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Trevor Potter Comments on Revisiting Nonprofits' Exemptions

March 10, 2015, Tax Notes Today

Tax Notes Today quoted Trevor Potter on reevaluating the tax-exempt status of 501(c)(4) social welfare organizations when the majority of their activities become political. For the complete article, please visit Tax Notes Today's website (subscription required).

Excerpt taken from the article "Some Nonprofits' Exemptions Need Revisiting, Critics Say"
Paul C. Barton for Tax Notes Today.

Policing a Sensitive Area

"If an organization substantially changes its activities, so that they now diverge from what the IRS was originally told it would be doing, and instead moves to a mix of activities that are predominantly political, then it may well no longer qualify for 501(c)(4) status," said Trevor Potter, a former member of the Federal Election Commission now at Caplin & Drysdale Chtd.

The IRS should be examining such organizations, Potter said, even though "it is unclear that there are any mechanisms in place internally for them to do so absent complaints from outside the agency bringing it to their attention. Even then, there are obvious resource -- and potentially political -- problems for the IRS in pursuing such an examination of an organization's activities."

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