Monday, September 16, 2013
Donald Tobin (Ohio State) presents Politics, Tax-Exempt Entities, the Internal Revenue Service, and a Crisis of Confidence: A New Regulatory Approach for a New Era at Loyola-L.A. today as part of its Tax Policy Colloquium Series:
In 2013, a crisis of confidence in the IRS erupted after disclosures that the IRS used partisan criteria to determine whether heightened scrutiny was appropriate for groups seeking tax-exempt status as charities or social welfare organizations. The IRS actions and the upheaval that followed created questions whether the IRS was fairly and equitably enforcing our nation’s internal revenue laws. For historical, legal, and practical reasons, the Internal Revenue Code regulates the political campaign activity of tax-exempt groups, in some instances providing for disclosure of donors and expenditures, and in other instances limiting or prohibiting the activity. Since modern day political campaigns and campaign advocacy is conducted through tax-exempt groups, the increased sophistication and complication of political campaigns puts pressure on the rules regulating the political campaign activity of tax-exempt organizations. The current structure is unworkable, and the recent crisis highlights the breakdown in the current regulatory regime. This breakdown has serious repercussions for efficient regulation of tax-exempt organizations and campaign activity but also for our nation’s confidence that the IRS is operating as a non-partisan fair enforcer of the internal revenue laws. This article outlines ideas for reforming the current regulatory regime. It argues that three themes – transparency, reform of the statutory framework, and reform of the enforcement mechanism – are necessary to restore confidence in the fair and equitable treatment of groups engaged in political campaign activity. The article recommends restoring confidence by: 1) Increasing transparency and changing the privacy rules regarding the IRS processing and evaluating tax-exempt groups; 2) Restoring faith in the regulation of groups by changing the statutory framework to create more uniform rules, including disclosure rules, and 3) Shifting the enforcement of the political campaign provisions to an independent group, either inside or outside the IRS.
(Loyola-L.A.) and Jessica Levinson
(Loyola-L.A.) are the commentators.