Paul L. Caron
Dean


Thursday, August 1, 2019

Federal Judge Overturns IRS Rule To Shield Political Donor Identities

Bloomberg, Judge Overturns IRS Rule to Shield Political Donor Identities

A federal judge in Montana overturned an Internal Revenue Service rule that would allow many political non-profit groups to keep their donor lists private [Bullock v. Rettig, No. CV-18-103-GF-BMM (D. MT July 30, 2019).

The ruling upends a change the IRS made last year that permitted so-called Section 501(c)4 groups, known as “social-welfare” organizations, to keep their donor lists private. A federal judge said the IRS didn’t follow proper procedure in writing the rule and needs to allow the public to weigh in on the change before altering the tax code.

“Then, and only then, may the IRS act on a fully informed basis when making potentially significant changes to federal tax law,” U.S. federal Judge Brian Morris said in the opinion published Tuesday evening. ...

The ruling is a blow to Treasury Secretary Steven Mnuchin who touted the rule, saying it protected donor privacy because the IRS didn’t need the information to enforce tax laws. Democrats had criticized the agency’s move, saying it opened up the possibility for foreign interests to influence elections.

Update:  Bloomberg Tax, IRS Could Face More Court Battles After Nonprofit Donor Ruling:

The IRS may be vulnerable to more court challenges after a federal judge struck down agency guidance that rolled back nonprofit donor disclosure requirements, according to tax professionals.

The ruling upends a position that the Internal Revenue Service and Treasury Department have taken for a long time that guidance falling short of a regulation doesn’t have to go through a full notice-and-comment period, said Kristin Hickman. ...

“The fact that the judge declared a revenue procedure to be a legislative rule is a big deal,” said Hickman, a professor at the University of Minnesota Law School who specializes in tax administration and administrative law.

The decision could subject other revenue procedures—or revenue rulings—to challenges from taxpayers if Morris’s ruling stands, said Lloyd Hitoshi Mayer, a professor at University of Notre Dame Law School. This, however, may not work in every case. The fact that the donor disclosure change amended a nearly 50-year-old rule seemed to play a large role in the judge’s decision, Mayer said.

For background of the case, see:

https://taxprof.typepad.com/taxprof_blog/2019/08/federal-judge-overturns-irs-rule-to-shield-political-donor-identities.html

IRS News, New Cases, Tax, Tax News | Permalink

Comments

There is no truth to the suspicion that the impetus for disclosure is to "persuade" right-wing voters to stop donating or face harassment at work and at home. No truth at all.

Posted by: AMTbuff | Aug 1, 2019 7:20:12 PM

Obama appointee. This is my shocked face.

Posted by: Art Deco | Aug 2, 2019 1:19:31 PM

I'm confused. Why is this a big deal? Is it that the Koch Bros. can't trust the IRS to keep the donor records secret? This seems to have no relevance to campaign finance, and only be a requirement to monitor fraudulent use of the orgs for personal tax evasion.

Posted by: Eric B Rasmusen | Aug 2, 2019 6:43:32 PM