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.

WEST PALM BEACH, FL - MAY 21: Christina King (L) and Lynne Sherrer (C) hold signs during aTea Party Internal Revenue Service (IRS) demonstration on May 21, 2013 in West Palm Beach, Florida. Tea Party activists organized the protest against the Internal Revenue Service saying they improperly targeted conservative groups seeking tax-exempt status. 
National Journal
James Oliphant
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James Oliphant
Feb. 5, 2014, 6:31 a.m.

Not­ably ab­sent in 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 hasn’t been do­ing any­thing about it.

Rather, the ques­tion is wheth­er it will have the guts to see through the ef­fort already un­der­way.

The Treas­ury De­part­ment has been ad­van­cing a new rule that could rad­ic­ally con­strain the ac­tions of so-called 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 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 same sort of screen­ing activ­ity that led them to ac­cuse the agency last year of tar­get­ing tea-party groups and oth­er grass-roots 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 it of stand­ing by idly. Obama didn’t even men­tion cam­paign fin­ance re­form in his na­tion­al ad­dress last month, and in­quir­ies to the White House on the mat­ter were routed to Treas­ury.

For it’s part, Treas­ury says the rule, which re­mains in its early stages, is an at­tempt to over­haul the 501(c)(4) pro­ced­ures that sparked last year’s up­roar. And 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, R-Ky., 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 con­ser­vat­ive fears that the IRS meas­ure tar­gets them, and the lan­guage was stricken.

That’s 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 can­not pre­dom­in­antly be 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 of non­profit arms of groups with overt polit­ic­al aims, such as Pri­or­it­ies USA and Cross­roads GPS, along with the bevy of smal­ler groups formed in ad­vance of the 2012 elec­tions, has made en­force­ment of the rule more per­ni­cious. The new rule would ex­pand the defin­i­tion of what is con­sidered “polit­ic­al activ­ity” by the agency and would lim­it that activ­ity to a set win­dow close to Elec­tion Day.

The op­er­a­tion­al ef­fect would 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 or­gan­ized un­der dif­fer­ent sec­tions of the code, such as the U.S. Cham­ber of Com­merce.

Con­ser­vat­ives may be treated equally un­der the rule, but they’re act­ing as if they have more to lose. Her­it­age Ac­tion, the ad­vocacy arm of the Her­it­age Found­a­tion, last month sent a let­ter to Con­gress signed by a mix of 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 are “part of a so­cial wel­fare mis­sion.”

Some trade groups, too, 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 Col­or­ado sen­at­or who now heads up gov­ern­ment re­la­tions at the Amer­ic­an Mo­tor­cyc­list As­so­ci­ation, who says the rule would in­hib­it the group’s abil­ity to com­mu­nic­ate with its mem­bers.

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