WASHINGTON — The Obama administration's proposal to clamp down on political spending by tax-exempt groups wouldn't just target conservatives. Liberal groups say the rules, as written, would also curtail efforts to register voters, distribute candidate guides and get voters to the polls on Election Day.
"This would affect vast numbers of organizations that span the left, middle and right," said Nan Aron,president of the Alliance for Justice, which represents more than 100 liberal organizations and advises others about navigating tax and election rules.
The rules proposed by the Treasury Department last month attempt to better define what constitutes political activity by tax-exempt social-welfare groups. It comes after the Internal Revenue Service admitted it targeted Tea Party groups for extra scrutiny based solely on their names. The new rules would define voter registration and get-out-the-vote drives as "candidate-related political activity," even if they were done in a non-partisan way.
"That anyone could describe voter registration as a 'candidate-related political activity' is crazy," said Kim Keenan, the general counsel of the NAACP. "It's like saying you don't believe in American democracy."
The NAACP's local chapters registered nearly 700,000 voters ahead of the 2012 elections, Keenan said.
Social-welfare organizations range from neighborhood civic leagues to influential groups with household names, such as the AARP and the National Rifle Association. Groups operating under this section of the tax code are allowed to keep their donors' identities secret.
Their role in politics has exploded in recent years. Social-welfare groups reported spending more than $256 million to influence federal elections in 2012 – led by Crossroads GPS, an organization founded with help from Republican strategist Karl Rove, according to a tally by the non-partisan Center for Responsive Politics. That's more than three times what these groups spent in the 2008 elections.
Campaign-finance watchdogs have clamored for the IRS to crack down on these organizations, arguing they have abused their tax-exempt status to funnel secret donations into politics.
"They're largely corporate fronts," said Josh Orton of Progressives United, a Wisconsin-based group founded by former Democratic senator Russ Feingold. "My metaphor is — did you ever watch The Sopranos? Tony didn't use the butcher shop for the sausages. He had it for other nefarious purposes."
Lisa Gilbert of Public Citizen said the proposal "in concept … is the right approach for the IRS and Treasury to take."
"That said, the rules themselves have a lot of problems we need to address. We wouldn't be happy with a final rule that looks like this," she said. "They capture a lot of things that I don't think they mean to, like voter registration and voter guides that talk about candidates in an objective way."
Public Citizen, the consumer advocacy group founded by Ralph Nader, is part of the Bright Lines Project, a coalition of money-in-politics watchdog groups writing their own proposed rules for political activity by non-profits. Those rules would carve out "safe harbor" provisions to allow groups to put out voter guides or to speak out in self-defense. Gilbert said the Treasury's rules are "a little too hyper-bright."
Treasury spokeswoman Victoria Esser said agency officials "welcome comments about whether — and if so, how — the more definitive rules we have proposed are under- or over-inclusive." She notes that the rule-making doesn't ban all political activity by social-welfare groups.
Organizations, however, could jeopardize their tax-exempt status if they participate too heavily in elections. That proportion isn't specified in existing rules but has been widely assumed to be less than 50%. The proposed rules do not outline how much political activity would too much in the future, but ask the public to weigh in.
The administration is accepting public comments on the proposal until Feb. 27. Public hearings, additional reviews and an implementation period will follow. As a result, final rules are unlikely to be in place before next year's elections
Republicans aren't happy with the proposed rules, either. In a floor speech last week, Senate Minority Leader Mitch McConnell, R-Ky., slammed the IRS proposal as the "latest in a long and troubling pattern of Chicago-style tactics under this administration."
The draft rules, McConnell said, target "the speech of those who criticize the administration while leaving its supporters untouched."
Not so, others say.
"The assertion that this is a rule-making targeting the Tea Party is ridiculous," said Paul Ryan, a lawyer with the Campaign Legal Center, which has called for more aggressive IRS enforcement. "This will affect groups across the political spectrum."
The proposed rules aim to replace a vague and subjective "facts-and-circumstances" test with more objective criteria for deciding what constitutes political activity. For example, any mention of a candidate within 60 days of a general election would be considered political — even if it appears in a voter guide issued by a non-partisan group. Events at which candidates appear, including debates, within 60 days of the election, also would fall into the category of political activity.
The draft rules also expand the definition of political campaigns to activity affecting people who don't appear on any ballot, such as executive branch appointees, judicial nominees and others appointed to federal, state or local public offices.
Experts warn that clamping down on one category of tax-exempt organizations could just drive more political activity into other categories, such as trade associations, which can accept anonymous donations.
If that happens, "these regulations will do nothing to fix the problem … but may in fact do real harm to the ability of everyday Americans to have an impact in the civic life of the country," Aron said.
Marcus Owens, a Washington lawyer who spent 10 years as director of the IRS division that oversees tax-exempt organizations, said the proposal may add more confusion than clarity.
"Internal Revenue agents, who supposedly were having difficulty applying tax-law standards, now have a brand new set of standards to learn," Owens said. "What this is doing is making the rules incredibly complex because they are going to be an amalgam of election law and an amalgam of tax law."
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