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Proposed IRS Rules on Political Nonprofits Divides Parties

Camp criticized the Obama administration for a proposed IRS crackdown on "social welfare" groups. (Bill Clark/CQ Roll Call)
Camp criticized the Obama administration for a proposed IRS crackdown on "social welfare" groups. (Bill Clark/CQ Roll Call)

The top Republican and Democrat on the Ways and Means Committee, Chairman Dave Camp, R-Mich., and ranking member Sander M. Levin, D-Mich., don’t see eye to eye on a proposed IRS crackdown on political activity by 501(c)(4) “social welfare” groups.

While Levin called the new guidance a “good first step,” Camp had a simple message for the Obama administration: Don’t do it.

“This smacks of the Administration trying to shutdown potential critics,” Camp wrote in a release Tuesday. Camp was referring to critics of a political targeting scandal where the IRS was said to be giving additional scrutiny to applications from tea party groups for 501(c)(4) status — a reference to the section of the tax code that outlines which groups constitute this sort of tax-exempt status.

“There continues to be an ongoing investigation, with many documents yet to be uncovered, into how the IRS systematically targeted and abused conservative leaning groups,” Camp said. “Before rushing forward with new rules, especially ones that appear to make it harder to engage in public debate, I would hope Treasury would let all the facts come out first — something they could achieve by fully cooperating with Congress in the investigation.”

While Camp stops short of explicitly denouncing the proposed rules, which Roll Call wrote about in detail here, the guidance is likely to be another ongoing difference between Republicans and Democrats on the committee.

Under current law and interpretation, a group can attain tax-exempt status by promoting the “social welfare.” Political groups use a loose interpretation of that concept to do all sorts of political activities, including educating voters, hosting politically inspired discussions and coaching potential candidates for office.

Under the new guidelines, “candidate-related political activity” would not be considered as promoting social welfare.

Levin called the work of 501(c)(4) groups “vital in communities across the country,” and he said it is “important that there be clear guidelines between promoting social welfare and engaging in political activity for organizations seeking this tax exemption.”

“As we plainly saw in the investigations into the failings within the IRS tax-exempt division, the lack of clear guidance on defining and measuring political activities under current law led to mismanagement and delays in the processing of exemption applications from progressive and conservative organizations,” Levin said. “The proposal for a ‘candidate-related political activity’ is a reasonable starting place, but the details will be important, for example in an area as critical as voter registration drives.”

Levin said the proposal was a good first step to engage the public so that the government can remove the “ambiguity” from the current system. While Levin said there was “gross mismanagement of the tax-exempt division,” he said clearer guidelines were important so that mistakes are not repeated. However, Levin said that after “dozens of interviews and the review of hundreds of thousands of pages of documents, there is absolutely no evidence of any political motivation or outside involvement, contrary to what Republicans have alleged from the beginning.”

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