Paul L. Caron
Dean


Tuesday, July 7, 2015

The IRS Scandal, Day 789

IRS Logo 2New York Times, I.R.S. Expected to Stand Aside as Nonprofits Increase Role in 2016 Race:

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 groups are able to carry out many of the same political activities as candidates and their affiliated “super PACs” but do not have to disclose where they get their money, allowing total anonymity for donors.

While the nonprofit groups are supposed to limit their political activity, the I.R.S. appears powerless to stop the onslaught of money coursing through them.

The tax agency remains deeply wounded by the scandal that began two years ago over its scrutiny of nonprofits tied to the Tea Party and other political causes, both conservative and liberal.

“It’s anything goes for the next couple of years,” said Paul Streckfus, a former nonprofit specialist at the I.R.S. who now edits a newsletter on tax-exempt groups. “The whole system has really collapsed.”

Under an exemption established more than a century ago, the nonprofit groups — known as 501(c)(4) organizations for the section of the tax code that created them — are supposed to be devoted to “social welfare,” with an aim “to further the common good and general welfare of the people of the community.” But there is disagreement over just how much politicking the nonprofits can do.

I.R.S. officials concede that the rules are vague and difficult to enforce. Audits for excessive campaign work are extremely rare, even for groups spending huge chunks of their budgets to support candidates. Complaints about abuses can languish for years, records show.

The Treasury Department recently squashed speculation that new rules would soon be put into effect to limit the political activity of nonprofits. The I.R.S. commissioner, John Koskinen, drew criticism this year when he said nonprofits could spend up to 49 percent of their money on political activities. Watchdog groups have said Congress meant for those groups to work “exclusively” on social welfare and not politics.

The I.R.S. put out its first proposal for regulating nonprofits’ political work in 2013, just as the controversy was building over the targeting of Tea Party groups. Both liberals and conservatives attacked the move as chilling political speech, and the agency shelved the proposed rules.

“Because of the way the I.R.S. has been attacked, they’ve become extremely hesitant to act,” said Miriam Galston, a campaign finance specialist at George Washington University who believes tougher restrictions are needed.

Bloomberg View:  Why Nonprofits Get Away With Campaigning, by Noah Feldman (Harvard):

Nonprofit groups are supposed to exist to promote the public welfare, not to run political campaigns. IRS rules say that tax-exempt 501(c)(4) organizations, which are allowed to campaign consistent with their welfare-promoting missions, can’t have politicking as their primary activity. But because those rules aren’t being enforced, presidential campaigns now feature such nonprofits.

Why is this happening? And what -- if anything -- can be done to stop it?

The source of the problem isn’t IRS laziness. It’s a deeper difficulty in defining the interaction between money and free speech in the logic of the First Amendment, one that’s gotten much worse in the era of Citizens United and the U.S. Supreme Court’s gradual subversion of campaign-finance laws. The solution, if there is one, is going to have to come from the courts.

https://taxprof.typepad.com/taxprof_blog/2015/07/the-irs-scandal-day-789.html

IRS News, IRS Scandal, Tax | Permalink

Comments

If various leaders at the IRS had not pursued conservative groups their regulators would not now feel so restrained from their proper functions.

Posted by: larry sullivan | Jul 7, 2015 9:01:47 AM

When you politicize every facet of our lives then every thing is about politics.

Posted by: Roux | Jul 7, 2015 9:27:57 AM

First of all, this article only brought up one Democrat and it said she MIGHT do something similar but the truth is Democrats have thousands and thousands of these non profit militant activist groups. How can everyone just flat out ignore the grand champions of political activist groups?

Second of all, the article claims that Democrats are equally outraged as Republicans, that they were united in bipartisan anger. This is a lie. Democrats have defended the IRS and the Obama administration throughout. They even go so far as to blame the victims and claim they deserved what happened.

Posted by: wodun | Jul 7, 2015 11:17:44 AM

Mr. Roux: "Politics" is defined as the activities involved with governing a country, state, or area. In other words, government and politics are intertwined and inseparable. "Office politics" is the private sector version of politics. And though it apparently means something bad or dirty to you, politics beats the h--- out of the alternatives.

Posted by: Publius Novus | Jul 8, 2015 6:28:17 AM