The US Chamber of Commerce just published another blog post slamming an Internal Revenue Service (IRS) rulemaking that could clarify the rules for nonprofits and reduce the influence of undisclosed political spending (like the more than $35 million the Chamber spent in 2012). The Chamber points out that vague rules are bad rules, and that the IRS’s first draft of proposed rules was deeply flawed. We agree!
The IRS also agreed that the proposed rules needed revision — that’s why the IRS is revising the rules and planning to reissue a new draft in early 2015.
The Chamber piece points out that unclear rules can have a chilling effect on democratic participation, which is precisely why tax law experts formed the Bright Lines Project five years ago (full disclosure, now housed at Public Citizen). The current rules that define political activity for nonprofits are based on the vague notion that IRS agents will be able to evaluate all the “facts and circumstances” surrounding each case to determine if something is political or not. Better would be bright-line definition for political activity to ensure that nonprofits know what they can and can’t do when it comes to political activity.
We agree with the Chamber that the first draft of the rules didn’t quite get there, and would have prevented nonprofits from participating in our democracy in ways that should be encouraged (like hosting debates and holding get-out-the-vote drives). So we’re glad to see the IRS taking another crack at fixing this important problem with the existing system.
But the Chamber gets a lot else wrong in its post, and not just the IRS Commissioner Koskinen’s name (his first name is John, not “Joel”). Its post shows that it is more concerned with keeping its ability to spend big money on our elections than about making sure the rules empower free speech.
The Chamber piece suggests that the Federal Elections Commission (FEC) regulate political activity for nonprofits rather than the IRS. To most, that just doesn’t make sense. The IRS has plenty of business policing how a group qualifies for tax breaks while the FEC has none. Sorting out the differing requirements for the many kinds of exempt organizations – which have different rules for lobbying, investment income, business expenses and different levels of donor disclosure – is something no other agency has the expertise to undertake. Furthermore, the IRS’s system is universal, covering federal, state, local and foreign jurisdictions. Who else but the IRS could be the referee for what these nonprofits can and cannot do in order to qualify for their nonprofit tax status?
The Chamber’s suggestion that the FEC take over regulation of tax-exempt entities from the IRS has a darker purpose as well. Stifled by partisan politics, the FEC has proven itself incapable of stemming the tide of dark money influencing our elections (and Public Citizen has been taking them to task for it, see here). The Chamber would love nothing more than to make sure the IRS can’t enforce the rules either so they can continue their spending spree.
The first draft of new rules was aimed only at 501(c)(4) social welfare organizations. The Chamber is deeply worried that the new draft will expand a proposed rule to cover more exempt entities, particularly 501(c)(6) business organizations like the Chamber itself. The Chamber of Commerce spent $35 million on elections in 2012, and nearly $15 million so far in 2014,without disclosing where any of that money came from. They have a vested interest in ensuring they keep their ability to spend that money in secret. The current, vague, rules help the Chamber game the system.
It may be surprising that unlikely bedfellows like Public Citizen’s Bright Lines Project and the U.S. Chamber of Commerce agree that the first draft of the rules needed revision. But the Chamber’s opposition to new rules that could curtail the ability of CEOs and corporations to use the business group as a vehicle to spend unlimited amounts of undisclosed money on our elections is no surprise at all.
Emily Peterson-Cassin is the Bright Lines Project Coordinator for Public Citizen’s Congress Watch division