WASHINGTON — Correction: A prior version of this story gave the wrong date for publication of the proposed rule. It is scheduled to be published Friday.
The Obama administration is moving to clamp down on the growing political activity of “social welfare” tax-exempt groups, six months after controversy erupted over the IRS scrutiny of conservative groups.
The Treasury Department’s proposed rules, released Tuesday, would restrict the ability of those groups to conduct a wide range of activities, from running ads to distributing mailers that target specific candidates to get-out-the-vote drives.
Social welfare organizations funded by anonymous donors have become a big force in federal elections, reporting $256.3 million in political spending in 2012, according to a tally by the non-partisan Center for Responsive Politics, which tracks money in politics. That’s up from $82.7 million in 2008.
The proposed rules represent a significant change in how the IRS would treat social welfare groups. But a 90-day deadline for public comments, followed by public hearings, additional review and an implementation period make it unlikely that any regulation would be in place before the 2014 congressional elections.
Treasury officials would not discuss the proposed rules on the record, but said in the published notice that they “wish to receive comments from a broad range of organizations before deciding how to proceed.”
The proposal completely avoids one of the most controversial issues: How much political activity — however it’s defined — a group can engage in before threatening its tax-exempt status. That proportion isn’t specified in existing rules but is widely assumed to be less than 50 percent.
“It’s clear that the IRS is treading slowly into the waters, knowing that it’s fraught with peril, and that they are starting to get ideas from people, which is exactly what they should be doing,” said Donald Tobin, a law professor at Ohio State University. “One of the big problems you had in this area is the IRS couldn’t win. There are people like me who complain they haven’t been enforcing enough. There are others who say they’ve been unfairly targeted.”
Tea Party groups denounced the proposal. Jay Sekulow, an attorney representing 41 groups suing the IRS, called it “a feeble attempt by the Obama administration to justify its own wrong-doing with the IRS targeting of conservative and Tea Party groups.”
The IRS admitted in May that it had improperly held up groups seeking tax-exempt status based solely on the fact that they had the words “tea party” or “patriots” in their name. A list of targeted groups later obtained by USA Today revealed that groups were singled out for “anti-Obama rhetoric,” but that some liberal groups were also flagged for scrutiny.
IRS officials told congressional investigators that they applied a “facts and circumstances” test to decide whether activities were political. The proposed rules would replace that test with more objective criteria.
So, for example, any mention of a candidate within 60 days of a general election would be considered political, regardless of the context. The rule would even apply to mentions of a candidate that happened before the 60-day window, but which remained on an organization’s website. But it wouldn’t apply to third-party comments on the same site.
Sekulow and other conservatives argue that the rules would force groups engaging in constitutionally protected speech to disclose their donors, exposing them to political harassment. “With this move, the Obama administration opens a new front in its war against political dissent,” he said.
But the issue isn’t speech, watchdog groups say. It’s about disclosure.
The proposal “provides hope that the IRS is going to shut down a huge loophole that has allowed political organizations to spend hundreds of millions of dollars without disclosing their donors,” said Paul Ryan, senior counsel with the Campaign Legal Center, which has sued the IRS to clamp down on the political activity of tax-exempt groups.
Rep. David Camp, R-Mich., who chairs the House committee that writes tax laws, said the proposal “smacks of the administration trying to shut down potential critics.”
“There continues to be an ongoing investigation, with many documents yet to be uncovered, into how the IRS systematically targeted and abused conservative-leaning groups,” he said in a statement. “Before rushing forward with new rules, especially ones that appear to make it harder to engage in public debate, I would hope Treasury would let all the facts come out first — something they could achieve by fully cooperating with Congress in the investigation.”
Korte and Schouten write for USA Today.