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IRS Ruling on Political Donation Reporting Sets Off Campaign Finance Fight

McConnell cheers, but Democrats blast decision, arguing it reduces transparency

Senate Majority Leader Mitch McConnell has set up a long series of potential nomination votes. (Bill Clark/CQ Roll Call file photo)
Senate Majority Leader Mitch McConnell has set up a long series of potential nomination votes. (Bill Clark/CQ Roll Call file photo)

Monday’s announcement by the Treasury Department that it will no longer collect information about donors to some political nonprofits was met with applause from Senate Majority Leader Mitch McConnell, perhaps the leading advocate for unrestricted campaign donations. At the same time, it ignited a campaign finance fight with the midterm elections less than four months away.

“It’s bad enough to wield government power to chill political speech and invite harassment of citizens — based on what an angry mob might assume their opinions are, based on their private financial records,” the Kentucky Republican said on the Senate floor Monday. “It’s even more egregious to pursue that nakedly political goal while calling it ‘good government.’ In this country, good government means protecting citizens’ First Amendment rights to participate in the competition of ideas — not trying to shut down that competition.”

For McConnell, campaign spending is key to his expansive interpretation of the First Amendment. Senate Democrats, led by Finance ranking member Ron Wyden of Oregon, criticized the announcement.

Wyden said in a statement that he would now oppose President Donald Trump’s choice to head the IRS, Charles Rettig, unless there’s a commitment to rescind the new policy.

“Trump’s Treasury Department made it easier for anonymous foreign donors to funnel dark money into nonprofits the same day a Russian national linked to the NRA was arrested for attempting to influence our elections,” Wyden said. “It’s the latest attempt by Secretary [Steven] Mnuchin and Donald Trump to eliminate transparency and keep officials and lawmakers from following the money.”

The Finance panel is scheduled to mark up the Rettig nomination on Thursday morning, the committee announced Monday.

‘Swampiest’ decision

Montana Sen. Jon Tester was among the first Democrats to blast the new IRS policy.

“This is the swampiest, darkest, dirtiest decision,” he said in a statement. “We need more transparency in our campaigns, not less.”

Montana is among a group of states whose campaign finance laws have required disclosure and transparency in how political money is spent.

Liberal groups and political money watchdogs said they were concerned about the IRS changes and even more concerned about potential moves by GOP lawmakers to go further.

Fred Wertheimer, the president of Democracy 21, predicted that the policy change could actually enable money laundering for the purposes of political spending in the United States.

“[T]he Treasury Department opened a massive loophole that will, as a practical matter, allow Russia, Russian oligarchs and other foreign interests to launder unlimited amounts of undisclosed, illegal contributions into federal elections,” he said in a statement. “By eliminating donor disclosure to the IRS, Secretary Mnuchin and the Treasury Department just eliminated any practical way for the government to protect against non-profit advocacy groups being used by foreign governments, foreign companies and foreign individuals to launder tens of millions of dollars in illegal, undisclosed foreign money into our elections.”

Proponents push back

Under the new policy, the IRS will only require tax-exempt groups that generally receive tax-deductible contributions to report on their donors. The Monday night announcement said the action will ease the reporting burden on groups such as volunteer fire departments, but the announcement also noted it would lift the requirement for reporting from groups engaged in issue advocacy.

That’s the key, since many “dark money” political operations are covered under parts of the tax code that do not have statutory reporting requirements on their donors.

“Americans shouldn’t be required to send the IRS information that it doesn’t need to effectively enforce our tax laws, and the IRS simply does not need tax returns with donor names and addresses to do its job in this area,” Mnuchin said in a statement Monday. “It is important to emphasize that this change will in no way limit transparency. The same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected.”

Republicans have been particularly critical of the IRS practice of data collection, warning of the targeting of politically engaged conservative groups.

In his floor speech Tuesday, McConnell said that at times the IRS has not protected confidential donor information from an “angry mob.”

“It fails to protect this private information from leaking to the army of angry left-wing activists who stand eager to harass and bully anyone who’s contributing to national conversations with political views that they disagree with,” he said.

Even as the new guidance from the IRS will allow some political groups to more easily shield their donors, some of the nation’s biggest lobbying groups, including the U.S. Chamber of Commerce, are calling on lawmakers to go even further.

“We now encourage Congress to take action to remove onerous donor disclosure requirements for tax-exempt organizations that were not covered by this important announcement,” chamber spokeswoman Blair Holmes said in a statement.

Holmes said the chamber applauded Treasury’s move, noting that it “will help ensure that sensitive donor information will not fall into the hands of those who wish to suppress the First Amendment right to free speech.”

Some House Republicans, led by Illinois Rep. Peter Roskam, have introduced legislation that would largely prohibit the IRS from collecting donor information from any nonprofit organization. The Institute for Free Speech, a group that opposes campaign finance restrictions, supports that measure.

“We applaud the Treasury Department and Secretary Mnuchin for its common-sense move to protect the privacy of Americans who give to nonprofits,” the institute’s president, David Keating, said in a statement. “Repealing that requirement will provide even greater protection to Americans’ privacy and freedom of association.”

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