IRS vows to re­write rules for non­prof­its Aims to amend for ‘tar­get­ing’ scan­dal

The Washington Times Weekly - - Politics - BY STEPHEN DI­NAN

The IRS said Thurs­day it will go back and re­write the pro­posed rules gov­ern­ing non­profit groups and po­lit­i­cal ac­tiv­ity, bow­ing to overwhelming op­po­si­tion from tea party groups and free speech ad­vo­cates on both ends of the ide­o­log­i­cal spec­trum who feared the tax agency would hurt po­lit­i­cal de­bate.

In a state­ment, the IRS said it still in­tends to up­date its rules but will put off a hear­ing un­til af­ter it is­sues a new ver­sion — and gave no timetable for mov­ing ahead.

Con­ser­va­tives hailed the move as a vic­tory, say­ing that is­su­ing a new ver­sion of the rule be­fore the hear­ing is tan­ta­mount to start­ing over. Mean­while, Democrats on Capi­tol Hill said the move was a set­back for their ef­forts to try to push wealthy donors to the pe­riph­ery of po­lit­i­cal de­bate.

“This de­lay is deeply dis­ap­point­ing and a real set­back for democ­racy and faith in govern­ment,” said Sen. Charles E. Schumer, New York Demo­crat. “The only hope we have is when the IRS goes back, they don’t suc­cumb to any form of po­lit­i­cal pres­sure and en­act a very tough rule that will equally cur­tail lib­eral and con­ser­va­tive groups.”

It’s the lat­est chap­ter in the IRS tea party-tar­get­ing scan­dal that erupted a year ago, when the IRS’s in­ter­nal au­di­tor found the agency im­prop­erly tar­geted tea party and con­ser­va­tive groups who ap­plied for sta­tus as non­profit “so­cial wel­fare” or­ga­ni­za­tions. Ac­cord­ing to the au­dit, the agency asked in­ap­pro­pri­ate ques­tions of con­ser­va­tive groups and blocked some ap­pli­ca­tions for years.

As of ear­lier this month, some ap­pli­ca­tions were still be­ing held up — in­clud­ing one that has been wait­ing for five years.

The agency says the cur­rent rules — and a crush of new ap­pli­ca­tions — cre­ated con­fu­sion, which they said led to the tea party-tar­get­ing scan­dal.

Un­der the cur­rent rules, so­cial wel­fare groups, also known as 501(c)(4) or­ga­ni­za­tions, are al­lowed to con­duct po­lit­i­cal ac­tiv­i­ties as long as such ac­tiv­i­ties aren’t the ap­pli­cant’s “pri­mary” pur­pose. Many of the groups have in­ter­preted that to mean 49 per­cent of their ac­tiv­i­ties can be po­lit­i­cal. Or­ga­niz­ing as a so­cial wel­fare group also al­lows them to shield their donors from pub­lic dis­clo­sure.

The re­write that the IRS pro­posed late last year would have banned a wider ar­ray of po­lit­i­cal ac­tiv­ity, in­clud­ing even pub­lish­ing voter guides or invit­ing can­di­dates, such as sit­ting mem­bers of Congress, to talk to groups in the months ahead of an elec­tion.

The re­vi­sion drew scathing crit­i­cism, with more than 150,000 com­ments — most of them neg­a­tive — of­fi­cially filed with the agency and with the Trea­sury Depart­ment, which cowrote the new rules.

Groups rang­ing from the Amer­i­can Civil Lib­er­ties Union and the League of Women Vot­ers to the Amer­i­can Con­ser­va­tive Union said they feared the rules would sti­fle demo­cratic de­bate.

Faced with that op­po­si­tion, IRS Com­mis­sioner John Kosk­i­nen had hinted the agency would make sub­stan­tial changes. And on Thurs­day the agency made that of­fi­cial.

“Con­sis­tent with what Com­mis­sioner Kosk­i­nen has pre­vi­ously stated, it is likely that we will make some changes to the pro­posed reg­u­la­tion in light of the com­ments we have re­ceived,” the IRS said in a state­ment. “Given the di­ver­sity of views ex­pressed and the vol­ume of sub­stan­tive in­put, we have con­cluded that it would be more ef­fi­cient and use­ful to hold a pub­lic hear­ing af­ter we pub­lish the re­vised pro­posed reg­u­la­tion.”

Repub­li­cans said putting off a hear­ing un­til af­ter a re­write amounts to scrap­ping the orig­i­nal rules.

“This pro­posed rule was wrong from the start,” said House Ways and Means Com­mit­tee Chair­man Dave Camp, the Michi­gan Repub­li­can who is Congress’s chief tax writer. “The Amer­i­can people spoke out loud and clear against it, and hope­fully the IRS and the Obama ad­min­is­tra­tion will think twice be­fore ever try­ing to go down this path again.”

The IRS said it is com­mit­ted to still go­ing ahead with a re­write, but Mr. Kosk­i­nen had pre­vi­ously said it wouldn’t be in place for this Novem­ber’s con­gres­sional elec­tions.

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