Republicans grill IRS nominee on crackdown of tax-exempt groups

Top Senate Republicans blasted new proposed IRS regulations for tax-exempt groups on Wednesday, underscoring the challenge facing President Obama’s choice to take over the troubled agency.

Senate Finance Committee members from both sides of the aisle told John Koskinen, the former Freddie Mac executive tapped to be IRS commissioner, that they plan on supporting his nomination and expect him to be confirmed.

But more than six months after the IRS acknowledged that it improperly targeted conservative groups, GOP senators expressed deep skepticism about the agency’s proposal to police how much political activity tax-exempt groups can conduct.

“I hope we can get the IRS out of politics. Why are we trying to regulate free speech?” Sen. Pat Roberts (R-Kan.) told Koskinen. “The IRS has become a four-letter word with too many people, and that’s a tremendous burden you’ll have to face.”

Koskinen, facing his second day of confirmation hearings, repeatedly said he had no role in drafting the regulations.

The proposed rules from the Treasury Department and the IRS would limit how much campaign activity so-called “dark money” groups, organized as social welfare organizations under the tax code, can conduct. Those groups have poured tens of millions of dollars into election activities since 2010.

Republicans made clear to Koskinen that he would have to deal with the fallout from those rules. They questioned whether the IRS should have any role in regulating political activity, and whether the new rules are focused too heavily on groups that are more likely to be conservative.

GOP senators suggested the new rules could make it even more difficult for Koskinen to help rebuild trust in the agency after the targeting controversy — something Koskinen, and lawmakers in both parties, have said should be a top priority.

Sen. John Thune (R-S.D.) said that the IRS should try to separate its tax administration role from any political judgments it has to make.

“It completely undermines the confidence and the trust the American people have in an institution that is so important and so powerful in our country and our culture,” said Thune, a member of Senate GOP leadership.

Current regulations say that a group must be primarily engaged in social welfare work to be eligible to be a 501(c)(4) group, even though the law says those groups should exclusively work on social welfare issues.

Campaign finance reformers say the difficulty of enforcing the hazy rules contributed to the targeting controversy.

The new proposed IRS rules aim to set clear guidelines for the tax-exempt groups by stating that any activity for a candidate cannot count as part of a group’s social welfare mission. The agency is asking for input about how much political work the groups should be allowed to conduct.

“The goal of the regulations, and ultimately the final regulations, will be to get the IRS out of politics as much as possible,” said Koskinen, adding that the previous regulations gave the IRS too much leeway to decide what was political activity.

“I think everybody would like to make sure that the IRS is involved in political decisions to the minimum amount necessary.”

Sen. Orrin Hatch (Utah), the top Republican on the Finance panel, said he wasn’t totally satisfied with Koskinen’s answers on the 501(c)(4) issues.

But Hatch, who plans to support Koskinen’s nomination, said the Obama administration had hamstrung the nominee by releasing the regulations before he was confirmed.

“He shouldn’t be bound by that kind of crap,” Hatch told The Hill after the hearing. “I mean, it’s clear that there’s some partisanship over there. And we’ve got to clean that up and get rid of it.”

Senators said they looked forward to working with Koskinen on how to regulate tax-exempt organizations and a variety of other issues, including the IRS’s role in implementing the Affordable Care Act.

Koskinen has vowed to help the committee with its own investigation into the targeting controversy, and made clear he didn’t agree with White House comments suggesting it was a “phony” scandal.

Democrats have stressed that there’s no evidence yet that anyone outside the IRS was involved in the controversy, or that there was any political motivation behind the targeting.

But Koskinen also said that he wasn’t sure that more firings were necessary at the agency, stressing sometimes mistakes “are simply mistakes.” And the nominee, who has donated to Democratic candidates in the past, said he would work to ensure that taxpayers viewed the IRS as nonpartisan.

The public, Koskinen said, needs to be confident that “the commissioner, whatever his political views are, is not going to apply them to the IRS.”

Koskinen’s confirmation by the full Senate looks like more of a question of when than if, with lawmakers from both parties largely complimenting the nominee’s credentials.  

Senate Finance Committee Chairman Max Baucus (D-Mont.) plans to hold a committee vote on Friday, with hopes for a confirmation vote in the full Senate before the holiday recess.

But Republicans, still angry over the Democrats’ use of the “nuclear option” on nominees in the upper chamber, have slowed down the consideration of some nominees in recent days.

Danny Werfel, currently the interim chief at the IRS, has told the Finance Committee that he will leave the agency by the end of the year.  

— This story was updated at 4:01 p.m.