Remember the IRS Tea-Party Scandal? Get Ready for Round Two

Obama isn’t talking about it, but his administration might restrain the activities of advocacy groups, including ones the IRS targeted last year.

WASHINGTON, DC - JANUARY 31: U.S. President Barack Obama delivers remarks about his plans to help America's long-term unemployed during an event in the East Room of the White House January 31, 2014 in Washington, DC. During the event Obama signed a memorandum directing the federal government not to discriminate against long-term unemployed job seekers. 
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James Oliphant
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James Oliphant
Feb. 6, 2014, 4 p.m.

Not­ably ab­sent in all of Pres­id­ent Obama’s re­cent can-do talk about ex­ec­ut­ive ac­tion has been a pledge to clean up cam­paign fin­ance. But that doesn’t mean his ad­min­is­tra­tion has been ig­nor­ing the is­sue.

Rather, the ques­tion is wheth­er the White House will have the guts to see the ef­fort through that’s already un­der­way.

The Treas­ury De­part­ment has been ad­van­cing a new rule that could rad­ic­ally con­strain the ac­tions of 501(c)(4) groups — or­gan­iz­a­tions that are the bane of pro­gress­ive re­formers be­cause they of­ten blur the line between edu­ca­tion and out­right polit­ic­al ad­vocacy and be­cause they don’t have to dis­close their donors.

The pro­posed rule has Re­pub­lic­ans on Cap­it­ol Hill at battle sta­tions, while ad­vocacy groups on both the left and the right be­siege the In­tern­al Rev­en­ue Ser­vice with ob­jec­tions and put pres­sure on the Obama ad­min­is­tra­tion to modi­fy or sus­pend it. In par­tic­u­lar, con­ser­vat­ives charge that the IRS now wants to le­git­im­ize the sort of screen­ing activ­ity that led them to ac­cuse the agency last year of tar­get­ing tea-party groups and oth­er grass­roots ad­voc­ates.

“Right now, the Obama ad­min­is­tra­tion is get­ting ready to co­di­fy the same kind of in­tim­id­a­tion and har­ass­ment of its polit­ic­al op­pon­ents that stunned the na­tion last year,” Mitch Mc­Con­nell, the Sen­ate’s Re­pub­lic­an lead­er, said on the floor last week. “And hardly any­body’s talk­ing about it.”

That in­cludes the White House, which has been si­lent about wheth­er it fa­vors the IRS rule change — lead­ing some in the re­form com­munity to ac­cuse the ad­min­is­tra­tion of stand­ing idly by. Obama didn’t even men­tion cam­paign fin­ance re­form in his State of the Uni­on ad­dress last month, and in­quir­ies to the White House on the mat­ter were routed to Treas­ury.

For its part, Treas­ury says the rule, which re­mains in its early draft stages, is an at­tempt to over­haul the 501(c)(4) pro­ced­ures that sparked last year’s up­roar. While the de­part­ment would not ad­dress Mc­Con­nell’s cri­ti­cisms, the pro­posed rule is writ­ten in a way that would af­fect lib­er­al and con­ser­vat­ive groups equally.

That’s little ton­ic to Re­pub­lic­ans. Last month, at the be­hest of Rep. Har­old Ro­gers of Ken­tucky, the chair­man of the House Ap­pro­pri­ations Com­mit­tee, the GOP in­ser­ted a pro­vi­sion in the House om­ni­bus spend­ing bill that would nul­li­fy the IRS rule’s im­ple­ment­a­tion. But Sen­ate Demo­crats wouldn’t agree — ex­acer­bat­ing con­ser­vat­ives’ fears that the IRS meas­ure tar­gets them — and the lan­guage was stricken.

That has left the re­form meas­ure still in play at Treas­ury. Un­der cur­rent law, groups that qual­i­fy for non­profit status un­der sec­tion 501(c)(4) of the IRS code must, as their main pur­pose, pro­mote “so­cial wel­fare” and may not be pre­dom­in­antly ded­ic­ated to polit­ic­al activ­ity. Long­time Wash­ing­ton or­gan­iz­a­tions such as the Na­tion­al Rifle As­so­ci­ation, the Si­erra Club, AARP, and the League of Wo­men Voters are or­gan­ized un­der the sec­tion.

But the rise in groups with overt polit­ic­al aims set­ting up non­profit arms, such as Pri­or­it­ies USA Ac­tion and Cross­roads GPS, along with the bevy of smal­ler groups formed in ad­vance of the 2012 elec­tions, has made en­force­ment of the rule more dif­fi­cult. The new rule would ex­pand the agency’s defin­i­tion of what is con­sidered “polit­ic­al activ­ity” and would lim­it that activ­ity to a set peri­od close to Elec­tion Day.

The op­er­a­tion­al ef­fect would be to knock scores of groups out of their cozy cat­egory. Moreover, Treas­ury is also con­sid­er­ing wheth­er to ex­pand the new rule’s lim­its on politick­ing to oth­er en­tit­ies, such as the U.S. Cham­ber of Com­merce, or­gan­ized un­der dif­fer­ent sec­tions of the code.

Con­ser­vat­ives and lib­er­als may be treated the same un­der the rule, but groups on the right are act­ing as if they have more to lose. Her­it­age Ac­tion for Amer­ica, the ad­vocacy arm of the Her­it­age Found­a­tion, last month sent a let­ter to Con­gress signed by tea-party and so­cial-con­ser­vat­ive groups ur­ging it to stop the “IRS power grab” and ar­guing that ad­vocacy on health care, the budget, and oth­er policy is­sues is “part of a so­cial-wel­fare mis­sion.”

Some trade groups also see the rule as go­ing too far. “They’re try­ing to lim­it con­tri­bu­tions from the su­per PACs and, in the pro­cess, they’re catch­ing a lot of in­no­cent folks,” says Wayne Al­lard, the former sen­at­or from Col­or­ado who dir­ects gov­ern­ment re­la­tions at the Amer­ic­an Mo­tor­cyc­list As­so­ci­ation. He says the rule would in­hib­it the group’s abil­ity to com­mu­nic­ate with its mem­bers.

The IRS is still tak­ing pub­lic com­ments on the rule and likely will re­write it in re­sponse. The groundswell of op­pos­i­tion from en­trenched in­terests has re­formers wor­ried that the ad­min­is­tra­tion will do little. At the very least, don’t ex­pect the rule to be fi­nal­ized in time to af­fect the 2014 midterm elec­tions — des­pite the GOP’s fears to the con­trary.

There’s a pre­ced­ent. Three years ago, the White House floated the idea of an ex­ec­ut­ive or­der that would re­quire fed­er­al con­tract­ors — in­clud­ing some of the na­tion’s largest com­pan­ies — to dis­close their cam­paign activ­it­ies. After an out­cry from Re­pub­lic­ans and big busi­ness, the ad­min­is­tra­tion junked the or­der just in time for the 2012 elec­tions. “Quite frankly, the pres­id­ent stopped push­ing it,” says Craig Hol­man, a lob­by­ist for Pub­lic Cit­izen.

Des­pite all the talk about the pres­id­ent’s “pen and phone,” the White House hasn’t shown any in­terest in re­viv­ing that or­der. And it hasn’t done any­thing to em­brace the IRS pro­pos­al — al­though, giv­en that many Re­pub­lic­ans view Obama as en­gaged in a con­spir­acy to des­troy the con­ser­vat­ive grass­roots net­work, that neg­lect might be a good thing, Hol­man says.

That’s where the pres­id­ent sits today with re­gard to cam­paign fin­ance re­form: Re­viled on the left be­cause he hasn’t gone far enough and on the right be­cause they’re afraid of what he might do. All in all, it’s a re­cipe for in­ac­tion in Obama’s “Year of Ac­tion” — which may be, on this par­tic­u­lar is­sue, how the White House likes it.

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