The brouhaha over the
IRS’s zeal in investigating conservative political organizations’ application
for tax exemption under a501(c)(4)
clause is one more episode of the IRS stepping into political doo doo. The current focus creates an opportunity to fix a problem.
A long standing interpretation of the laws by the IRS has opened the door to a dodge of campaign
finance laws.. Unlike other political organizations, the names of donors to “C4’s” are not required to be
disclosed. Requests for the exempt status doubled after the Citizens United
Supreme Court decision in 2010 permitting corporations and labor to donate to political
organizations. The IRS’ triaging priorities for review given a limited staff and more work
could be interpreted as intentionally or inadvertently biased. The
Inspector General’s conclusion was the
latter.
Conservative groups claim they were singled out for long delays and
demands for excessive documentation . No
Tea Party or Patriot applicant was
denied tax exempt status, though one did lose it. The
report conducted by the independent Inspector General and the House hearings reveal no White House involvement. Whether
a criminal act was committed is
yet to be seen.
Abuse of IRS regulations has happened under the aegis of both parties. In 2004, in the Bush administration, the NAACP complained their applications were singled
out by the IRS and approval were delayed for two years. There are other incidents involving tax exempt status and politically
motivated audits over the 100 year history of the IRS .
The most constructive outcome of this newest scrutiny of the IRS
is to rewrite the tax code to eliminate ambiguities or , better still, simply to deny exempt status to any political
organization that spends any money on political ads that intervene in campaigns.. Why should
taxpayers have to make up the difference for reduced income to the Treasury by exempting
organizations intervening actively in political campaigns, anyway ?
Why is the IRS caught up trying to determine whether a politically
oriented applicant is primarily spending resources on political intervention? The law
says those getting tax exempt status are organizations that operate “exclusively for the promotion of social
welfare”. In 1959, the regulators interpreted the law to mean groups
“primarily” engaged in helping the community.
“Primarily” by definition is not the
same as “exclusively”. “Primarily” makes the test more vulnerable to some underling’s judgment call. Is the tipping point 50%?, 51% or more?. Whether either term is followed, the IRS’
burden will always be to determine how
much of an organization’s activity is used for political campaign advocacy and
that can only be learned by asking for
evidence.
The devil is also in defining what constitutes forbidden action.
Is it that a political organization has paid for
advertising urging votes for or against an issue or candidate? Whether that is the situation or not has been a subject of court cases and conflicting laws on the state
level, including a recent case in Colorado.
This hearing is an
opportunity to fix a problem at the federal level by amending the federal tax
laws. The easiest fix, requiring no act of Congress, is for the IRS to follow the statute as written: (C4)’s should spend zero money on campaigning for or running ads exhorting voters to cast ballots
for or against a specific ballot issue or a candidate.
The House Committee has provided a public service by exposing the need
for reforms regarding
(C4)’s. So long as the GOP does not spew turbo charged rhetoric that gives the impression their goal
is mostly to damage the President, the public will not dismiss the hearings as just partisan politics .They are in
danger. CNN polls as of Friday, May 17, showed
President’s approval of 53% broke down heavily by party affiliation.
A version of this will appear this week in the www.skyhidailynews.com
Footnote: Felicia Muftic has been active in government relations in 501(C)(3) and 501(c)(4) organizations and as an election commissioner and a government official in a career spanning 40 years. She wrote the handbook for campaign finance disclosures for the City and County of Denver.
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