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April 9, 2014

As Partisan Hearings on IRS Scandal Continue, Nonprofits Stay Focused

IRS Rulemaking Is an Opportunity to Correct Vague Standard

WASHINGTON, D.C. – As partisan maneuvering over the IRS targeting scandal continues in the U.S. House of Representatives, organizations are calling for real reforms to the way the IRS treats nonprofit political activity.

The House Committee on Ways and Means today referred former IRS official Lois Lerner to the Department of Justice for possible prosecution, and Thursday, the Committee on Oversight & Government Reform holds yet another hearing on the IRS targeting scandal – this time to hold Lerner in contempt of Congress. Meanwhile, organizations from across the political spectrum are asking for the continuation of an IRS rulemaking that could address the causes of the scandal.

The scandal, which came to light last May, involved IRS employees allegedly using inappropriate criteria, such as the names of nonprofits, to determine which would get increased scrutiny about their level of political activity. The U.S. Treasury Inspector General for Tax Administration issued a report noting that the problems in applying the current “facts and circumstances” test were a significant contributor to the scandal and recommended that the IRS issue clear guidance on what constitutes political activity.

The IRS proposed new rules in November that seek to resolve the ambiguity of the current regime. Though most organizations said that the rules as proposed needed to be amended, 67 percent of organizations that commented or signed on to comments asked that the rulemaking continue, according to a Public Citizen analysis.

“As Congress continues down its increasingly partisan path, it’s good to know that real stakeholders are cutting through the noise and suggesting real solutions,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division and manager of the Bright Lines Project. “The rules need to be improved, but they are an important first step toward providing an objective and easy-to-follow definition of political activity for nonprofits.”

“This is an opportunity to correct the outdated ‘facts and circumstances’ standard that’s been shown to cause more problems than it solves,” added Craig Holman, Public Citizen’s government affairs lobbyist. “Objective definitions of political activity will help ensure that nonprofits can fully participate in our democracy without fear of losing their 501(c) tax-exempt status.”

“The Bright Lines Project has been working for years to create clear, fair rules that would apply to all nonprofits and would encourage nonpartisan civic engagement while removing opportunities for abuse,” Gilbert said. “We agree with the nearly 70 percent of commenting organizations that the rulemaking must continue and that the IRS should enact these important reforms.”


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