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This inherently difficult task became even more so after the Supreme Court decided in Citizens United that corporations and unions had a constitutional right to participate in campaign intervention. Savvy advisers realized that they could create entities that could engage in considerable campaign intervention without having to disclose donor names by setting up these entities as 501(c)(4) organizations rather than as primarily political organizations subject to donor disclosure under either Federal Election Commission or IRS rules. After Citizens United, applications for 501(c)(4) status undoubtedly became more complex as well as more voluminous.
The duty of the IRS reviewers, however, did not change. They continued to have an obligation to ensure that the applicants qualified for recognition of exempt status under section 501(c)(4). While the reviewers and their supervisors blundered in how they went about their business for the applications at the heart of this controversy, we must not conclude from that behavior that IRS review is inherently wrong.
Such review is required to ensure organizations carry out the charitable, educational, civic and other activities that are so vital to our country and for which they are granted tax exemption.
Ellen P. Aprill is the John E. Anderson professor of tax law at Loyola Law School, Los Angeles, and is the organizer of the school’s annual Western Conference on Tax Exempt Organizations.