In the midst of the seemingly never-ending, Groundhog Day style, investigation into the IRS issues from last year, organizations across the political spectrum have chosen to rise above the fray and tell the IRS to continue a rulemaking effort that could finally end decades of confusion over the way the agency defines political activity for nonprofits. And with the newly reinvigorated big money awareness stemming from last week's McCutcheon vs. FEC ruling, strong rules from the IRS are more necessary than ever to stem the tide of dark money. The IRS has jurisdiction over a big conduit of secret spending, the 501(c)(4) organizations that spent more than $250 million in 2012 -- roughly a quarter of all campaign spending by outside groups.
An analysis* by Public Citizen's Bright Lines Project has found that 67 percent of organizations that commented on the new proposed rules for nonprofit political activity are encouraging the Treasury Department and the IRS to continue the rulemaking rather than allow the current, vague, test for political activity to remain.
Despite press reports that the vast majority of comments call for the rulemaking to end, a thorough analysis of comments from organizations shows that those whom the rulemaking would most affect are also the ones most eager for it to proceed. There is widespread agreement among these organizations that the proposed rules are flawed, but a majority wants the rules to be fixed, not abandoned.
The rule proposed in November by the agency is for a new definition for "candidate-related activity" for 501(c)(4)s, or so-called "social welfare" groups. The current rules have allowed large groups willing to aggressively interpret the tax rules to funnel millions of dollars into campaigns without donor disclosure, while on the other side of the issue smaller groups--unable to hire fleets of lawyers-- remain unsure how much political activity they can engage in, and consequently fail to participate in our democracy as fully as they are actually allowed.
Despite the obvious need for revised rules, the IRS rulemaking has unfortunately become a divisive partisan issue and the political punching bag du jour. Recent hearings in the U.S. House of Representatives' Committee on Oversight & Government Reform devolved into bickering, culminating in an incident in which U.S. Rep. Darrell Issa (R-Calif.) cut off ranking member Elijah Cummings' (D-Md.) microphone to prevent him from asking questions of former IRS official Lois Lerner. And late last month, IRS Commissioner John Koskinen was raked over the coals over his alleged failure to turn over documents related to the scandal, while negotiations on an important bill to provide aid to Ukraine strangely evolved to include an effort to halt all progress on the IRS rulemaking for one year.
All these moves seem designed to keep the "scandal" breathing through the upcoming elections, and highlight the degree to which politicians are disconnected from the reality most organizations face in dealing with the IRS's confusing standards.
Fortunately, organizations that need these reforms don't have to wait for politicians to sort out their differences. They have taken the opportunity to cut through the noise and resoundingly tell the IRS to use this opportunity to continue the rulemaking and change the proposed rule to better allow them to carry on their missions. The agency should heed their call, and work to improve the final rules. In these dire days for our democracy, in which big money is so empowered, so should our politicians.
*To complete its analysis, the Bright Lines Project collected comments submitted to the proposed rulemaking by organizations. Each comment was then reviewed to determine whether the commenting organization supported or opposed continuing the rulemaking process. Organizations that signed on to letters from other entities were also counted based on the position of the comment to which they signed on.
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