Turmns out we don't know much about the history of the tax exemption for these organizations. The WSJ provides a few hints:
- The roots trace back a century ago to when Congress enacted the Revenue Act of 1913, also known as the “Underwood Tariff Act,” . . . “The legislative history of the Tariff Act contains no reason or explanation for the exemption. The general belief is that [the] United States Chamber of Commerce pushed for the enactment of exemptions for both civic and commercial nonprofit organizations,”
- Wikipedia: Revenue Act of 1913.
- Over the years, the IRS expanded the exemption into more political territory, allowing 501(c)(4) groups to engage in lobbying and other political activity. The “notion that the section 501(c)(4) social welfare organization category is an appropriate classification for politically active charitable organizations seems to have originated with the IRS in the 1950′s,”
- Four years later, the federal government codified that policy, assigning the label of “action organization” to any legislatively active organization and issuing regulations stating that an action organization can qualify as a social welfare organization under section 501(c)(4). The IRS then loosened the rules on political campaign activity in 1981 with another ruling, which stated: [An] organization may carry on lawful political activities and remain exempt under section 501(c)(4) as long as it is primarily engaged in activities that promote social welfare.
