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IRS Scandal Reignites Campaign Finance Debate

The controversy embroiling the IRS kicked up another storm of rhetoric Monday over enforcement of campaign finance laws.

Senate Minority Leader Mitch McConnell connected allegations that the IRS improperly targeted conservative groups for extra scrutiny to a Democratic-led effort to expand campaign finance disclosure requirements known as the DISCLOSE Act.

McConnell told the National Review that the bill to require corporations, unions and super PACS to report large expenditures “should go nowhere.”

“The whole effort by the administration to silence their enemies is going on across the board,” McConnell said Monday of activities he said were being conducted by the Federal Election Commission, the Federal Communications Commission, the Securities and Exchange Commission and the Health and Human Services Department. McConnell has long led efforts against tightening campaign finance regulation — even when it proves unpopular — citing an expansive view of the First Amendment on political speech.

But some Democrats took the opposite lesson from the revelations about the IRS.

“There needs to be more clarity in the law regarding the activities of tax exempt organizations along with greater disclosure and transparency. We must overturn Citizens United, which has exacerbated the challenges posed by some of these so-called ‘social welfare’ organizations,” House Minority Leader Nancy Pelosi, D-Calif., said in a statement.

One of many outcomes of the 2010 Citizens United v. FEC ruling is that partisan groups have, in huge numbers, taken advantage of new opportunities to register as tax-exempt “social welfare” organizations to indirectly raise money for their political candidates and causes.

The ruling has been wildly divisive, with Democrats calling it an affront to a fair and regulated political system and Republicans hailing it a landmark in facilitating free speech. Though liberal-leaning groups stepped up their game in the 2012 election cycle, the first groups to take advantage of this new playing field after the decision came down were those with conservative slants.

Pelosi’s suggestion that the court ruling could have planted one of the seeds of IRS misconduct — that agency officials felt a need to scrutinize conservative organizations given the overwhelming number of applications being filed in a post-Citizens United landscape — may shape future Democratic talking points on the IRS allegations, which continue to develop.

Regardless of whether either party can successfully shift the debate to campaign finance issues, the IRS is in for a brutal few months on Capitol Hill.

A draft report by the IRS’ inspector general obtained by several news organizations Monday says senior IRS officials knew that agents had targeted conservative groups with “tea party” and “patriot” in their names as early as 2011. That contradicts testimony that former IRS Commissioner Douglas Shulman gave before the House Ways and Means Committee in 2012. Shulman denied that any such targeting was being done, but Rep. Tom Graves, R-Ga., put out a release Monday demanding to know if Shulman “lied” to him under questioning last year.

House Ways and Means Chairman Dave Camp, R-Mich., announced that his committee will hold a hearing Friday with acting IRS Commissioner Steven T. Miller and J. Russell George, the Treasury inspector general for tax administration, to delve into the issue.

“The Committee on Ways and Means will get to the bottom of this practice and ensure it never takes place again,” Camp said in a written statement. “It is essential that there be a thorough and bipartisan investigation and effective remedial action,” added Ways and Means ranking member Sander M. Levin, D-Mich.

Republicans were the most vocal when the news broke last week, but by Monday afternoon, plenty of Democrats had called for probes, including Senate Majority Leader Harry Reid and two senators with committee gavels.

Reid called the allegations “very troubling” but noted that he had spoken with Senate Finance Chairman Max Baucus, D-Mont., who announced Monday that his committee would also investigate the matter after the IG report is released.

“I have full confidence in Sen. Baucus and the Finance Committee to get to the bottom of this matter and recommend appropriate action,” the Nevada Democrat said.

In his own statement Monday, Baucus said, “The IRS should be prepared for a full investigation into this matter by the Senate Finance Committee. The IRS will now be the ones put under additional scrutiny.”

The investigatory arm of the Senate Homeland Security and Governmental Affairs Committee was already investigating improper use of nonprofit designations by politically involved groups when the news broke May 10 that an IRS official conceded the agency had singled out conservative groups for extra scrutiny. Longtime Sens. Carl Levin, D-Mich., and John McCain, R-Ariz., are the chairman and ranking member of that subpanel.

“The Permanent Subcommittee on Investigations has been for several months examining on a bipartisan basis whether the IRS has adequately enforced rules regarding the extent to which tax exempt nonprofit 501(c)4 groups engage in partisan politics. We had tentatively planned a hearing on that issue for June,” Levin and McCain said in a joint statement. “After Friday’s announcement that the IRS, to the extent it has been enforcing the law, may have done so in ways that singled out some groups for special scrutiny, we have determined that the subcommittee should investigate that additional issue as well. As a result, we have decided to delay our hearing in order to examine this issue carefully.”

President Barack Obama also registered his outrage at a joint news conference with British Prime Minister David Cameron. “If, in fact, IRS personnel engaged in the kind of practices that have been reported on, and were intentionally targeting conservative groups, then that’s outrageous. And there’s no place for it. And they have to be held fully accountable,” Obama said.

Steven T. Dennis and Humberto Sanchez contributed to this report.

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