New IRS Rules Would Lessen Influence Of Social Welfare Groups

The Obama administration is pushing new regulations that will make it harder for so-called "social welfare" tax-exempt groups to influence elections.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

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And I'm Audie Cornish.

Today, the IRS released proposed rule changes for so-called social welfare groups that are involved with politics. These tax exempt groups are allowed to keep their donors secret and have become big players in recent elections. They spend hundreds millions of dollars to affect the outcome of races. The proposal would limit that spending by clearly defining what is political activity.

And to help us sort through this we're joined now by NPR's Tamara Keith. And, Tamara, first, what more can you tell us about these social welfare groups? And why is the IRS proposing new rules?

TAMARA KEITH, BYLINE: These are 501(c)(4) tax exempt groups. It's part of the tax code that was originally intended for Rotary clubs and the like. But in recent years, political groups have been created under this part of the code specifically to get involved in politics and to keep their donors secret. These are groups like Crossroads GPS, Priorities USA - lots of others. They're spending big money and keeping their donors identities secret as part of this part of the tax code.

The requirement was that their activities had to be primarily in pursuit of social welfare and not politics. But there's never been an official definition of primarily. And even the definition of political activity has been pretty murky, too.

CORNISH: So how much does this have to do with the controversy from earlier this year over the targeting of Tea Party groups for extra scrutiny, when they applied to the IRS for tax exempt status?

KEITH: Oh, it has everything to do with this. One of the big lessons that the IRS took from that scandal - which in many ways remains unresolved - is that the way political activity was defined was really unclear. And one of the many recommendations coming out of all that was that the IRS should clarify the rules and this is a first stab at that.

The IRS is seeking public comment on a number of things. One big one is simply what primarily should mean. A lot of groups have interpreted it to mean 49.9 percent of what they do could be directly in support of candidates. Others have said that it should be less than that. And the IRS, with this process, may well end up finally putting a number on it.

They are also looking to define political activity. And they're proposing that ads that air close to election time and that mention a candidate's name would be counted as political. So that would be those ads that say: candidate X is terrible, call him and tell him to stop being so terrible. That would no longer count as social welfare. They're also about making voter guides considered political activity, as well, and that could be controversial.

CORNISH: So, so far, what's the reaction to these proposed rules been?

KEITH: Kind of what you'd expect. ACLJ, which is a group that represents those groups that feel they were unfairly targeted by the IRS, says that the agency is sort of coming in after the fact here and trying to justify the targeting. They're concerned about the voter guide rules and also just feel that more broadly these proposals could limit free speech.

Folks on the more good government, open government side of things, say that these rules are a good start; that these proposals are a good start, but that some of these rules have holes that you could drive a truck through if you were a creative political group, which all of these political groups are. So it's sort of all over the map.

And the significant thing here is that this is the very beginning of what is going to be a long process, with a lot of comment periods and hearings and rule-making.

CORNISH: That's NPR congressional correspondent Tamara Keith. Tamara, thank you.

KEITH: You're welcome.

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