On Monday, in response to allegations of misconduct at the Internal Revenue Service (IRS), U.S. Senator Angus King, Jr. sent a letter to Treasury Secretary Jacob Lew urging him not to overlook the underlying issue: that 501(c)(4) organizations are being improperly utilized to circumvent campaign finance law.

"I am appalled by what appears to be an improper focus on identifying conservative 501(c)(4) applications and the undue burdens placed on such organizations in complying with requests for information," Senator King wrote. "I am even more troubled by an issue that the current scandal threatens to obscure: the problematic emergence of 501(c)(4) organizations as a means to circumvent established campaign finance restrictions and to funnel money into political activities under the guise of promoting 'social welfare.'"

The Internal Revenue Code clearly defines 501(c)(4) organizations as "civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare." The statute, said King, does not bear any mention of political activity, but subsequent IRS regulations have interpreted the statute to permit such activity as long as it's not the "primary" activity of the social welfare organization. The inconsistency between the statute and the rule means that no clear definition exists to determine what level of political activity violates the regulatory standard.

"I believe that this regulatory interpretation, though longstanding, is incorrect on its face," wrote King. "There is no way that 'exclusively' can be construed to mean 'primary.' This is particularly concerning in the context of campaign finance law, for 501(c)(4) organizations do not have to disclose the names of their donors, and no restrictions are imposed upon monetary contributions to these organizations. As a result, 501(c)(4) organizations have emerged as the preferred mechanism through which donors can shield their identity while exercising extensive political influence during campaigns.... We must ask ourselves: Why do we permit these organizations to engage in broad political activity without clear regulations regarding what constitutes excessive political activity and without the disclosure requirements of other entities that engage in substantial campaign activity?" wrote King.

King urged the IRS to bring its regulations in line with the intent of the law: "From my perspective, the solution is simple: the law should be enforced as written. The IRS should engage in new rulemaking that accurately reflects the intent of the original statute. In addition to being over 50 years old, the existing rule fails to fit the current campaign finance landscape, whereby entities are using 501(c)(4) organizations to intentionally shield the identities of donors."