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At heart of IRS scandal: flawed 501(c)(4) rules
Congress passes laws and usually the appropriate agency can write regulations implementing the law. However, the regulations cannot contradict the law. Nevertheless, with respect to the tax law provision 501(c)(4), that is exactly what happened. Under this provision, the government provides a tax exemption to nonprofit organizations who operate exclusively for social welfare ("White House aide: Obama didn't know of IRS policy," May 20). The implementing regulation and the advice from the IRS is self-contradictory. First, the IRS states that "To be tax-exempt as a social welfare organization described in Internal Revenue Code (IRC) section 501(c)(4), an organization must not be organized for profit and must be operated exclusively to promote social welfare."
May 21, 2013