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Republicans Tell IRS to Scrap Rule on Election Spending

House Speaker John Boehner. Photographer: Pete Marovich/Bloomberg
House Speaker John Boehner. Photographer: Pete Marovich/Bloomberg

Feb. 6 (Bloomberg) -- A proposed rule that may limit groups’ spending on elections “is an affront to free speech” and should be scrapped, congressional Republicans wrote in a letter to Internal Revenue Service Commissioner John Koskinen.

The rule, which hasn’t been finalized, could limit spending from outside groups officially classified as non-profit social welfare organizations.

The groups spent more than $310 million over the two-year 2012 election cycle, according to the Center for Responsive Politics that tracks campaign finance. Some $265 million of that -- about 85 percent -- was from organizations that align with Republicans, according to the watchdog group.

“It is our view that finalizing this proposed rule would make intimidation and harassment of the administration’s political opponents the official policy of the IRS,” said the letter released today. It was signed by House Speaker John Boehner, Senate Minority Leader Mitch McConnell and the top Republicans on committees with jurisdiction over the IRS.

The proposal, released in November by the Treasury Department, would create a new definition of political activity for groups organized under section 501(c)(4) of the tax code.

The groups, which don’t have to disclose donors, must be organized “exclusively” for social welfare purposes, according to U.S. tax law. IRS rules have defined that as requiring that such groups don’t have politics as their primary purpose.

Social Welfare

Republican-leaning groups, including large organizations such as Crossroads Grassroots Policy Strategies and smaller Tea Party-backed groups, have increasingly used the social welfare status to engage in politics.

Starting in 2010, the IRS selected some Tea Party groups’ applications for 501(c)(4) status for extra scrutiny, and the disclosure of that action in 2013 led to leadership changes at the agency and congressional investigations.

“The eyes of America are on you,” McConnell said on the Senate floor. “They’re counting on you to do the right thing.”

The proposed rule would define political activity broadly, including voter registration drives and voter guides. The proposal has drawn more than 22,000 comments so far, mostly opposing the change.

The proposed rule doesn’t say how much political involvement would be enough to disqualify groups from obtaining and keeping social welfare status, and that’s an issue the IRS would have to resolve before it implemented the change.

The IRS has asked for public comment on whether the same definition should apply to labor unions and business groups. Many Democrats say the IRS should adopt a strict definition that follows the word “exclusively” in the tax code.

When asked yesterday, Koskinen gave no indication that he would stop the rule. Comments are due by Feb. 27 and he said the IRS would hold a public hearing after that.

Officials have said the rule wouldn’t take effect in time for this year’s elections.

To contact the reporters on this story: Derek Wallbank in Washington at dwallbank@bloomberg.net; Richard Rubin in Washington at rrubin12@bloomberg.net

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

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