IRS Suggests Guidelines On Politicking By Tax-Exempt Groups

The Obama administration is pushing a new set of regulations that would make it much harder for so-called "social welfare" organizations to engage in political campaigns. This comes after a summer of controversy over the way the IRS treated Tea Party groups applying for tax exempt status.

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It's MORNING EDITION from NPR News. I'm Linda Wertheimer.

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The IRS is proposing new rules for so-called social welfare groups. Under the proposal, to maintain their tax exemption, these groups would have their political activities restricted. The rules also aim to define what political activity actually is - that's something that's been murky at best in the past. All this comes after a summer of controversy over the way the IRS treated Tea Party groups applying for tax exempt status.

NPR's Tamara Keith has the story.

TAMARA KEITH, BYLINE: This section of the tax code, 501(c)(4), was intended for groups like the Kiwanis Club. But in recent years, the social welfare designation has become a refuge for other groups, raising and spending hundreds of millions of dollars in politics while protecting their donors' identities. Current IRS rules say they can get involved in political campaigns, but they have to spend most of their money on their social welfare mission.

Paul S. Ryan is senior council at the Campaign Legal Center, a watchdog group.

PAUL S. RYAN: To date they have not have rules that have not been sufficient clear and they have not had sufficient enforcement of those rules.

KEITH: And so you get ads like this.

(SOUNDBITE OF AD)

UNIDENTIFIED MAN: We need solutions, not just promises. Tell President Obama to cut the deficit...

KEITH: This ad is from the conservative social welfare group Crossroads GPS, which considers it an issue ad - part of its social welfare mission. They don't consider it political activity. And apparently neither did the IRS.

With its draft new rules, the IRS aims to align regulation of these groups with the current political reality. The proposed rules say that if this ad ran within 60 days of a general election, or within 30 days of a primary, it would count as political activity. Voter guides and voter registration drives would be considered political too.

DAN BACKER: The current system isn't a good system because it's unclear. But this doesn't add clarity. This makes things worse.

KEITH: Dan Backer is principal attorney for DB Capitol Strategies, a political and election law firm. He represents some of the conservative groups that faced delays and hassle from the IRS when they applied for 501(c)(4) status. He's among those that believe the current system contributed to that treatment. And he clearly isn't sold on the proposed new rules either.

BACKER: Looking at these subjective, arbitrary, unconstitutional restraints on speech and association, there is not a doubt in my mind that the IRS will use this as a political weapon against whomever is out of power.

KEITH: And he's not the only one fuming at the proposed rule changes. Jay Sekulow is with the American Center for Law and Justice, and represents Tea Party groups as well.

JAY SEKULOW: I am very concerned about voter guides being deemed suspect material. That really does concern me.

KEITH: As he sees it, the rules would limit speech.

SEKULOW: Well, we're going to give them comments - that I can assure you.

KEITH: The Campaign Legal Center's Ryan says his organization will have plenty of comments as well.

RYAN: I can already see a hole or two in it, so I'm hoping through the rule-making process that this proposed rule can be strengthened.

KEITH: Still, Ryan says it's a good sign that the IRS is looking more closely at these groups and the rules that govern them.

RYAN: Today you have lawyers fighting over what the IRS standard even is. We'll move on to arguing whether or not a particular ad meets the standard.

KEITH: The IRS is also seeking comment on just how much political work these social welfare groups should be allowed to do.

Tamara Keith, NPR News.

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