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December 3, 2013
Editorial: Don't count on IRS for campaign disclosure any time soon

Thumbnail image for Ann_Ravel_AP_2011.jpg

(Dec. 3 — The Editorial Board)

Voters almost certainly will endure another election in 2014 without meaningful regulation of nonprofit corporations that claim to be social welfare organizations, but engage heavily in campaigns while benefiting from their tax-exempt status.

President Barack Obama's administration, through the Internal Revenue Service, last week issued the beginnings of what might become regulations that could curtail political activity by social welfare organizations.

Given the complexity of the undertaking, and high level of interest on the part of lawyers, political consultants and politicians, there is virtually no way new rules governing these nonprofit corporations will be in place before the 2016 election.

The IRS proposal leaves basic issues to be determined. Social welfare organizations risk losing their tax-exempt status if they spend a majority of their time engaged in political activity. But the proposal fails to offer a suggestion for the amount of time they ought to be allowed to engage in campaigns. Is it 49.9 percent or is it 20 percent? That will be decided later.

Politically active nonprofit corporations spent at least $336 million in 2012, according to the nonpartisan Center for Responsive Politics. By law, the identities of individual and corporate donors don't become public, which is why nonprofits have become a preferred method for wealthy donors to influence the outcome of elections.

The IRS and Treasury Department noted that their goal was to provide greater clarity for political actors and the public, but also noted that the proposed regulations "may be both more restrictive and more permissive than the current approach." As The Washington Post noted, "That seemingly contradictory statement reflects the muddy zone now occupied by 'social welfare' organizations set up under section 501(c)(4) of the tax code."

Exactly what is and is not political activity will be subject to the rule-making process. Oddly, the IRS proposal suggests voter registration should be considered campaign-related activity. In our view, policymakers should encourage voter registration. So long as social welfare organizations register citizens of all political persuasions, that activity ought to be considered nonpartisan.

Congress ought to intervene by requiring greater disclosure by politically active nonprofits, and by directing the Federal Election Commission, which regulates federal campaigns, to take a greater role in policing politically active nonprofits.

House Republicans and Senate Democrats don't agree on much of anything. That leaves it to the IRS, an agency that must protect taxpayer confidentiality, and is ill-suited to regulate campaigns in a democracy that values openness. The better alternative would be for the Federal Election Commission to regulate all campaigns, including those by social welfare organizations.

PHOTO: Ann Ravel, the former chairwoman of the Fair Political Practices Commission, recently joined the Federal Election Commission.