Republicans To IRS: Back Off Anonymous Money Groups

August 7, 2012 7:00 am

A battle between leaders of the two parties over campaign finance rules intensified this week as Sen. Chuck Schumer (D-NY) accused Republicans of flat-out threatening the Internal Revenue Service after they warned the agency not to tighten oversight of anonymous money groups misusing the tax code.

The squabble is about how forcefully to crack down on groups approved under special 501(c)(4) tax status by claiming to primarily engage in “social welfare,” but which pour significant resources into political activities. Democrats want a strict cap on how much money they may spend for politics; Republicans prefer the ambiguity of the status quo. Beneath the issue is a sea of anonymous spending in which pro-GOP groups are drowning Democrats.

By using 501(c)(4) status, these “political charities” are allowed to keep their donors anonymous, leaving voters unable to evaluate which interests might be funding ads or what their motives are.In March, Schumer and six Democratic colleagues sent IRS Commissioner Douglas Shulman a letter asking for a “bright line test” for approval of tax-exempt status that imposes “a strict, percentage-based cap on the amount of a nonprofit group’s spending that can go towards political activities.”

“We urge the IRS to take these steps immediately to prevent abuse of the tax code by political groups focused on federal election activities,” the Democratic senators wrote. They continued that “if the IRS is unable to issue administrative guidance in this area then we plan to introduce legislation to accomplish these important changes.”

In response, 12 Republican senators — including Minority Leader Mitch McConnell (R-KY), Minority Whip Jon Kyl (R-AZ) and Finance Committee Ranking Member Orrin Hatch (R-UT) — sent the IRS a letter warning them not to do just that, arguing that stricter enforcement could get mired in a political agenda.

“It is critical that the public have confidence that federal tax compliance efforts are pursued in a fair, even-handed, and transparent manner — without regard to politics of any kind,” the Republican senators wrote.

Then on July 17, Shulman wrote to groups petitioning for the tighter oversight saying the IRS “will consider proposed changes” — like the ones Democrats called for — that “identify tax issues that should be addressed through regulations and other published guidance.”

On Monday, top Republican senators fired back, seeking an update from the IRS and warning the agency not to go there. “We believe these petitions have less to do with concerns about the sanctity of the tax code and more about setting the tone for the upcoming presidential election, and we urge you to resist allowing the IRS rulemaking process to be subverted to achieve partisan political gains,” they wrote in a letter.

That didn’t sit well with Schumer.

“The only thing missing from the Republicans’ letter is the ‘or else’. This unsubtle threat is clearly designed to put a chilling effect on the agency’s enforcement of the law,” the No. 3 Democratic senator said in a statement Monday afternoon. “The IRS should not be bullied into looking the other way when blatantly political groups are claiming non-profit status.”

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