IRS Stands Firm On Tax-Exempt Groups’ Activities

Washington — The Internal Revenue Service is forging ahead with plans to develop new rules limiting the political activities of tax-exempt groups, despite pressure from conservatives to abandon the effort, the agency’s director said Wednesday.

“My bottom line is that it’s in everyone’s interest to have clarification,” IRS Commissioner John Koskinen said in an interview with The Washington Post. “My position since I started more than four months ago is that we ought to have clarity, and that any rule that comes out ought to be fair and easy to administer.”

Koskinen said this week that the IRS and Treasury Department are likely to rewrite controversial draft guidelines proposed in November to define “candidate-related political activities” that could disqualify advocacy groups from tax-exempt status.

That announcement brought relief to groups that want reform but feared the draft rules had gone too far. But it did little to ease the concerns of conservative groups that want the IRS to end its efforts.

The commissioner also said the agency will hold a public hearing on the original proposal around midsummer. The rule-making process, however, is likely to continue through the end of the year, Koskinen said.

He offered no insight into how the guidelines might change, saying the IRS is still handling more than 150,000 comments it received before the initial public-input phase ended in February.

“When you have this many comments, you have to listen to them,” he said. “My goal is to have an open mind about this, so I don’t come at it with a prejudgment.”

Lawmakers and policy analysts at both ends of the political spectrum have criticized the draft guidelines, which would bar tax-exempt groups from engaging in certain election-related activities, including voter-registration and get-out-the-vote drives.

Conservatives have argued that the proposals are part of an Obama administration plot to silence criticism from the right. Liberals, many of whom contend that groups are using their tax-exempt status to influence elections without disclosing their donors, have said the plans simply go too far and need reworking.

The IRS found itself awash in groups applying for the tax-exempt 501(c)(4) status after the Supreme Court’s Citizens United ruling. Treasury Department inspector general Russell George said in a report issued last May that lack of clarity about how those groups can operate contributed to the agency targeting organizations for extra scrutiny on the basis of their policies and names. That report led to an agency leadership shake-up, and a political battle that has only intensified and is intertwined with the fight over new guidelines.

“Our hope with the rule-making is that they take into account the very important issues of free speech and having real Americans all across the country engage in the political process in a substantive way,” said Levi Russell, a spokesman for the right-leaning group Americans for Prosperity.

Common Cause, which backs stricter limits on tax-exempt groups, said it plans to attend the IRS public hearing and submit comments on the revised draft guidelines once the agency releases them. The group said it will also press its members to send recommendations to the agency.

“It seemed to us that there was an active effort to get folks to send in comments that were negative or hostile to the idea of changing these rules at all,” said Common Cause policy counsel Stephen Spaulding. “We want to buck up the commissioner to stand up to that.”

The American Civil Liberties Union, which has criticized the draft guidelines, said the new rules should “draw a true bright line to ensure that issue advocacy and non-partisan voter work, on both the left and right, aren’t treated like partisan electioneering.”

Current regulations, which affect tax-exempt 501(c)(4) entities, say the groups must be “primarily engaged” in social welfare work as opposed to political efforts. Critics say the rules lack clarity about what constitutes prohibited activity and how much is allowed.

Senate Minority Leader Mitch McConnell, R-Ky., one of the staunchest opponents of the limits, said the Obama administration should drop its plans for new regulations affecting nonprofit advocacy groups.

“The commissioner has the ability to stop the IRS from stepping on the First Amendment altogether, and that’s exactly what he should do,” McConnell said in a statement on Tuesday.

Cleta Mitchell, a conservative election-law expert, said in an interview Tuesday that the Obama administration has been working “behind closed doors” and “in secret” on new rules to hinder nonprofit advocacy groups with right-leaning policy positions.

“It doesn’t give me comfort that (Koskinen) says he’s rewriting the draft regulations,” Mitchell said. “This is a flawed process that is going to continue to produce a flawed product.”