)s receive under current rules. 501(c)(3)s are currently entirely exempt from the electioneering communications prohibition. The Bipartisan Campaign Reform Act of 2002 (BCRA) exempts certain communications from the definition of electioneering communications. It also authorizes the FEC to issue regulations exempting other communications as long as the communications do not "promote, support, attack or oppose" a federal candidate. In 2002, the FEC exempted 501(c)(3)s because it did not want to discourage organizations from issue advocacy based on a threat that had not manifested. The FEC also assumed that the Internal Revenue Code (IRC), which prohibits charities from intervening in political campaigns, could be used to regulate 501(c)(3)s for the purposes of election law. Shays v. FEC challenged the exemption for 501(c)(3) organizations, with the plaintiff complaining that the rule was neither inadequately considered or explained and questioning whether the FEC should leave enforcement to the Internal Revenue Service (IRS). A U.S. District Court found the record unclear as to whether the regulation's reliance on the IRC prohibitions would result in exempt advertisements that "promotes, supports, attacks and opposes" a federal candidate. The Court held that the exemption for 501(c)(3) organizations violated the Administrative Procedure Act (APA) because the explanation and justification for the rule led the Court to believe that the FEC had failed to conduct a reasoned analysis. Specifically, the Court found that the explanation was deficient because it did not address the "compatibility" of the IRS' enforcement with Federal Election Campaign Act's (FECA) requirements, and identified three specific omissions:

• whether public communications that PASO a federal candidate would be viewed by IRS as political activity in which 501(c)(3) organizations may not engage;
• the risks, if any, that limited lobbying activity permitted for 501(c)(3) organizations could give rise to advertisements that PASO a federal candidate; and
• the implications of allowing the IRS to "take the lead in campaign finance law enforcement."

The District Court remanded the regulation to the FEC for further action consistent with the order. Rather than appealing this aspect of the Court's decision, the FEC is initiating rulemaking to address the three concerns. A well-developed administrative record will help inform their decision, as well as allay the Court's concerns. If the FEC makes changes in the rules affecting charities, it could result in stifling nonprofit speech, as nonprofits would struggle to determine how to conduct issue advocacy without referencing an elected federal official in a manner that is neither too flattering or too disparaging to the satisfaction of the government. Comments on the proposal are due on or before Sept. 30 and should be sent to ECdef@fec.gov, or through the Federal eRegulations Portal at www.regulations.gov. The FEC will hold a hearing on Oct. 19. The FEC is considering a range of options including:

• retaining the section 501(c)(3) exemption;
• narrowing the section 501(c)(3) exemption;
• repealing the two current exemptions for 501(c)(3) organizations; and
• replacing all of the current exemptions with a broad new exemption covering all communications that do not promote, support, attack, or oppose a federal candidate.