Vulnerable Dems want IRS to step up

Senate Democrats facing tough elections this year want the Internal Revenue Service to play a more aggressive role in regulating outside groups expected to spend millions of dollars on their races.

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In the wake of the IRS targeting scandal, the Democrats are publicly prodding the agency instead of lobbying them directly. They are also careful to say the IRS should treat conservative and liberal groups equally, but they’re concerned about an impending tidal wave of attack ads funded by GOP-allied organizations. Much of the funding for those groups is secret, in contrast to the donations lawmakers collect, which must be reported publicly.

One of the most powerful groups is Americans for Prosperity, funded by the billionaire industrialists Charles and David Koch. It has already spent close to $30 million on ads attacking Democrats this election cycle.

“If they’re claiming the tax relief, the tax benefit to be a nonprofit for social relief or social justice, then that’s what they should be doing,” said Sen. Mark Begich (D), who faces a competitive race in Alaska. “If it’s to give them cover so they can do political activity, that’s abusing the tax code. And either side.”

Asked if the IRS should play a more active role policing political advocacy by groups that claim to be focused on social welfare, Sen. Jeanne Shaheen (D-N.H.) responded, “Absolutely.”

“Both on the left and the right,” she said. “As taxpayers, we should not be providing a write-off to groups to do political activity, and that’s exactly what we’re doing.”

She called the glut of political spending by self-described social welfare groups that qualify under section 501(c)(4) of the tax code “outrageous.”

Shaheen is in a good position now but could find herself embroiled in a tight campaign if former Sen. Scott Brown (R-Mass.) challenges her.

Sen. Mark Pryor (Ark.), the most vulnerable Democratic incumbent, said the IRS has jurisdiction over 501(c)(4) groups, as well as charities, which fall under section 501(c)(3) of the tax code and sometimes engage in quasi-political activity.

“That whole 501(c)(3), 501(c)(4) [issue], those are IRS numbers. It is inherently an internal revenue matter,” he said. “There are two things you don’t want in political money, in the fundraising world and expenditure world. You don’t want secret money, and you don’t want unlimited money, and that’s what we have now.” 

This month, Americans for Prosperity launched a three-week advertising campaign targeting Pryor. The group has also targeted Shaheen and Sen. Kay Hagan (N.C.), another vulnerable Democratic incumbent.

Last month, Americans for Prosperity-New Hampshire launched a television ad criticizing Shaheen for her 2009 and 2010 votes for the Affordable Care Act. It highlighted the plight of New Hampshire residents who have to travel hours to find healthcare in hospitals covered by the state’s insurance exchange.

Last week, the group announced a $1.4 million TV campaign against Hagan.

On Wednesday, it unveiled an ad hitting Sen. Mary Landrieu (D-La.), another endangered incumbent, for voting for ObamaCare.

A spokesman for Americans for Prosperity estimated the three-week advertising campaign would cost $750,000.

Robert Maguire, the political nonprofit investigator at the Center for Responsive Politics, which tracks spending by outside groups, said Americans for Prosperity has spent far more money than any other 501(c)(4) group this election cycle.

In the last election cycle, Crossroads GPS, a group founded by GOP super-strategist Karl Rove, spent the most political money of any social-welfare group, according to the Center for Responsive Politics, which estimated the total at $71 million. The group has remained relatively quiet this cycle.

The law states that 501(c)(4) groups must be operated exclusively for the promotion of social welfare, but the IRS has traditionally adopted a more lenient standard, said Paul S. Ryan, senior counsel at the Campaign Legal Center.

The IRS says social-welfare activity must be the primary activity of such groups. It gives them broad leeway by not classifying voter registration drives and even ads that criticize candidates as political activity.

Under new proposed regulations by the Treasury Department, the IRS would define voter registration, distributing voter guides and running ads that mention candidates as political activities. 

It also proposed setting a bright-line limit for what percentage of groups’ activity would be allowed to fall into the category of candidate-related political activity.

If enacted, the regulations would, in effect, limit how much outside groups, such as Americans for Prosperity or League of Conservation Voters, could spend as a percentage of their budgets on the Senate races.

Sen. Charles Schumer (N.Y.), the Senate Democrats’ chief political strategist, called for the IRS to curb political spending by outside groups during a major speech on how to blunt the impact of conservative donors such as the Koch brothers.

“The Tea Party elites gained extraordinary influence by being able to funnel millions of dollars into campaigns with ads that distort the truth and attack government,” he said in remarks at the Center for American Progress Action Fund.

“There are many things that can be done administratively by the IRS and other government agencies — we must redouble those efforts immediately,” he added. 

Democrats, however, know they must tread carefully while pushing the IRS to act. Revelations that the tax agency had targeted conservative groups swelled into a major controversy last year. Congressional Republicans have grilled the Obama administration on why there have been no indictments nine months after the IRS news broke.

The Senate Finance Committee is in the middle of investigating whether IRS investigators acted with improper political motivations. The probe could be delayed, however, by the departure of the recent chairman, former Sen. Max Baucus (D-Mont.), who was recently confirmed as the U.S. ambassador to China.

Sen. Ron Wyden (D-Ore.), the incoming chairman of the Finance panel, has not yet fully merged his staff with the committee. A Wyden aide could not provide an update on the status of the investigation.

Republican lawmakers have pushed back strongly against the proposed IRS regulations.

Rep. Dave Camp (R-Mich.), the chairman of the Ways and Means Committee, has introduced legislation that would block the agency from implementing new rules until after the 2014 midterm election.

“The administration’s proposed rules openly target groups that are exercising their First Amendment rights. We cannot allow these draft regulations to go into effect,” he said in a statement.

"These regulations will put conservative groups out of business," he later told Newsmax.