IRS to modify rules for tax-exempt groups

 

The IRS is taking a second crack at writing rules governing the tax-exempt groups at the center of the agency’s targeting controversy.

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In a statement, the tax agency said that it would look to revise the regulations it released last November — which were broadly panned — before holding a public hearing on the rules.

Conservative organizations and GOP lawmakers were the quickest to slam the proposed rules for 501(c)(4) groups. But even some liberal groups said they thought the rules went too far, and the proposed regulations got a record of roughly 150,000 comments, most of them negative.

“We intend to review those comments carefully, take into account public feedback, and consider any necessary changes,” the IRS said in a statement. “It is likely that we will make some changes to the proposed regulation in light of the comments we have received.”

The IRS gave no timetable for when those changes would be released, but congressional aides said they didn’t expect them this year.

The agency had been expected to hold a public hearing on the already released rules, as soon as this summer. Now, the agency will hold off on a hearing until the new proposal is released.

Before Thursday’s announcement, John Koskinen, the IRS commissioner, had already stressed that the rules were unlikely to be in place before November’s elections.

Koskinen had previously said in interviews and congressional testimony that he expected the proposed rule to be revised, and Thursday’s IRS statement suggests the rules won’t undergo a full-scale rewrite.

“Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation,” the IRS said in its statement.

“Treasury and the IRS remain committed to providing updated standards for tax-exemption that are fair, clear, and easier to administer.”

The decision comes more than a year after former IRS official Lois Lerner acknowledged and apologized for the agency’s improper scrutiny of Tea Party groups.

The Obama administration released the proposed regulations as a way to clear up any confusion about rules guiding 501(c)(4) groups.

Organizations that have played a large role in political campaigns, including the prominent GOP group Crossroads GPS and the President Obama-linked Organizing for Action, have sought that status.

Currently, the law says that those groups should exclusively concentrate on social welfare goals. But the IRS regulations say social welfare should be those groups’ primary purpose, leading most to assume that a majority of their work can’t be political.

Under the rules, 501(c)(4) groups couldn’t count candidate-related activity as social welfare work. That would include any advertisements that mention candidates within 30 days of a primary election and 60 days of a general election.

Republicans have said that the proposed rules would essentially codify the targeting of conservative groups, even though the regulations would apply to groups across the political spectrum.

House Ways and Means Chairman Dave Camp echoed those criticisms on Thursday, calling the rule “wrong from the start.”

“The American people spoke out loud and clear against it, and hopefully the IRS and the Obama Administration will think twice before ever trying to go down this path again,” Camp said in a statement. “If they do, we will continue to defend Americans’ First Amendment rights.”

Even some liberal groups like the American Civil Liberties Union feared the rules would count nonpartisan get-out-the-vote and voter registration efforts as candidate activity.

But Sen. Chuck Schumer (N.Y.), the No. 3 Democrat in the Senate, called the delay “deeply disappointing and a real setback for democracy and faith in government.”

Campaign finance groups had also urged the IRS to press ahead with the rules, saying that waiting would only keep vague regulations on the book and allow dark money to keep flowing in elections.

“The only hope we have is when the IRS goes back, they don’t succumb to any form of political pressure and enact a very tough rule that will equally curtail liberal and conservative groups,” Schumer said in a statement.

Congressional investigations into the IRS’s scrutiny of Tea Party groups continue more than a year later, with the focus remaining on Lerner, who led an agency division that oversees tax-exempt groups.

The House voted recently to hold Lerner in contempt of Congress, and the Ways and Means Committee has urged the Justice Department to examine more closely whether she broke the law.

Democrats have accused Republicans of overreaching in their investigation, saying there’s no proof that anybody outside the IRS was involved.  

Updated at 6:42 p.m.