Common Cause Urges “Bright Line” Rules for Political Nonprofits

Social Welfare Groups Should Not Be "Hiding Place" for Big Donors, Group's Counsel Tells Senators

Political organizations posing as “social welfare” nonprofits and pumping hundreds of millions of dollars from hidden donors into political campaigns are depriving voters of information they need to make decisions on Election Day, a Common Cause attorney told senators today.

Stephen Spaulding, the organization’s policy counsel, said the Internal Revenue Service should issue “bright line” rules for political activity by the nonprofits. Organizations whose overriding purpose is to make political expenditures should be classified as political committees and required to disclose their donors, he said.

Whatever the designation, the groups will remain tax-exempt, Spaulding noted. “Congress never intended for social welfare organizations to serve as a hiding place for political campaign donors,” he said.

Spaulding faulted members of Congress who he said have blocked comprehensive disclosure legislation. But even without Congressional action, the IRS should remain committed to revising its rules to end the flagrant abuse of tax laws in an effort to funnel money from secret sources into campaigns, he said. “It continues to be wrong for the IRS to look the other way as partisan political operatives on the right and the left establish phony social welfare organizations,” he asserted.

Spaulding was a witness at a Senate Judiciary subcommittee hearing chaired by Sen. Ted Cruz, R-TX, on allegations that the IRS unfairly targeted “tea party” groups applying for social welfare status. The agency’s use of the names of organizations as a criteria for review was wrong and the agency should ensure that it is not repeated, he said, but no group should be permitted to use its social welfare status to hide donations used to finance partisan political activity.

Spaulding’s full statement is available here.