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In the wake of the Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling to deregulate political spending, outside groups such as unrestricted super PACs and politically active nonprofits are on track to spend hundreds of millions of dollars in the elections.
But unlike super PACs, which in theory must disclose their donors to the FEC, nonprofits face nominal disclosure requirements. This has sparked warnings from watchdogs, activists and even some Republicans, such as Sen. John McCain (Ariz.), that undisclosed political money poses a corruption threat on the scale of the Watergate scandal, the 40th anniversary of which has drawn headlines this week.
In response to McConnell’s AEI speech, Sen. Charles Schumer (D-N.Y.) complained in a statement that the Kentucky Republican “has gone from being the greatest champion of disclosure to being its foremost opponent.”
Historically, the IRS has stayed out of politically charged battles over campaign spending. But lately the agency appears to be giving nonprofits a closer look. IRS rules permit 501(c)(4) social welfare groups to engage in politics, but not if it’s their “primary purpose.”
An Exempt Organizations Division work plan for fiscal 2011 outlines a new project examining the activities of 501(c)(4) groups. A recent IRS move to strip a nonprofit known as Emerge America and its local affiliates of their tax-exempt status has alarmed some in the nonprofit sector. The agency’s explanation to the group, which helps elect Democratic female candidates, hints that overly partisan organizations may not pass the “primary purpose” test.
“Educational activities undertaken to provide a partisan benefit are considered to serve private interests, rather than the common good,” stated the IRS letter to the group, which was first reported in EO Tax Journal.
The letters to tea party groups, sent out early this year, are a particular sore point for Republicans. The questionnaires may have been unprecedented, a Hatch aide said, in that they explicitly ask the groups to provide detailed information about donors.
In their recent letter to Shulman, Hatch and other GOP Senators warn that the donor information will end up as part of the public record because application materials are made available for public review at IRS headquarters.
“Even if not prohibited by law, the actions of IRS are an inappropriate circumvention of the policy of donor privacy embedded in the Code,” the letter states. The letter also asks Shulman to state the “statutory authority” behind the agency’s request for donor names and to name the IRS employees and officials involved in drafting questions that requested donor names.
Testifying on Capitol Hill in March, Shulman told a House panel that the IRS is a nonpartisan agency and does not target or impose burdens on tea party groups seeking tax exemption.