IRS Wants To Tighten Its Rule On Social Welfare Groups

The IRS is asking Americans to comment on how it should regulate social welfare groups. Under the tax code, they are known as 501(c)(4) groups. They are the new players in politics — heavily financed but done so anonymously.

RENEE MONTAGNE, HOST:

The Internal Revenue Service wants to tighten rules on social welfare groups and it has opened itself up for public comment, giving Americans a chance to sound off. It seems people have a lot to sound off about. The agency has received thousands of comments about the IRS scrutiny of Tea Party groups seeking tax exempt status and the hundreds of millions of dollars raised from unnamed donors and spent on the 2012 elections. NPR's Peter Overby has more.

PETER OVERBY, BYLINE: What the IRS wants to do is make it harder for social welfare groups to get into campaign politics. More than 10,000 public comments have come in and among those viewable online, the vast majority wants the IRS to give up and go away.

ROBIN LUMB: I don't think that the Internal Revenue Service ought to be in the business of circumscribing our free speech rights.

OVERBY: Robin Lumb is a city councilman in Jacksonville, Florida. He's active in the local Republican Party, but for this...

LUMB: We've taken off the partisan hat. We're non-partisan, non-denominational.

OVERBY: Lumb is a founder of the Jacksonville Alliance of Christian Voters.

LUMB: Not exclusively Christians, but those who share a Christian worldview that embraces a traditional understanding of Christian morality and ethics.

OVERBY: He told the IRS that the social welfare groups, known as 501(c)(4) groups under the tax code, don't need more regulation. It's a popular theme in the online comments. One reason for that, the argument is made in four prepared messages to the IRS posted on an anonymous website called Protect C4 Free Speech.com. These messages were used by more than 45 percent of the online comments.

Protect C4 Free Speech is the work of NumbersUSA, a nonprofit group that calls for more restrictive immigration policies.

ROSEMARY JENKS: You know, it didn't seem like it was in any way useful to have affiliations on there.

OVERBY: Rosemary Jenks is NumbersUSA's director of government relations.

JENKS: There's no nefarious intent behind it. This was an attempt to make it easy for anybody with concerns about these regulations to have their voices be heard.

OVERBY: Jenks says the proposed regulations would stifle debate.

JENKS: You know, one would think that it would be in the government's best interest to have an informed citizenry.

OVERBY: Another group that wants to be left alone is the American Motorcycle Association. It sent off a four-page letter to the IRS signed by the association's lawyer, former Colorado Senator Wayne Allard. He says the association sometimes holds fundraisers for members of Congress.

WAYNE ALLARD: We try and treat Democrats and Republicans in a balanced way.

OVERBY: He says the proposed regulations would lump the association in with more political groups.

ALLARD: They somehow need to differentiate our types of organization from - if it's the Tea Party group they're after.

RICK HASEN: If you were looking at this from 30,000 feet, the rational way to approach this would not be through an IRS regulation.

OVERBY: Rick Hasen, a law professor at the University of California, Irvine, says the issue is too big for one agency to handle. Here's why. The top political 501 (c)(4)s such as Crossroads GPS and Americans For Prosperity on the right, and to a lesser extent Priorities USA on the left, these groups get seven and eight figure contributions, partly because they shield donors from disclosure.

So if the IRS restricts (c)(4)s, the big money is likely to find another vehicle. Hasen says a smarter strategy would be to target the activity of big spending.

HASEN: Then you would make disclosure required for all such large spending, regardless of the form of organization that the group takes.

OVERBY: But that would take an act of Congress. It's true that the Supreme Court embraced disclosure four years ago in the Citizens United decision, but with Republican lawmakers adamantly opposed to disclosure, Congress isn't inclined to follow the court's lead. Peter Overby, NPR News, Washington.

Copyright © 2014 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.