Six months after the Internal Revenue Service's inspector general revealed that the tax-collection agency had been targeting conservative organizations for added scrutiny and delaying their applications for tax-exempt status, the IRS has proposed new rules for handling political activity by nonprofits. The proposed rules would plunge the agency deeper into political regulation.

The rules would upset more than 50 years of settled law and practice by limiting the ability of certain tax-exempt nonprofits, organized under Section...