Josh Barro, Columnist

Don't Buy the 'Social Welfare' Defense of the IRS

You don't have to do a lot for the social welfare to legally qualify as a 'social welfare organization.'

May 14, 2013 at 8:16 PM UTC

Josh Barro is the lead writer for the Ticker, Bloomberg View's blog on economics, finance and politics. His primary areas of interest include tax and fiscal policy, state and local government, and planning and land use. Previously, Barro was a Senior Fellow at the Manhattan Institute for Policy Research and a commercial real estate banker at Wells Fargo. He holds a bachelor's degree in psychology from Harvard and lives in Queens, New York.

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(Corrected to remove reference to Club for Growth in fourth paragraph)

A lot of the calls for the Internal Revenue Service to crack down on political 501(c)(4) organizations -- which is what the IRS was trying to do when it touched off the scandal over Tea Party groups -- focus on the claim that ideological, political groups are obviously not "social welfare" organizations as required under the law. Not so fast.

"Social welfare" is a term of art that doesn't mean exactly what it sounds like. To qualify, a group must have the aim of producing benefits that accrue to the community as a whole, not just its members. "Benefit" and "community" are construed broadly; organizations do not have to demonstrate that the policies they promote are good or that they benefit everyone.