Could Anger At the IRS Unite Democrats And the Tea Party?

What could bring reform advocates and tea partyers together? Anger at the IRS.

Tea Party supporters gather for a rally outside the IRS headquarter in Washington, May 21, 2013. A few dozen tea party activists and their supporters have gathered outside the IRS headquarters in Washington to protest extra scrutiny of their organizations.
National Journal
Patrick Reis
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Patrick Reis
Aug. 21, 2013, 8:31 a.m.

Rep. Chris Van Hol­len has a pro­pos­al he says can as­suage both the tea party’s con­cerns over IRS over­reach and pro­gress­ives’ fret­ting over the flood of an­onym­ous cam­paign cash un­leashed by the Su­preme Court’s Cit­izens United rul­ing.

His plan: Sue the IRS.

The Mary­land Demo­crat  an­nounced Wed­nes­day that he is su­ing the agency, as well as the Treas­ury De­part­ment, to de­mand a change in the way they eval­u­ate non­profits that pro­claim them­selves to be “so­cial-wel­fare” or­gan­iz­a­tions.

The IRS cur­rently al­lows such or­gan­iz­a­tions — a class of power play­ers known as “tax-ex­empt 501(c)4s,” whose ranks in­clude Karl Rove’s Cross­roads GPS and the Obama-aligned Pri­or­it­ies USA — to dabble in polit­ic­al ad­vocacy, so long as they keep such activ­it­ies sec­ond­ary to their gen­er­al char­it­able work.

But Van Hol­len says that such a “primary char­it­able, sec­ond­ar­ily polit­ic­al” ar­range­ment leaves open a loop­hole for overtly polit­ic­al or­gan­iz­a­tions to ex­ploit be­ne­fits in­ten­ded to be re­served for char­it­ies. Chief among those be­ne­fits is that 501(c)4s do not have to dis­close their donors, and so cor­por­a­tions, uni­ons, and oth­er groups can pour money in­to ad­vocacy ef­forts without fear­ing pub­lic back­lash, or in­deed any pub­lic scru­tiny at all.

Hop­ing to lift the cur­tain on polit­ic­al spend­ing, Van Hol­len wants the IRS to re­write its rules to re­quire 501(c)4s to en­gage ex­clus­ively in so­cial-wel­fare activ­it­ies, and keep out of polit­ic­al spend­ing en­tirely. If the groups want to get in­to polit­ics, they should re­gister un­der a dif­fer­ent non­profit clas­si­fic­a­tion — known as 527s — that would pro­tect the groups from tax­a­tion but re­quire them to dis­close all of their donors.

“You can spend the money, but the law does re­quire, as Con­gress in­ten­ded, that you [tell] the pub­lic where the money is com­ing from,” Van Hol­len said Wed­nes­day.

The fight over polit­ic­al spend­ing has taken on new ur­gency since 2010, when the Cit­izens United de­cision struck down cam­paign fin­ance laws that had pre­vi­ously checked out­side groups’ polit­ic­al spend­ing.

Out­side polit­ic­al spend­ing has ex­ploded since the de­cision, as have the num­ber of groups seek­ing 501(c)4 status. More than 3,200 groups sought the status in 2012, as op­posed to 1,735 in 2010.

Van Hol­len said that his primary goal in the suit was cam­paign fin­ance trans­par­ency, but he hoped that the suit’s an­cil­lary con­sequences could pull in al­lies from the op­pos­ite end of the polit­ic­al spec­trum.

Con­gres­sion­al Re­pub­lic­ans have been out­raged over the IRS’s cam­paign fin­ance role since the agency ad­mit­ted earli­er this year that some of its em­ploy­ees had used cri­ter­ia that tar­geted tea-party groups seek­ing 501(c)4 status for closer scru­tiny.

Van Hol­len re­jec­ted Re­pub­lic­ans’ claim that the IRS was en­gaged in polit­ic­ally mo­tiv­ated at­tacks, echo­ing Demo­crats’ re­cent claims that lib­er­al groups were also in the agency’s crosshairs. But he said the prob­lem could be rendered moot by re­mov­ing the IRS’s ob­lig­a­tion to judge where groups stand along the blurred line between so­cial wel­fare and polit­ic­al ad­vocacy.

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