Senator Proposes Limits on Charity Politicking

Sen. Joseph I. Lieberman, a Connecticut Democrat, has proposed a sweeping campaign-finance overhaul bill that includes strict new limits on partisan political activity by tax-exempt organizations.

Under the measure, S 1666, organizations registered under Sections 501(c)(3) or 501(c)(4) of the Internal Revenue Code would lose their tax-exempt status if they solicited or accepted a contribution from a political party or candidate; made or directed a contribution to a political party or candidate; or spent money in coordination with political parties or candidates.

The tax code now limits political activity by non-profit groups, but Senator Lieberman’s bill would go much further. His measure, he said, was a response to his concerns that, in 1996, “supposedly independent, tax-exempt organizations” were used “to influence the outcome of campaigns — often covertly.”

For example, Mr. Lieberman said, Citizens for Reform, a group in McLean, Va., spent $2-million on ads in the month before the 1996 Congressional elections. “The group claimed its ads were about specific issues, but the ads clearly were intended to promote the defeat of Democratic candidates and the election of Republican candidates,” he said.

The group did not report its activities to the Federal Election Commission or identify the source of its contributions, Senator Lieberman said. Yet it was subsidized by taxpayers through exemption from various forms of taxation, he said.

Senator Lieberman’s measure also includes limits on the ability of organizations registered under Section 501(c)(4) to switch their status to Section 527, a part of the tax code that governs political parties and political advocacy committees. Section 527 affords tax benefits with fewer restrictions on political activity than other sections of the tax code.

Under Senator Lieberman’s measure, the tax benefits under Section 527 would be available only to groups whose activities were regulated under the Federal Election Campaign Act.

Mark Braden, a lawyer for Citizens for Reform, says Senator Lieberman’s bill appears to be an attempt to squelch free-speech rights. “This would appear to be an effort to keep people from engaging in political speech,” he says.