In the News
NRO: Silenced by the Taxman
By Bradley A. Smith
But the IRS has not been completely inactive. Just before heading off for the Thanksgiving holiday, the agency dumped a proposed rule into the Federal Register that, if enacted in its current form, would place further restrictions on the political activity of citizen groups, including nonpartisan voter-registration efforts, “meet the candidate” nights and debates, and communications aimed at informing citizens about pending legislation in Congress and the states. It appears, frankly, to be an effort to institutionalize political discrimination in the tax code.
The proposed rule is not entirely without merit. It would do away with the broad, indeterminate “facts and circumstances” test that was a major contributing factor to the IRS scandal. Under that rule, it was left to IRS agents, considering all the “facts and circumstances,” to decide whether an organization’s activities constituted “social welfare activities” (good) or “electioneering” (bad). Obviously, that gave huge discretion to the IRS agents, and once agency higher-ups approved “Be On the Lookout” (BOLO) lists, targeting groups with words such as “Freedom” and “Tea Party” in their names, it was not surprising how this discretion was used. Replacing the “facts and circumstances” test with more objective criteria is a plus.
The problem is in the proposed criteria. First, the proposed rule would limit the ability of 501(c)(4) non-profits to engage in voter education that even mentions a candidate within 30 days of a primary or 60 days of a general election. Thus, if Congress is debating a budget next October, as it was this past October, non-profits would be limited in attempting to run ads urging citizens to contact members of Congress. Moreover, don’t think this applies only to big TV campaigns. It applies to any form of advertising that might reach over 500 people. Inexpensive Internet ads purchased by a local Tea Party outfit, or a mailer announcing a meeting and sent to 2,500 area residents, could endanger a group’s tax-exempt status under the proposed rule.
Wall Street Journal: IRS Rules on Nonprofits’ Political Activity Get Mixed Reaction
By Thomas Catan
Mr. Keating, who previously worked for Club for Growth, one of the conservative groups that could be affected by the new rules, criticized one of the new IRS proposals, which would count as political work any communications naming a candidate in the run-up to an election.
He said he also would be closely watching the outcome of a separate rule expected from the IRS on how much political activity a nonprofit can engage in before it stops qualifying for tax-exempt status. Many 501(c)(4) organizations have worked under the assumption that they cannot spend more than half of their funds on overtly political activity, but the IRS could set a more restrictive standard.
“The ultimate percentage that can be devoted to these activities—which we believe in fact do constitute ‘social welfare’ activities—will tell us whether this is an effort to clarify the law or simply to smother political speech,” Mr. Keating said.
SCPR: Obama Administration proposes new rule to rein in nonprofit political groups
The Obama administration this week unveiled a proposed rule that would limit the role tax-exempt, nonprofit groups play in politics and election campaigns. Under the proposed rule, “social welfare” groups like Karl Rove’s Crossroads GPS and the pro-Obama outfit Priorities USA, which enjoy certain tax benefits under the 501(c)(4) designation but could raise millions of dollars for election campaigns, would be kept from engaging in political activities like running ads, registering voters or distributing campaign literature.
This discussion features CCP Chairman Bradley A. Smith.
CPI: IRS Sets Its Sights on Political ‘Dark Money’
By Michael Beckel
David Keating, the president of the Center for Competitive Politics, said the proposalwent “seriously off track” by including “electioneering communications” as “candidate-related political activity.”
He argued that groups may be compelled to run issue ads on controversial legislation in the two months before Election Day because of the timetable under which Congress decides to act.
For instance, he cited votes on an alternative to sequestration, an omnibus appropriations bill and the reauthorization of the Foreign Intelligence Surveillance Act among high-profile votes occurring within 60 days of the November election last Congress.
“It is absurd to categorize ads on such legislation as per se political activity simply because an incumbent is mentioned in the communication,” Keating said. “Many social welfare groups are active on a single issue and are at the mercy of the congressional schedule.”
Roll Call: Treasury, IRS Propose New Nonprofit Rules
By Eliza Newlin Carney
But much of what Treasury and the IRS outlined Tuesday is similar to draft regulations that the pro-free speech Center for Competitive Politics is preparing to submit to the agencies, said center President David Keating. However, Keating objected to the section of the federal guidance that defines political activity to include communications made within 60 days of a general election and 30 days of a primary that “clearly identify a candidate or political party.”
“Much of that activity is clearly issue speech, and the IRS has no ground to be regulating or limiting that,” Keating said. He noted that the window before a primary or general election “is a time when Congress is at the peak of its session in an election year,” and that “these are times when groups need to be making communications about bills before Congress.”
Washington Post: New IRS rules add both clarity and confusion about the role of advocacy groups in politics
By Matea Gold
“The IRS should not be in the business of regulating political activity,” said David Keating, president of the Center for Competitive Politics, a conservative legal policy group. “They’re trying to reinvent the wheel. A lot of the activity that they’re trying to describe, the [Federal Election Commission] has already written regulations on.”
The regulation still has to go through an extensive public comment period and is expected to change substantially before it is issued in final form. But the debate about the proposal will accelerate the shift of political money into other vehicles, such as private partnerships and for-profit corporations, election law experts said.
Milwaukee Journal-Sentinel: John Doe recall probe could focus on free speech, Supreme Court makeup
By Patrick Marley and Dave Umhoefer
Two former Federal Election Commission members interviewed by the Journal Sentinel offered mixed opinions on the effectiveness of a free-speech defense.
First Amendment defenses alleging unfair limits on political speech are “probably a loser” in such cases because of various U.S. Supreme Court rulings, said Bradley Smith, who heard such cases as a Republican member of the FEC from 2000 to 2005.
But targets in past cases have had charges overturned on appeal by arguing that laws are too vague on what is right and wrong, Smith said.
Marketplace: Following the money on the new IRS rules
By Mark Garrison
Libertarian critics object to many campaign finance regulations on free speech and privacy grounds. They point out that people may have good reasons to want to give anonymously, such as fear of harassment tied to their political views. There’s a fear that excessive regulations hinder political participation.
“It’s a bad thing to get carried away and make it hard for people to engage in political speech,” says Bradley Smith, a former Federal Election Commission chair and founder of the Center for Competitive Politics, a group that’s broadly skeptical of campaign finance regulations.
CCP
Treasury Releases Vague Details on New IRS Guidance
By David Keating
The Treasury press release is vague on key details that won’t be known until a draft rule is released. The devil will be in the details. The proposed rule is right to recognize that advocacy nonprofit groups can conduct political activities. Participation in our nation’s elections is vitally important to efficient and effective government and advances the legitimate public policy goals of social welfare groups, labor unions and trade associations. The ultimate percentage that can be devoted to these activities – which we believe in fact do constitute “social welfare” activities – will tell us whether this is an effort to clarify the law or simply to smother political speech.
Additionally, the IRS must scrap the “facts and circumstances” test. While the press release indicates that the IRS is moving towards clearer standards, it is not clear yet whether the proposal ends this test or not.
Much of the rule is in the right direction. Political activity should be defined as supporting candidates and parties with contributions or expressly advocating for candidates.
However the proposal goes seriously off track when it seeks to count candidate-related political activity to include “Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate.” Such communications are protected issue speech and should not be limited. Indeed, such communications could solely advance, and in fact long have solely advanced, activities that are clearly grassroots lobbying or educational activities that have always qualified as activities that advance social welfare.
Independent Groups
Wall Street Journal: The History of the 501(c)(4) Exemption
By Jacob Gershman
The roots trace back a century ago to when Congress enacted the Revenue Act of 1913, also known as the “Underwood Tariff Act,” according to Mr. Desiderio and other tax scholars.
“The legislative history of the Tariff Act contains no reason or explanation for the exemption. The general belief is that [the] United States Chamber of Commerce pushed for the enactment of exemptions for both civic and commercial nonprofit organizations,” wrote Mr. Desiderio in a book about tax-exempt groups.
The statute, described as a precursor to section 501(c)(4), aimed to patch up a gap in the law and carve out exemptions for “organizations which could not qualify as charitable, educational, or religious, but whose activities somehow benefited the general public,” wrote Case Western Reserve University law professor Laura B. Chisolm in a 1988 article for the Indiana Law Journal.
SCOTUS/Judiciary
More Soft Money Hard Law: “Accentuating the Positive” in Campaign Finance Reform
By Bob Bauer
The Supreme Court has boxed the debate over campaign finance into a corner, forcing the focus entirely on “corruption.” Because corruption is the whole game, it is played with vigor, and we have seen in recent years how the term has been pulled this way or that, depending on the commenter’s policy preference.
The struggle has taken place in part on a doctrinal level, with the Supreme Court pressed on expansive definitions of corruption that, most emphatically in Citizens United, it now rejects. For a while, in the wake of McConnell v. FEC, there was some thought that corrupt official conduct could consist of favors thrown the way of donors in the provision of access or the scheduling of legislative priorities. Citizens United stopped this doctrinal development in its tracks. So we now only have a sharply narrowed version corruption to go on—“quid pro quo” corruption.
Corporate Governance
Wall Street Journal: The SEC Is Not the IRS: Mary Jo White refuses to enlist in the war on political speech.
The Internal Revenue Service, which has abused President Obama’s philosophical opponents and continues trying to limit political speech, remains unreformed. But the good news out of Washington is that the Securities and Exchange Commission has formally abandoned its own campaign to muzzle critics of big government.
The latest “unified agenda” of regulations published by the White House budget office shows that forcing more political disclosure out of corporations is no longer on the SEC’s to-do list. This month the SEC withdrew the proposal from its regulatory agenda.
Acton Institute: ICCR: There Will Be Blood?
By Bruce Edward Walker
One might buy such an argument if applied to such admirable ICCR initiatives exposing and eliminating human trafficking, but the Mirror article fails to mention the plethora of ICCR shareholder resolutions pertaining to imagined rather than real-world ignominies. Among the long list of activist causes ICCR inflicts on corporate boardrooms across the United States are labeling genetically modified foods, hindering/limiting hydraulic fracturing and – the latest obsession of the left – forcing companies to disclose political contributions and financial donations to nonprofit organizations as an end-run to circumvent Citizens United.
The only blood spilled in this latter instance would belong to the companies losing their voice in the political process because ICCR and its cronies on the religious left have cut out their tongues.
Washington Post: SEC drops disclosure of corporate political spending from its priority list
By Dina ElBoghdady
Missing from the Security and Exchange Commission’s list of regulatory priorities for the coming year is any plan to consider whether public companies should disclose their political spending, a setback for investor advocates who rallied behind the cause.
