IRS Must End Misuse of Nonprofits to Hide Political Spending But Proposed Rules As Drafted Need Major Revisions, Common Cause Asserts

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  • Dale Eisman

The “social welfare” organizations and other tax exempt groups that funneled hundreds of millions of dollars from anonymous donors into the 2012 presidential and congressional elections ran a “charade (that) must not be repeated,” Common Cause asserted today.

The nonpartisan government watchdog group praised the Internal Revenue Service for taking steps to stop the misuse of social welfare groups to hide political spending, but criticized the agency’s draft rules as being too broad in some areas while leaving big loopholes in others.

“It is critical to the preservation of an open, honest and accountable government that Treasury and the IRS tackle the difficult problem of shining a light on political spending by nonprofits,” saidCommon Cause counsel Stephen Spaulding. “But the rules as currently drafted would interfere with important nonpartisan voter education, registration and mobilization activities, while still allowing groups like Crossroads GPS to pour millions of secret dollars into political attack ads outside of a narrow pre-election window.

“Groups that engage in genuinely nonpartisan civic engagement, like voter registration and turnout drives, should be able to continue doing so under the existing rules, without undue reporting burdens. But when social welfare organizations are heavily involved in partisan electioneering, obviously promoting the election of some candidates and the defeat of others, those activities should be financed through political committees organized under Section 527 of the tax code. That designation allows them to remain tax-exempt but requires donor disclosure,” Spaulding added.

The Common Cause proposal was submitted Thursday, shortly before the IRS’s deadline for comments on a draft rule that would put new limits on “candidate related political activity” by the social welfare groups. The IRS draft has sparked a record number of public comments, with some Republican leaders charging that it’s part of an attempt by the Obama administration to silence critics of the President.

Common Cause stressed that, despite hype from Tea Party groups, the proposed rules would not prohibit any political spending, but would just require groups to disclose the source of their political dollars.

“We believe there’s a common sense way forward here,” Spaulding said. “Notwithstanding the overheated rhetoric coming from some of its critics, the IRS draft is not a threat to free speech. It’s an attempt, which our proposal tries to improve on, to satisfy every voter’s right to know who is paying for attempts to influence our votes.

“At the same time, we acknowledge that social welfare activities can have a political component. Our proposal recognizes that those groups should not be subject to new reporting requirements simply because they devote an insubstantial part of their activities to things other than their tax-exempt mission.”