IRS Debacle Shows Need for Clearer, not Fewer Rules


The IRS’s admission that it targeted groups with conservative sounding names for scrutiny will no doubt be held up by some as “proof” that the agency can’t be trusted with determining whether organizations claiming to be “social welfare” organizations are actually political organizations in disguise. In fact, just the opposite is true. The agency needs to apply clear and unequivocally neutral rules to its determinations about whether a group is in fact a 501(c)(4) social welfare organization, entitled to tax exempt status but not required to disclose its donors, or whether it is a political organization, also entitled to tax exempt status but not allowed to keep its donors secret. Using a shortcut, like whether a group had the word “tea party” or “patriot” in its name to aid in making that determination is dead wrong for an agency that must be scrupulously nonpartisan.

But the wrongness of that decision should not undermine efforts to lift the veil on groups trying to hide their political activities (and their donors) behind a false claim that they are social welfare organizations. The wrongness of the decision does not change the fact that in a democracy, the funding of election-related activities must take place under the brightest light to deter corruption and the appearance of corruption. And the wrongness of the decision does not alter the fact that since the Citizens United decision the number of groups applying with the IRS to be social welfare organizations nearly doubled.

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It’s reasonable to assume that some of those groups with a sudden interest “social welfare” were really more interested in impacting elections while keeping the names of their donors secret. In fact, we don’t have to assume. We know that groups claiming to be social welfare organizations spent more than $300 million in dark money to influence elections That’s why we called on the IRS to investigate groups like Crossroads GPS (on the right) and Priorities USA (on the left), both of which appear to have been organized to influence elections. (And neither of which have the words “tea party” or “patriot” in their name.)

We also urged the IRS to change its own internal rules to establish clear guidelines on how to approach the new proliferation of c4s. A bright line rule, clarifying that organizations engaged in more than a minimal amount of political activity would have to disclose their donors, would have given the IRS a proper tool to trigger an investigation into a group’s activity.

Those opposed to disclosure of political activities will no doubt use the IRS’s partisan investigation to undermine efforts at reform. They might also try to punish the agency by cutting its funding or limiting what it can spend on enforcing the rules that apply to social welfare organizations. Either of those responses would only exacerbate the problem. The IRS, along with the FEC and FCC—the other agencies who have a role to play in enforcing campaign finance laws—need clear guidance from Congress as to how to achieve transparency in a post Citizens United world. They also need the resources to enforce the law. The IRS actions, while dumb and dangerous, also show clearly that the system is broken. So while the inevitable congressional hearings will be held in an effort to shed light on what happened, hopefully they will also be used to come up with solutions that will address the larger issues of transparency and accountability in our elections.