Republicans Seek to Block IRS Rule in Ukraine Aid Package

Republicans in Congress want to add language to a U.S. aid plan for Ukraine that would block a proposed IRS rule curbing political activity by tax-exempt groups, Senator Bob Corker said today.

Corker, the top Republican on the Foreign Relations Committee, said the proposed Internal Revenue Service measure was one of the unresolved issues facing lawmakers working to complete a Ukraine aid package in time for the panel to consider it tomorrow.

The other was whether to add a boost in International Monetary Fund resources that President Barack Obama’s administration has requested, Corker said.

“Everything else is in good shape,” the Tennessee senator said. “The package relative to Ukraine itself is, I think, in good shape.”

Republicans are reviving a failed effort earlier this year to link language delaying the proposed IRS rule with the IMF funding increase. Both provisions eventually were dropped from legislation to fund the U.S. government through Sept. 30.

The House today approved, on a 402-7 vote, a non-binding resolution calling for sanctions against Russian officials and state-owned banks in response to what the measure calls a “violation of Ukraine’s sovereignty.”

The Senate also unanimously passed a resolution, S.Res. 378, condemning Russian aggression in Ukraine.

Senate Minority Leader Mitch McConnell and other Republicans say the proposed IRS rule would wrongly suppress free speech. It could limit political spending by outside groups that receive tax exemptions as non-profit social welfare organizations.

One-Year Delay

The House on Feb. 26 passed legislation, which Obama has threatened to veto, that would delay that rule for a year.

John Koskinen, the IRS commissioner, told a House subcommittee the same day that the chances of completing the rule before this November’s election were “fairly slim.” He said the agency will hold a public hearing and may solicit more comments.

The IRS timeline means that the bill wouldn’t create much of a delay beyond what will happen anyway.

Pairing the IRS and IMF provisions may help ease Republican opposition to the IMF assistance. Obama’s fiscal 2015 budget plan, sent to Congress March 4, would boost the U.S. share, or quota, at the Washington-based IMF by shifting about $63 billion from an existing credit line.

Senator Ron Johnson, a Wisconsin Republican who also sits on the foreign relations panel, said he opposed including the IMF language in the Ukraine aid bill.

‘Controversial Elements’

“We shouldn’t be doing that,” Johnson said today in an interview. “There are many controversial elements of that.”

The Ukraine issue marks “a point in time for us to be unified, to speak with one voice,” Johnson said, while the IMF provision “divides us.”

An organization of company chief executive officers urged the Senate to back the IMF provision, in a letter to Corker and New Jersey Democrat Bob Menendez, chairman of the Senate foreign relations panel.

“If Congress fails to act, it will cede U.S. influence and leverage in the IMF and international financial system to China, India, Brazil, and other countries, as well as, ironically, Russia,” John Engler, president of the Business Roundtable, wrote on behalf of more than 200 members of the group in a letter dated March 10. Engler, a Republican, is a former Michigan governor.

A bipartisan group of former U.S. officials yesterday also urged Congress to include the measure or risk undermining U.S. efforts to promote growth and financial stability.

$1 Billion

The House passed a Ukraine aid plan March 6 that would allow about $1 billion in loan guarantees to the fledgling Ukraine government. The House’s Ukraine aid plan, H.R 4152, didn’t include IMF language.

Closed-door briefings were held in the House and Senate today on the Ukraine matter. That country’s Prime Minister Arseniy Yatsenyuk is scheduled to meet tomorrow in the Capitol with House Speaker John Boehner, Minority Leader Nancy Pelosi, and also with members of the Senate Foreign Relations Committee.

The House resolution called Russia’s military intervention in Crimea a “violation of international law” and a “reckless escalation of its long-standing efforts to pressure Ukraine” into closer ties with Moscow instead of Europe.

It said major world powers should boycott the scheduled G-8 meeting in Sochi, hold a G-7 meeting somewhere else and consider expelling Russia from the G-8, “given its record of international aggression, domestic repression, and human rights records that are inconsistent with democratic standards.”

The resolution, H.Res. 499, called for NATO and European Union members to suspend military cooperation with Russia and restrict military sales to the country.

To contact the reporters on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net; Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Laurie Asseo

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