At least initially, the term “dark money” was used to characterize support of tax-exempt organizations that are categorized under Internal Revenue Code § 501(c)(4), as one of us previously has examined.[i] The term’s application has since been broadened quite a bit beyond that.

By its own terms, § 501(c)(4) nonprofit groups are “Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.” As part of their mission, they may engage in unlimited legislative advocacy and some partisan political-campaign activity, as long as the latter is not their “primary” purpose or activity. As part of what can be considered the bargain they cut with the state, and with their donors,[ii] donations to (c)(4) groups are not tax-deductible—and they do not have to publicly report their donors to the Federal Election Commission (FEC), except for certain contributions raised for independent-expenditure campaigns.[iii]

Hence the adjective in “dark money”—the negative connotation of which helpfully served a post-Citizens United v. Federal Election Commission[iv] purpose to some, mostly liberals reviling the 2010 decision and its effects. Citizens United, recall, famously held that limits on speech about candidates by corporations, associations, or labor unions were unconstitutional, just as they are for individuals. Groups under tax law’s § 501(c)(4) were an already-existing stream through which such funding could, and can still, easily flow.

After Citizens United, others wanted to serve that same negatively connotative purpose behind the early usage of the “dark-money” term in other contexts. They thus journalistically and polemically broadened the term to additionally describe support of a wider range of groups and projects, including non-(c)(4) ones.

What originally gave rise to § 501(c)(4) itself, to the degree it’s possible to explore, and how has it changed, if at all? What were (c)(4)s before Citizens United—before they became what they are? Or at least what they’re currently considered, or now labelled? What were they during the decades leading up to the “darkness” being deemed descriptive of their support?


In 1909, Congress enacted a one-percent excise corporate tax on “the entire net income over and above $5,000” of “every corporation, joint- stock company or association, organized for profit,” as recounted by election-law attorney Allison Hayward in a comprehensive 2015 report on the tax regulation of nonprofit advocacy groups from the Center for Competitive Politics, now called the Institute for Free Speech (IFS). “This tax also specifically exempted corporations not organized for private profit,” according to Hayward.

After the 16th Amendment permitting a federal income tax was ratified in 1913, Congress began defining what could and could not be taxed. The Senate Finance Committee amended a tax bill that year, Hayward describes,

to specifically exempt “business leagues ... chambers of commerce or boards of trade, not organized for profit or no part of the net income of which inures to the benefit of the private stockholder or individual; nor to any civic league or organization not organized for profit, but operated exclusively for the promotion of social welfare.” Here is the inaugural appearance of the “social welfare” exemption found now in Section 501(c)(4) of the Internal Revenue Code.

The “social welfare” category may have been added in response to testimony filed with the Senate Finance Committee by Elliott H. Goodwin, General Secretary of the U.S. Chamber of Commerce, and Charles Criss, Secretary of the American Warehousemen’s Association. Both groups argued that the scope of taxable corporations in the 1913 law was broader than in the 1909 law and that under the plain reading of the proposed tax, chambers of commerce, boards of trade, and other nonprofit commercial entities would be subject to income tax unless made exempt.[v]

It is widely assumed that the Chamber of Commerce and the warehousemen sought the amendment “to broaden the range of exempt organizations to include” those types of groups “which could not qualify as charitable, educational, or religious, but whose activities somehow benefited the general public,” according to Case Western Reserve University law professor Laura B. Chisolm in a 1988 Indiana Law Journal article.[vi]

Hayward notes that “[t]his ‘social welfare’ clause provoked no apparent debate that could assist in deciding what it meant, and records from the Committee for these years were not archived.”[vii] Similarly, “It turns out that the origins of section 501(c)(4), providing exemptions for ‘social welfare’ groups, are surprisingly foggy,” Jacob Gershman observes in a 2013 Wall Street Journal article.[viii]

The bill with that first social-welfare language was signed by President Woodrow Wilson in October 1913. The Revenue Act of 1916 then edited the exemption provision, breaking each category of exemption into its own numbered clause. That which was later renumbered into § 501(c)(4) exempts, again, “Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.” Okay, got it.

The section itself “is silent regarding whether an organization engaging in political candidate and other partisan activities is consistent with tax-exempt status under that subsection of the Code,” as American Civil Liberties Union (ACLU) general counsel Terence Dougherty notes in a thorough 2013 Seattle University Law Review article.[ix]


There is little research on social-welfare groups’ actual political and/or legislative-advocacy activities and interactions with regulators in their first decades.

In 1955, considering the exempt status of an unnamed group encouraging government to “practice wise economy in public spending,” the IRS said one of the group’s “principal means of accomplishing these purposes is the printing and dissemination of literature devoted to advocating the principles which it supports. Occasionally, the literature may advocate or oppose pending legislation,” according to a relevant revenue ruling that both Gershman and Chisolm describe. The group was exempt under § 501(c)(4), the IRS concluded.

A Treasury Department regulation issued in 1959 essentially formalized this position.[x] The regulation “assigned the label of ‘action organization’ to any legislatively active organization and stated that ‘[e]ven though an organization is an ‘action organization’ it can qualify as a social welfare organization under section 501(c)(4),’” reports Chisolm.[xi] Under the regulation, (c)(4) groups need not limit their legislative-advocacy efforts to what it calls “insubstantial” amounts.

The regulation defines “exclusively”—the word used in the Code to modify “for the promotion of social welfare—“to require the organization only to be ‘primarily engaged in promoting in some way the common good and general welfare of the people of the community,’” as put by Daniel C. Kirby in a 2015 Chicago-Kent Law Review student note.[xii] It states that the “promotion of social welfare” does not encompass “direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”

Got all that?

Just as there are no Senate Finance Committee records from 1913, “no transcripts or records survive from the IRS hearings held to consider the final” 1959 rules, according to Hayward. “One newspaper account of an April 16, 1959 hearing,” however, “reported only that attendees were critical of the rules, and feared they would deny exemptions to groups that were deemed exempt under the former rules. …

“After 1959, the regulations governing the political activities of tax exempt nonprofits remained relatively stable,” Hayward writes. “The aggressiveness of the IRS in certain contexts, its use and abuse by political leaders, and public outcry in response to misuse of the tax code also persisted. The intersection of taxation and activism remains a treacherous one for the activist.”[xiii]

The Internal Revenue Code § 527—a category, separate from § 501(c)(4), to cover tax-exempt nonprofit groups that primarily influence the selection, nomination, election, appointment or defeat of candidates to federal, state or local public office—wasn’t created until 1975.


Many post-’59 regulatory and administrative-law efforts to struggle with (c)(4)’s treacherous taxation-activism intersection are nicely overviewed in a 1995 paper by Raymond Chick and Amy Henchey.[xiv] In one of them, a 1981 ruling heartening for activists, the IRS said that since an “organization's primary activities promote social welfare, its lawful participation or intervention in political campaigns on behalf of or in opposition to candidates for public office will not adversely affect its exempt status under section 501(c)(4) of the Code.”[xv]

As Hayward intimated, there were other struggles that were disheartening to many activists, however. Beginning in 2010, conservative Tea Party organizations thought they were unfairly denied (c)(4) exemption by the IRS. The IRS contended it was acting in its proper discretion, and it proposed a set of revisions to the (c)(4) regulations in 2013 that would have excluded many of the groups from exemption. Specifically, the proposed revisions would have denied (c)(4) status to groups engaging in “candidate-related political activity,” and they sought to define in detail what that would mean.

“The proposed rules would plunge the [IRS] deeper into political regulation,” former FEC chairman and current IFS chairman Bradley A. Smith observed in a 2013 Wall Street Journal op-ed.[xvi] They “would upset more than 50 years of settled law and practice by limiting the ability of certain tax-exempt nonprofits, organized under Section 501(c)(4) of the Internal Revenue Code, to conduct nonpartisan voter registration and voter education,” according to Smith.

The IRS asked the public for comments on the ’13 proposals and, after receiving a record number of them, it withdrew the proposed changes the next year.

Dougherty believes there is now

opportunistic behavior: an “anything goes” approach to these activities by Section 501(c)(4) organizations. Based on the understanding that exempt activities must constitute the organization’s “primary” activities and that political candidate- and party-related activities are not exempt activities, they take the position that as long as expenditures on these activities do not exceed fifty percent of the organization’s expenditures—i.e., are less than primary—anything goes; the organization can engage in these activities regardless of the nature of the political activities and whether they are in furtherance of the organization’s social welfare purposes.

Others think political speech and social welfare have never really been, and needn’t now be considered, so separate and distinct. Why do we have elections, by this thinking, if not to consider how best to manage or improve our social welfare?


“[T]he discussion of candidates and issues as a political-campaign activity” was not “perceived as a major problem so long as the 501(c)(4) category was dominated by the political left,” IFS’s Smith observes. “Beginning in the 1990s, however, and especially since 2010, organizations that were more conservative began using the 501(c)(4) category to engage in public education as well as political activity, thus challenging liberal dominance in nonprofit advocacy.” (At this writing, in the 2020 election cycle, interestingly enough, the left and Democrats appear to be using (c)(4) funding much more than conservatives and Republicans.[xvii])

Just as there may be ambiguity in the word “dark”—useful to many of the left who took initial advantage of it, in their journalistic and polemical discretion—many want to see, and there may be, some ambiguity in the relevant statutory, regulatory, and administrative language constituting the (c)(4) framework. “Political,” “insubstantial,” “exclusively,” and “primarily” are all susceptible to parsing. Looking at the section’s origins, classifications, and the struggles over them is not dispositive. There’s room for attempts at advantage-taking here, too, keeping in mind what the IRS tried in the eyes of conservative groups denied (c)(4) status after Citizens United.

Finally, and relatedly, who can and should properly wield such discretion? The ACLU’s Dougherty concludes by discussing the two poles of how to deal with (c)(4) political activity—“prohibiting all activities or permitting it unfettered”—and recommends that, no matter what might be done, “it should be accomplished not by the Treasury Department, but rather by Congress.”[xviii]

Smith’s Wall Street Journal piece on the proposed ’13 revisions points out that “[t]he statute leaves it to the IRS to define ‘social welfare’ in that context, and for half a century the agency has defined it to include political-campaign activity. The 501(c)(4) category has always been the home of political-advocacy groups.” He concludes that “legislation is not required. The IRS could with its own rules follow the bipartisan FEC on the question of a group’s political status.”[xix]

The (c)(4) definitional dithering may just be beginning. Or, will merely cantankerously continue. As probably will selective use of the term “dark money.”



[i] Michael E. Hartmann, “The Etymology of ‘Dark Money,’” Capital Research Center, July 15, 2019.

[ii] See Michael Hartmann, “Nonprofits Must Bargain With Both Donors & The State,” RealClearPolicy, March 7, 2019.

[iii] The law on what must be reported under such circumstances is murky at the moment. “Court Ruling on Independent Expenditures Creates New Risks for Groups,” Institute for Free Speech, August 23, 2018.

[iv] 558 U.S. 310 (2010).

[v] Allison Hayward, Eternal Inconsistency: The Stunning Variability in, and Expedient Motives Behind the Tax Regulation of Nonprofit Advocacy Groups, Center for Competitive Politics, 2015, pages 7, 9 (footnote omitted).

[vi] Laura B. Chisolm, “Exempt Organization Advocacy: Matching the Rules to the Rationales,” Indiana Law Review, Volume 63, Number 2, 1987-88, page 201.

[vii] Hayward, supra note v, page 9.

[viii] Jacob Gershman, “The Surprisingly Muddled History of the 501(c)(4) Exemption,” The Wall Street Journal, May 16, 2013.

[ix] Terence Dougherty, “Section 501(c)(4) Advocacy Organizations: Political Candidate-Related and Other Partisan Activities in Furtherance of the Social Welfare,” Seattle University Law Review, Volume 36, 2013, page 1336.

[x] Treas. Reg. § 1.501(c)(4)-1(a)(2)(i) (1960).

[xi] Chisolm, supra note vi, page 290.

[xii] Daniel C. Kirby, “The Legal Quagmire of IRC § 501(c)(4) Organizations and the Consequential Rise of Dark Money in Elections,”Chicago-Kent Law Review, Volume 90, Issue 1, 2015, pages 223 (emphasis in original), 225. Kirby thinks the section “should revert to its original interpretation” and “the political activity ban enforced before the 1959 Regulation would again be in effect.”

[xiii] Hayward, supra note v, at pages 26 (footnote omitted), 27.

[xiv] Raymond Chick and Amy Henchey, “Political Organizations and IRC 501(c)(4),” 1995 EO CPE Text.

[xv] Rev. Rul. 81-95, 1981-1 C.B. 332, cited in id.

[xvi] Bradley A. Smith, “The Latest IRS Power Grab,” The Wall Street Journal, December 8, 2013.

[xvii] See, e.g., Karl Evers-Hillstrom, “Influential ‘dark money’ network steers millions to pro-Biden super PACs,”, July 16, 2020. See also Michael E. Hartmann, “David Keating was right,” The Giving Review, May 4, 2020.

[xviii] Dougherty, supra note ix, page 1412.

[xix] Smith, supra note xvi.