Intimidating the IRS and Protecting ‘Dark Money’ Groups | Commentary
The Supreme Court’s Citizens United decision so radically changed the rules of our country’s political process that updating the 50-year-old IRS regulations governing 501(c)(4) social welfare organizations has jumped from long overdue to critically important. The announcement that the IRS would finally launch a rule-making to update those regulations is welcome news. While the initial IRS proposal clearly needs work, the Campaign Legal Center is actively participating in the regulatory process to significantly improve it. But the efforts in the U.S. House of Representatives, led by Ways and Means Chairman David Camp, R-Mich., are way off base when they attempt to paint the process as a partisan witch hunt.
The House bill passed by a vote of 243-176 during the last week of February to withhold IRS funding to implement new rules is reckless, and does nothing more than to provide partisan cover for those groups breaking the law to anonymously funnel hundreds of millions of dollars into political campaigns.
Campaign activity by 501(c)(4)s has exploded since the 2010 Supreme Court decision in Citizens United. Yet, current IRS regulations have proved woefully inadequate to address activities that are clearly contrary to the governing statute. The Wall Street Journal’s editorial page recently argued that, because the regulations governing (c)(4)s have been in place since 1959, efforts to update the rules must be motivated by partisanship. That’s simply wrong. There is no way the IRS rules could have anticipated the social and political changes of the past 50 years, much less taken into account the Citizens United decision that threw out a century’s worth of law and jurisprudence by permitting 501(c)(4) corporations (as well as business corporations) to spend money in federal elections. Is there any other area of tax law expected to have such a shelf life? We are talking about a regulation written before the first televised presidential debate between Richard Nixon and John Kennedy.
As the CLC predicted, the Citizens United decision gave new incentives for individuals to launder their “dark money” through social welfare and other 501(c) organizations. That is why not long after the decision the CLC and Democracy 21 sent a series of letters to the IRS urging the agency to update its rules and interpretations. Our letters made clear that IRS practices had become inconsistent with the law they were intended to implement, which states that (c)(4)s should “operate exclusively” for the purpose of social welfare. We urged the agency to exercise its responsibility to question any of these groups that appeared to be engaging in significant campaign activities. Clearly, the IRS’ response was ham-handed and inadequate.
Camp and his allies, including Sens. Jeff Flake, R-Ariz., and Pat Roberts, R-Kan., as well as the Wall Street Journal’s editorial board, are using the poorly executed efforts to apply outdated regulations to fan illegitimate fears of an IRS conspiracy against conservative groups. Moreover, the Wall Street Journal fails to acknowledge that the IRS looked at (c)(4) groups of all political stripes.
Congress should, as part of its oversight responsibilities, closely monitor executive agencies to ensure they are performing their duties appropriately. But these attacks on the IRS are clearly being orchestrated with an eye to the 2014 elections, more focused on fanning the flames of partisanship than working toward good public policy.
On Feb. 27, the CLC joined with Democracy 21 and Rep. Chris Van Hollen, D-Md., in submitting comments on the IRS proposal. This process should move forward and should not be derailed. A failure to issue updated regulations would be a failure to address the hundreds of millions of anonymous-source dollars being spent by these groups to influence the outcome of our elections despite the Supreme Court’s assurance in Citizens United that campaign spending would be fully transparent. The intimidation being visited on the IRS by members of the House and Senate is exactly the type of partisanship they accuse the agency of practicing when it is simply trying, however poorly, to enforce the laws passed by Congress.
Meredith McGehee is policy director of the Campaign Legal Center and heads McGehee Strategies, a public interest consulting business.