The effort launched Tuesday is an attempt to reduce the role of
loosely regulated big-money political outfits like GOP political
guru Karl Rove's Crossroads GPS and the pro-Obama Priorities USA.
The Internal Revenue Service and the Treasury Department said they
want to prohibit such groups from using "candidate-related political
activity" like running ads, registering voters or distributing
campaign literature as activities that qualify them to be tax-exempt
"social welfare" organizations.
The agencies say there will be a lengthy comment period before any
regulations will be finalized. That means groups like Crossroads and
Priorities USA will be able to collect millions of dollars from
anonymous donors ahead of next year's campaign.
"This proposed guidance is a first critical step toward creating
clear-cut definitions of political activity by tax-exempt social
welfare organizations," said Mark Mazur, treasury assistant
secretary for tax policy. "We are committed to getting this right
before issuing final guidance that may affect a broad group of
organizations. It will take time to work through the regulatory
process and carefully consider all public feedback as we strive to
ensure that the standards for tax-exemption are clear and can be
Organized under section 501(c)(4) of the tax code, such groups are
able to raise millions of dollars to influence elections. But they
can also be small-scale tea party groups, many of which say they
were harassed by the IRS after seeking tax exempt status.
House Ways and Means Committee Chairman Dave Camp, R-Mich., was
skeptical of the administration's move.
"There continues to be an ongoing investigation, with many documents
yet to be uncovered, into how the IRS systematically targeted and
abused conservative-leaning groups," he said. "This smacks of the
administration trying to shut down potential critics."
The 2010 Citizens United Supreme Court decision lifted the limits on
donations by labor unions and companies to 501(c)(4) groups,
allowing Crossroads, the largest of them, to raise large sums
outside the limits that apply to candidates' campaigns and
traditional party committees.
"Enormous abuses have taken place under the current rules, which
have allowed groups largely devoted to campaign activities to
operate as nonprofit groups in order to keep secret the donors
funding their campaign activities," said Fred Wertheimer, president
of Democracy 21, which advocates limits on money in politics.
[to top of second column]
Under current rules, social welfare organizations may conduct some
political work as long as it's not their main activity. The proposed
new rules would block such things as running ads that "expressly
advocate for a clearly identified political candidate or candidates
of a political party" as fulfilling their tax-exempt mission. And
ads that simply mention a politician to, for instance, urge him or
her to vote a certain way couldn't be run 60 days before a general
election of 30 days before a primary.
The rules also would limit voter drives and voter registration
efforts and distribution of literature.
The idea behind the new regulations is to simplify the rules of the
road going forward, proponents say. The current rules are confusing
and prone to abuse, critics say.
Treasury and the IRS don't have a proposal yet about what proportion
of a 501(c)(4) group's activities must promote social welfare and
are soliciting input. In other words, they don't have a
recommendation as to what percentage of a group's time and money can
be spent on politics.
Some of the outside groups that could be affected by the proposal,
including Crossroads GPS and Priorities USA, did not have any
initial reaction to the announcement. The groups are expected to
weigh in on the rulemaking as it proceeds.
Any changes to the regulations likely would not affect the 2014
elections because of legal challenges but the rule changes could
shape the next presidential election, said Kenneth Gross, a campaign
finance attorney and former head of enforcement for the Federal
"Brightening what are now blurred lines — what is political activity
— is not only useful but necessary to have some kind of clarity to a
vehicle that has been used to the tune of millions and millions of
dollars," he said.
But Gross cautioned that "this is a long and winding road before
anything is in ink."
Press; ANDREW TAYLOR]
Associated Press writer
Ken Thomas contributed to this report.
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