The Tax Reform Act of 1969 attempted to limit the political involvement of tax-exempt philanthropies. Both houses of Congress were controlled by Democrats when the law passed. It was signed by Republican President Richard Nixon.

Among other things, the law makes it a “taxable expenditure” for any private foundation to pay or incur any amount “to influence the outcome of any specific public election, or to carry on, directly or indirectly, any voter registration drive”—though excepted from this definition, among other things, is “any amount paid or incurred by any organization … the activities of which are nonpartisan, are not confined to one specific election period, and are carried on in 5 or more States ….”

The General Explanation of the Tax Reform Act of 1969, prepared by the staff of Congress’ Joint Committee on Internal Revenue Taxation, is excerpted below.

In recent years, private foundations had become increasingly active in political and legislative activities. In several instances called to Congress’ attention, funds were spent in a ways clearly designed to favor certain candidates. In some cases, this was done by financing registration campaigns in certain areas. …

… Congress determined that a tax should be imposed upon expenditures by private foundations for activities that should not be carried on by exempt organizations (such as lobbying, electioneering, and “grass roots” campaigning). …

In general, the Congress’ decisions reflect the concept that private foundations are stewards of public trusts and their assets are no longer in the same status as the assets of individuals who may dispose of their own money in any lawful way they see fit.

Explanation of provisions.—The Act forbids private foundations to spend money for lobbying, electioneering (unless certain standards are met, this includes voter registration drives), … and for any purpose other than the exempt purposes of private foundations. Any improper expenditure is subject to tax.

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