In late November 2013, the Internal Revenue Service, under the direction of an interim commissioner, proposed new rules unrelated to tax policy. The rules were designed to re-categorize how tax-exempt 501(c)(4) groups – organizations designated as promoting social welfare – may participate in the political process. On February 27th, the 90-day comment period on these proposed rules ends. At stake in the proposed rules is either:
- The curtailment of the political speech for 501(c)(4) groups; or
- Reclassification under the tax code for groups that persist in political activity and, thus, disclosure of donors.
The IRS must reject these proposed rules because they are irrelevant to the purposes of taxation.
“To anyone concerned about public confidence in nonpartisan tax collection and preventing future IRS scandals, the solution is not more tax rules. It is for the IRS to get out of the business of regulating politics.” -- Former FEC Chairman Bradley Smith
Limiting Political Speech
Under the proposed regulations, groups seeking tax exempt status under section 501(c)(4) would be precluded from such things as:
- Communications that expressly advocate for a clearly identified political candidate;
- Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party;
Voter registration drives and get-out-the-vote drives.
The rule “completely ignores the biggest of political players in the tax-exempt area: unions.” -- Kimberly Strassel, Wall Street Journal
Thus, the Obama Administration will effectively shut down grass-root and citizen groups that simply exercise their right to participate in the political conversation. Even the liberal American Civil Liberties Union observed that “the proposed rule threatens to discourage or sterilize an enormous amount of political discourse in America.”
Disclosure as a Form of Intimidation
Those groups that continue to participate in the political process would be re-classified under different sections of the tax code, most likely section 527. Once that happens, contributions made to these organizations would be reportable and subject to disclosure laws. Disclosure of the private information about conservative donors has long been an ambition of Democrats and the Obama Administration.
Now, through the proposed regulations, the Administration seeks to accomplish what it could not achieve through legislation. Through these proposed rules, the Administration will have done an end-run around the Supreme Court’s 2010 Citizens United decision. It hopes the new rules will intimidate groups into being less critical of the Administration’s policies, and donors into being less likely to support those groups.
Stop the Use of the IRS for Political Purposes
Americans expect the IRS to conduct its business, as the newly confirmed commissioner of the agency described it, with “integrity and fairness to all.” But the IRS has not always done so. Most recently, the agency targeted conservative grass roots organizations with unfair treatment. President Nixon infamously used the IRS to go after his political opponents. Fortunately, within months of taking over as head of the IRS, then-Commissioner Donald Alexander shut down the agency’s targeting of political enemies. Today, IRS Commissioner John Koskinen must be equally courageous and stand up to an Administration bent on shutting out its opponents from the political process.
“Political or social views, ‘extremist’ or otherwise, are irrelevant to taxation.” -- Former IRS Commissioner Donald Alexander
The IRS has proposed new regulations that are not about tax policy. Commissioner Koskinen can help restore the American people’s confidence in their government by rejecting the rules proposed by his predecessor.