The House approved a bill Tuesday that would bar the IRS from collecting the names of donors to tax-exempt groups, prompting warnings from campaign-finance watchdogs that it could lead to foreign interests illegally infiltrating American elections. The measure, which has the support of House Speaker Paul Ryan, R-Wis., also pits the Obama administration against one of the most powerful figures in Republican politics, billionaire industrialist Charles Koch. Koch’s donor network channels hundreds of millions of dollars each year into groups that largely use anonymous donations to shape policies on everything from health care to tax subsidies. Its leaders have urged the Republican-controlled Congress to clamp down on the IRS, citing free-speech concerns.
The federal government has all but surrendered to the powerful, rich donors whose anonymous contributions threaten to undermine the 2016 elections. The commissioner of the Internal Revenue Service, John Koskinen, signaled as much on Thursday when he told a House committee that there would be no change in the tax code in 2016 to end its growing abuse by political operatives using nonprofit “social welfare” institutions to disguise the identities of affluent campaign contributors. “I don’t want people thinking we are trying to get these regs done so we can influence the election,” Mr. Koskinen declared later to reporters. The statement was remarkable for blessing further procrastination at the I.R.S., whose clear obligation is to enforce existing law in a way that would end the current flood of “dark money” financing politics.
National: I.R.S. Expected to Stand Aside as Nonprofits Increase Role in 2016 Race | The New York Times
As presidential candidates find new ways to exploit secret donations from tax-exempt groups, hobbled regulators at the Internal Revenue Service appear certain to delay trying to curb widespread abuses at nonprofits until after the 2016 election. In a shift from past elections, at least eight Republican presidential candidates, including leading contenders like Jeb Bush and Senator Marco Rubio of Florida, have aligned with nonprofit groups set up to raise hundreds of millions of dollars. Hillary Rodham Clinton’s supporters are considering a similar tactic. Some of these so-called social welfare nonprofit groups are already planning political initiatives, including a $1 million advertising campaign about Iran by a tax-exempt group supporting Mr. Rubio.
The Internal Revenue Service says it won’t come out with new proposed rules for so-called dark money groups until late spring at the earliest, increasing the likelihood that no changes will take effect before the 2016 elections. These groups 2014 social welfare nonprofits that can engage in politics, but do not have to disclose their donors 2014 have become a major force in elections, pouring at least $257 million into the 2012 elections. The Wesleyan Media Project estimates that dark money paid for almost half the TV ads aired in the 2014 Senate races. The IRS originally issued a draft version of the rules for dark money groups more than a year ago, but withdrew them for revisions after receiving intense criticism from both ends of the political spectrum.
The Internal Revenue Service says it won’t come out with new proposed rules for so-called dark money groups until late spring at the earliest, increasing the likelihood that no changes will take effect before the 2016 elections. These groups—social welfare non-profits that can engage in politics, but do not have to disclose their donors—have become a major force in elections, pouring at least $257 million into the 2012 elections. The Wesleyan Media Project estimates that dark money paid for almost half the TV ads aired in the 2014 Senate races. The IRS originally issued a draft version of the rules for dark money groups more than a year ago, but withdrew them for revisions after receiving intense criticism from both ends of the political spectrum. It’s unknown how aggressive the IRS’ new proposal will be in attempting to rein in political activity by social welfare non-profits. Some observers expect the agency to set a hard limit on how much of groups’ spending can be devoted to politics, perhaps 40 percent or less.
The Internal Revenue Service says it won’t come out with new proposed rules for so-called dark money groups until late spring at the earliest, increasing the likelihood that no changes will take effect before the 2016 elections. These groups — social welfare nonprofits that can engage in politics, but do not have to disclose their donors — have become a major force in elections, pouring at least $257 million into the 2012 elections. The Wesleyan Media Project estimates that dark money paid for almost half the TV ads aired in the 2014 Senate races. The IRS originally issued a draft version of the rules for dark money groups more than a year ago, but withdrew them for revisions after receiving intense criticism from both ends of the political spectrum. Some advocates of campaign finance reform have touted tighter IRS controls as the best shot of reining in the influence of such groups ahead of the 2016 presidential race.
An 18-month congressional investigation into the Internal Revenue Service’s mistreatment of conservative political groups seeking tax exemptions failed to show coordination between agency officials and political operatives in the White House, according to a report released on Tuesday. The I.R.S. has admitted that before the 2012 election it inappropriately delayed approval of tax exemption applications by groups affiliated with the Tea Party movement, but the I.R.S. and its parent agency, the Treasury Department, have said that the errors were not motivated by partisanship. Republican lawmakers, dismissing the Obama administration’s denials, have suggested that the delays were not only politically motivated but also orchestrated by the White House. Some of the most strident comments have come from Representative Darrell Issa, Republican of California and the chairman of the House Oversight Committee, which has issued subpoenas to compel testimony from administration officials and held a series of tumultuous hearings on the I.R.S. scandal.
The Internal Revenue Service, one of the most beleaguered federal agencies, is seeking to assume a new role in regulating election financing. And the reaction, perhaps predictably, has been critical. Many of the nearly 67,000 comments following the IRS’ proposal to rein in politically active nonprofits urge the organization to focus on its day job: tax collection. “It sounds to me like the IRS is making law, not enforcing it. Leave rule-making to the buffoons in Congress,” one comment reads. Another puts it more bluntly: “Stick to taxes.” The public opposition comes from both liberals and conservatives, who are blasting draft regulations released by the Treasury Department in November that would tighten restrictions on political spending by nonprofit “social welfare’’ organizations, formally called 501(c)(4) groups under a section in the tax code.
If you’re concerned about “dark money” in politics and the tsunami of cash from the super-wealthy and corporations pouring into the political system, or if you were outraged by the recent “scandal” involving the IRS’s clumsy assessment of 501(c)(4) groups, your ears probably perked up when you heard that the Internal Revenue Service has issued draft regulations to “provide clarity” to the rules that govern so-called “social welfare” organizations. Yet the new regs will do almost nothing to fix the things you think are broken and may, in fact, do some real damage to the ability of everyday Americans to have an impact on the political process. The proposed rules cover 501(c)(4) groups, named for the section of the tax code that governs them. Although this is the segment of the nonprofit world best known for notorious organizations like Karl Rove’s Crossroads GPS, it is actually made up of over 86,000 mostly small organizations nationwide, some of which are almost certainly active participants in your own community’s civic life. They weren’t invented in the last election cycle; they’ve been around for generations. Their purpose isn’t to hide donors but to advance policies. The big, famous guys and the shady newcomers get all the attention, but they aren’t typical of the sector, any more than Lady Gaga and Justin Bieber reflect the experience of the bulk of the people making a living in the music industry.
A conservative group claiming it was targeted by the Internal Revenue Service stole the show at a congressional hearing on Thursday when it veered off topic and accused top panel Democrat Rep. Elijah Cummings of harassment. Catherine Engelbrecht, president of True the Vote, complained that Cummings, ranking member of the House Oversight and Government Reform Committee “sent letters to True the Vote, demanding much of the same information the IRS had requested” after she filed for nonprofit status and then “would appear on cable news and publicly defame me and my organization.” Democrats called it outrageous that Republicans gave the group a platform to attack a member, and even some Republicans tried to change the subject back to the IRS controversy itself.
The IRS and Treasury Department announced proposed guidelines clarifying the definition of political activities for social welfare nonprofits Tuesday afternoon, a move that could restrict the spending of the dark money groups that dumped more than $254 million of anonymous money into the 2012 elections. Read the guidelines here. However, the guidelines, which finally define what constitutes “candidate-related political activity,” aren’t a done deal. They will take some time for public comment and debate, and more time to finalize. (The IRS asks that all comments and requests for a public hearing be submitted by Feb. 27.) Experts also cautioned that the real test of oversight on the political spending by nonprofits will be how these regulations are enforced, something that the IRS has been so far reticent to do.
It’s considered the equalizer for the most-talked about organizations in politics: an IRS requirement that 501(c)(4) ‘social welfare’ groups spent less than half their cash on politics. But experts say the IRS left a big loophole that could play out big time in California: ballot measure spending isn’t considered political. “You could have a nonprofit doing virtually no traditional charitable work at all and really just being a funnel for campaign funds,” says Gary Winuk, the chief enforcement officer of the state’s Fair Political Practices Commission. The existence of the loophole is understandable; few states have an initiative system that allows voters to write their own laws. And even fewer have a system that’s used as often, and costs as much, as the one in California. Even so, it’s a loophole not widely publicized and likely to gain more attention as 501(c)(4) groups turn more of their attention — and money — to the Golden State.
A top House Democrat plans to file a lawsuit in federal district court Wednesday challenging the Internal Revenue Service’s interpretation of a law that governs whether groups qualify for tax-exempt status as so-called social welfare organizations. Rep. Chris Van Hollen (D-Md.), the ranking member of the House Budget Committee, said Tuesday that he will serve as lead plaintiff in the case, which addresses one of the main concerns that surfaced with the recent IRS targeting controversy: differences between federal law and the IRS rules on eligibility for 501(c)(4) candidates. Current law says the organizations must engage “exclusively” in social welfare activities, but IRS tax code requires only that they are “primarily engaged” in such purposes. That discrepancy has led to confusion for application processors, who have struggled to determine what constitutes political activity and how much should disqualify groups from tax-exemption, according to agency officials.
After a political group in Texas asked the IRS for a tax exemption last year, it got a lengthy, time-consuming list of questions — like a request for the minutes of all the board meetings since the group got started. And a California-based group got turned down completely in 2011, because the IRS concluded that it was set up “primarily for the benefit of a political party.” These two stories sound like they’d fit right into the raging IRS scandal over its treatment of conservative groups that applied for tax-exempt status. The only difference: these two groups — Progress Texas and Emerge America — were unabashedly liberal. POLITICO surveyed the liberal groups from an IRS list of advocacy organizations that were approved after the tougher examinations started. The review found some examples of liberal groups facing scrutiny similar to their conservative counterparts — they were asked for copies of web pages, actions alerts, and written materials from all of their events.
Interviews with 15 U.S. Internal Revenue Service employees show no political motivation or White House involvement in targeting groups applying for tax-exempt status, House Democrats said in a memo. The 36-page memo released by Democrats on the House Oversight and Government Reform Committee includes excerpts from several employee interviews with congressional investigators that haven’t been distributed publicly until today. The IRS has apologized for the delays and selective scrutiny given to Tea Party groups applying for nonprofit status. Democrats in Congress have resisted Republican arguments that IRS employees used their positions to harm Republican-leaning groups. Instead, they maintain that Tea Party groups were the victims of inadequate rules and inadvertent bungling.
The investigator who wrote a scathing report about the Internal Revenue Service targeting conservative political groups is heading back to Capitol Hill as a key House Democrat says his committee’s investigation has found no evidence of political bias at the agency. IRS inspector general J. Russell George is to testify Thursday before the House Oversight and Government Reform Committee, along with two IRS workers who have been interviewed as part of the committee’s investigation. George has been criticized by some congressional Democrats who say his report failed to mention that some liberal groups were targeted, too. Rep. Elijah Cummings, D-Md., released a memo Tuesday saying that interviews with 15 IRS employees and reviews of thousands of emails reveal no evidence of political bias by IRS workers. The memo said there is also no evidence that anyone outside the IRS directed the targeting.
Leaders of progressive groups say they, too, faced long delays in getting the Internal Revenue Service to approve their applications for tax-exempt status but were not subjected to the same level of scrutiny that tea party groups complained about. Several progressive groups said it took more than a year for the IRS to approve their status while others are still waiting as IRS agents press for details about their activities. The delays have made it difficult for the groups to raise money — just as it has for tea party groups that were singled out for extra scrutiny. But even with the delays, leaders of some progressive groups said they didn’t feel like they were being targeted. “This is kind of what you expect. You expect it to take a year or more to get your status because that’s just what the IRS goes through to do it,” said Maryann Martindale, executive director of Alliance for a Better Utah, a small non-profit that advocates for progressive causes. “So I don’t know that we feel particularly targeted.”
The Internal Revenue Service’s screening of groups seeking tax-exempt status was broader and lasted longer than has been previously disclosed, the new head of the agency acknowledged Monday. Terms including ‘‘Israel,’’ ‘’Progressive’’ and ‘‘Occupy’’ were used by agency workers to help pick groups for closer examination, according to an internal IRS document obtained by The Associated Press. The IRS has been under fire since last month after admitting it targeted tea party and other conservative groups that wanted the tax-exempt designation for tough examinations. While investigators have said that agency screening for those groups had stopped in May 2012, Monday’s revelations made it clear that screening for other kinds of organizations continued until earlier this month, when the agency’s new chief, Danny Werfel, says he discovered it and ordered it halted.
We just had five congressional hearings about the Internal Revenue Service, full of sound and fury, but, we now know, signifying nothing. Despite all the hoopla and headlines about IRS personnel targeting conservative tax-exempt organizations, there is no real scandal here. IRS staffers acted not only legally but, given their impossible task, quite rationally. They forgot, however, that they not only work in a political fishbowl, they swim in a sea of politics. Faced with internally contradictory regulations laid out in vague terms, and with little guidance from higher-ups, they botched it. Republicans may now finally get the chance to pour unlimited amounts of secret money into elections. The Internal Revenue Code provides a tax exemption under section 501(c)(4) for nonprofit groups “operated exclusively for the promotion of social welfare” (emphasis added). In classic oxymoronic bureaucratic doublespeak, however, a 1959 regulation decided “exclusively” really meant “primarily.” Though the courts have ruled that a tax-exempt group’s political activity must be “insubstantial,” lawyers have argued this means it can be as much as 49 percent – and the IRS has gone along. Even that has been flagrantly violated by both Democratic and Republican 501(c)(4)s.
Internal Revenue Service employees in Ohio, who singled out conservative groups applying for tax-exempt status for extra scrutiny, likely did not consider the political implications, an IRS official in Washington has told congressional investigators. Providing additional details about the worst crisis to hit the IRS in years, tax agency official Holly Paz told investigators she was concerned when she learned that IRS employees were singling out groups with “Tea Party” and other key words in their names. Paz is the most senior IRS official to be extensively interviewed by investigators. Ousted acting IRS Commissioner Steve Miller was among the top-level Washington officials grilled by Congress in recent weeks. Investigators conducted longer transcribed interviews with IRS employees behind closed doors.
An Internal Revenue Service supervisor in Washington says she was personally involved in scrutinizing some of the earliest applications from tea party groups seeking tax-exempt status, including some requests that languished for more than a year without action. Holly Paz, who until recently was a top deputy in the division that handles applications for tax-exempt status, told congressional investigators she reviewed 20 to 30 applications. Her assertion contradicts initial claims by the agency that a small group of agents working in an office in Cincinnati were solely responsible for mishandling the applications. Paz, however, provided no evidence that senior IRS officials ordered agents to target conservative groups or that anyone in the Obama administration outside the IRS was involved.
A U.S. Internal Revenue Service manager, who described himself as a conservative Republican, told congressional investigators that he and a local colleague decided to give conservative groups the extra scrutiny that has prompted weeks of political controversy. In an official interview transcript released on Sunday by Democratic Representative Elijah Cummings, the manager said he and an underling set aside “Tea Party” and “patriot” groups that had applied for tax-exempt status because the organizations appeared to pose a new precedent that could affect future IRS filings. Cummings, top Democrat on the House of Representatives Oversight and Government Reform Committee conducting the probe, told CNN’s “State of the Union” program that the manager’s comments provided evidence that politics was not behind IRS actions that have fueled a month-long furor in Washington.
Spin relies on confusion, and both seem to be prevalent in the ongoing saga over an IRS targeting campaign that singled out certain types of groups for special scrutiny after they applied for tax-exempt status. The most important questions in the IRS controversy are: Who started the filtering policy, what were the motivations, and how do we prevent it from happening again? Let’s examine some of the most common misconceptions that could distract from those issues. IRS officials have suggested that the targeting campaign, which began sometime before mid-2010, started as a policy to deal with an overwhelming increase in tax-exemption applications. This is an unsubstantiated claim that Democrats have replicated to defend the tax agency’s actions.
The conservative groups testifying about overzealous IRS scrutiny during a House Ways and Means Committee hearing Tuesday can’t get around a simple fact: All have been involved in the kinds of political activity that’s ripe for red flags. Simple searches on Google, Facebook, Twitter and other news engines point to plenty of political activities that are the essence of what the IRS looks for when deciding who gets an exemption from Uncle Sam. The group leaders attended rallies to stop Obama administration priorities and ripped into the president’s work on health care and missile defense. They spoke openly about defeating President Barack Obama in the 2012 election. They pushed for winners in state and local election races. Their activities might not have run afoul of the rules. But for the murky world of charitable exemptions now under heightened political scrutiny, their backgrounds underscore the gray area the IRS was in as it posed questions to the groups.
National: Substantial Minority of Scrutinized Exempt Organizations Were Not Conservative | Tax Analysts
We know now that the IRS used “inappropriate criteria” — names and policy views associated with conservative and Tea Party causes — for selecting applications for tax-exempt status for extra review. The Treasury Inspector General for Tax Administration laid out the charges in a May 14 report, and the IRS has admitted it made errors. But TIGTA’s report doesn’t shed much light on whether other organizations were subject to similar review. As the early furor gives way to more careful investigations, it will be important to get a more complete picture of IRS processing of applications for tax exemption. The IRS has helped somewhat by releasing a list of all the “centralized” groups (that is, organizations whose applications were referred to specialists for closer review) that were granted tax-exempt status as of May 9, 2013. Though the overlap between the subset and the full set of centralized groups isn’t perfect, the list suggests that the majority of groups selected for extra scrutiny probably matched the political criteria the IRS used and backed conservative causes, the Tea Party, or limited government generally. But a substantial minority — almost one-third of the subset — did not fit that description.
The new acting IRS chief stressed Monday that he was pressing ahead to fix the problems that allowed the agency to target conservative groups, saying the current controversies had sparked a difficult time at the IRS. Danny Werfel, in his first testimony on Capitol Hill, also stressed that the current controversy shouldn’t be used to tar the entire agency. Werfel, who has been acting commissioner for less than two weeks, told a House Appropriations subcommittee Monday that the singling out of Tea Party groups seeking tax-exempt status was inexcusable. “We have a great deal of work ahead of us to review and correct the serious problems that have occurred at the IRS and continue the important work of the agency on behalf of taxpayers,” Werfel said in prepared remarks for his first congressional appearance in his new role.
As the report of the IRS Inspector General shows, the agency’s scrutiny of conservative groups applying for non-profit status was, more than anything, a clumsy response to a task the IRS is ill-equipped to carry out – monitoring an accidental corner of campaign finance law, a corner that was relatively quiet until about 2010. That corner is the 501(c)(4) tax-exempt organization, belonging to what are sometimes called “social welfare” groups, which enjoy the triple privilege of tax exemption (though not for their donors), freedom to engage in some limited election activity, and, unlike other political committees (PACs, SuperPACs, parties, etc.), freedom from any requirement to disclose information about donors or spending. The use of (c)(4)s as campaign vehicles didn’t originate with the Citizens United decision in 2010 (Citizens United, the organization that brought the case, was already a (c)(4)), but the decision seems to have created a sense that the rules had changed, and even small groups – especially, apparently, local Tea Party organizations — rushed to create (c)(4)s.
Outrage first, facts later. That’s often the way American political “scandals” unfold, and it seems to be the case with the news that the IRS targeted conservative political groups for extra scrutiny before granting them tax-exempt status as social-welfare organizations. We knew from the beginning of the IRS mess that the only group actually denied tax-exempt status was the Maine chapter of a Democratic women’s group, Emerge America. Now we’re learning about some of the right-wing organizations that came in for extra scrutiny, as reported by the New York Times Monday: a conservative veterans’ group that only backed one candidate, a Republican, for Congress; an Alabama Tea Party group that took part in a “defeat Barack Obama” voter-turnout drive, and the “Ohio Liberty Coalition” led by a Republican activist who sent his members information on Mitt Romney campaign events and recruited them to volunteer for the GOP nominee.
The Bright Lines Project is a production of experienced tax law specialists seeking a clearer, more predictable test for “political intervention by 501(c)(4) organizations. In a detailed Drafting Committee Explanation, the team (including my partner Ezra Reese) lays out its proposed test and the rationale for it, and additional explanation of their goal appears in an op-ed written by Gary Bass and Beth Kingsley. The Bright Lines Project: Clarifying IRS Rules on Political Intervention (Interim Draft, May 23, 2013). What the Project authors have come up with is constructive and interesting, but this is the key question: does its utility lie in a fruitful application to the tasks the IRS faces, or in showing that even well-reasoned, thoughtful tests will bog the agency down in the political analysis—and therefore political resistance and controversy—that it is or should be trying to escape?
When CVFC, a conservative veterans’ group in California, applied for tax-exempt status with the Internal Revenue Service, its biggest expenditure that year was several thousand dollars in radio ads backing a Republican candidate for Congress. The Wetumpka Tea Party, from Alabama, sponsored training for a get-out-the-vote initiative dedicated to the “defeat of President Barack Obama” while the I.R.S. was weighing its application. And the head of the Ohio Liberty Coalition, whose application languished with the I.R.S. for more than two years, sent out e-mails to members about Mitt Romney campaign events and organized members to distribute Mr. Romney’s presidential campaign literature. Representatives of these organizations have cried foul in recent weeks about their treatment by the I.R.S., saying they were among dozens of conservative groups unfairly targeted by the agency, harassed with inappropriate questionnaires and put off for months or years as the agency delayed decisions on their applications.