The National Rifle Association is now deeply embroiled in two current political storms. This first, of course, in light of the Parkland shooting, involves its influence in blocking gun control legislation. The second involves the role it might have played in permitting Russian money to influence the presidential election, an issue that indictments released by Special Counsel Mueller also heightens .

According to reports in January, the FBI is investigating whether money from a Russian banker with Kremlin ties channeled funds through the NRA to President Trump Donald John TrumpBiden leads Trump by 36 points nationally among Latinos: poll Trump dismisses climate change role in fires, says Newsom needs to manage forest better Jimmy Kimmel hits Trump for rallies while hosting Emmy Awards MORE’s campaign. At the beginning of this month, Sen. Ron Wyden Ronald (Ron) Lee WydenGOP set to release controversial Biden report Democrats fear Russia interference could spoil bid to retake Senate GOP senator blocks Schumer resolution aimed at Biden probe as tensions run high MORE (D-Ore.) asked the NRA and the Treasury Department for documents related to these possible ties. If this accusation proves to be the case, the donation would violate the prohibition in our campaign finance laws on the use of foreign money to support a candidate.

ADVERTISEMENT

We know only that there is a reported investigation, not the validity of the claim. We do know, however, that recent changes to our tax laws may well increase the possibility of such illegal behavior regarding foreign influence in our elections.

The NRA is exempt from income tax as a section 501(c)(4) social welfare organization. These entities can lobby without limit and, of particular importance, can engage in campaign intervention – supporting or opposing candidates for public office – so long as such activity is not their primary activity. Permitted campaign intervention activity includes not only donations to campaigns and PACs, but also urging the organization’s members to support or oppose candidates.

FBI investigating whether Russian banker funneled money to Trump campaign through NRA: report https://t.co/tiQsVAp8tP pic.twitter.com/eun6iOj67O — The Hill (@thehill) January 18, 2018

Applicable tax regulations require that social welfare organizations operate “primarily for the promotion of social welfare,” and social welfare does not include campaign intervention. The IRS, however, has never defined what primary activity means. Congress shut down its efforts to promulgate regulations that would have provided guidance on this question.

Many advisors to organizations take the position that campaign intervention can constitute up to 49 percent of a social welfare organization’s activities. This freedom to electioneer comes with a tax price: Donations to social welfare organizations are not deductible as charitable contributions.

In contrast, organizations exempt as charities under section 501(c)(3) can lobby only to a limited extent and are prohibited completely from engaging in campaign intervention. Donations to them, however, are deductible from income tax as charitable contributions. But the charitable contribution deduction benefits only those taxpayers who choose to itemize their deductions rather than take the standard deduction. In recent years, approximately 30 percent of taxpayers have itemized their deductions. The new tax legislation, however, made two changes that will drastically reduce the number of taxpayers who itemize. First, it increased the standard deduction to $24,400 for married couples. Second, it limited the deduction for state and local taxes to $10,000, both for married couples and single individuals.

As a result of these changes, estimates of the percentage of taxpayers who will itemize has fallen to somewhere between 5 percent and 10 percent. The vast majority of taxpayers will benefit more from taking the standard deduction. Those taxpayers with income between $100,000 and $200,000 will show a particularly large shift from itemizing to taking the standard deduction, dropping from over 50 percent to under 20 percent.

The nonpartisan Tax Policy Center estimates that charitable contributions will decline by about $12.3 billion to $19.7 billion per year. Charitable organizations most dependent on the middle class, which includes organizations that provide social services, are now likely to have few itemizers among their donors.

A number of nonprofit law experts believe that those interested in social services and other activities supported by the middle class may well decide to form new section 501(c)(4) organizations or encourage contributions to an existing section 501(c)(4) organization. (The National Rifle Association, the Sierra Club and the ACLU are existing among the many groups that have both 501(c)(3) and 501(c)(4) arms).

For donors not itemizing the deductions, there is no tax disadvantage to giving to a section 501(c)(4) organization instead of a section 501(c)(3) entity. But there are advantages. Tax-exempt section 501(c)(4) organizations can not only do good and lobby legislatures freely on issues important to them, but give considerable support to candidates for election who share their positions on key issues.

Thus, given the coming conflict in Congress over the size and scope of the social safety net, the ability to engage in not only in unlimited lobbying but also and especially campaign intervention through a section 501(c)(4) social welfare organization will hold enormous, perhaps irresistible, appeal, as such organizations will undoubtedly explain in fundraising. Recent scholarly work has underscored the importance of fundraising efforts by 501(c)(4) organizations.

Newly energized 501(c)(4) organizations could well attract foreign persons whose money goes to candidates, as the investigation of the NRA demonstrates. For reporting under the campaign finance laws, however, only the name of the social welfare organization needs to be disclosed, not the names of the donors to the organization.

Although both section 501(c)(3) and section 501(c)(4) organizations must disclose the name of large donors to the IRS on the Annual Information Return, Form 990, the schedule of donors is not disclosed to the public. Neither do section 501(c)(4) organizations have to disclose their donors to the FEC when they spend money explicitly supporting or opposing a candidate or run certain issues ads close to an election.

Many have criticized Congress, in its hurry to pass the tax legislation, for failing to consider fully the combined impact of changes to the law, in particular on charitable giving. I doubt very much that anyone in Congress gave a moment’s thought to the possibility that the legislation would, inadvertently, encourage the expansion of section 501(c)(4) organizations and with it, the likely growth of unknown and unidentifiable donors free to engage in substantial electioneering.

Ellen P. Aprill is the John E. Anderson Chair in Tax Law at Loyola Law School, Los Angeles, where she founded the Western Conference on Tax-Exempt Organizations.