Key GOP senator lashes out at Dems over tax-exempt advocacy groups

A key Republican senator is accusing Democrats of playing politics with the IRS, over a request that the agency implement tighter controls on tax-exempt groups playing a role in politics.

Sen. Orrin Hatch (R-Utah) said in a Friday statement that Democrats were putting the IRS in an uncomfortable situation by reportedly asking the agency to do more to stifle tax deductions for donors to politically inclined tax-exempt groups. 

“Sending the IRS on a politically-motivated witch hunt is simply unacceptable and could have a chilling impact on the constitutionally-protected right to free speech,” said Hatch, the ranking Republican on the tax-writing Finance Committee. “I expect the IRS not to succumb to this type of political posturing.”

The Hatch statement comes a day after The New York Times reported that six Democratic senators were reaching out to the IRS to ask that the agency to keep tax exempt-groups from mostly doing political work. 

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It also comes as so-called super PACs, which rose to prominence after the Supreme Court’s 2010 Citizens United decision, are playing an outsized role in this year’s election – and just after a Washington good government group filed a complaint with the IRS about a conservative advocacy group.

Brian Fallon, a spokesman for Sen. Chuck Schumer (D-N.Y.), confirmed that Democrats would be sending a letter to the IRS, but not until next week.

According to The Times, the Democrats will inform the IRS that they will seek legislation to rein in political activity by tax-exempt groups, if the agency does not put in more controls. 

Schumer also expressed particular concern that businesses may be deducting costs associated with contributions to 501(c)(4) groups that engage in political activity. 501(c)(4) groups, named for their section in the tax code, do not have to disclose their donors, but a majority of their work cannot be political.

“That taxpayers may be subsidizing these negative ads is really hard to believe,” Schumer said.  

But on Friday, Hatch said he found the letter’s timing convenient, given the Democrats’ fund-raising habits. 

President Obama’s re-election campaign, for instance, has given donors its blessing to contribute to a supportive super PAC – saying that, while the president was generally opposed to those sorts of outside groups, the campaign could not allow Republicans to dominate fundraising on that front. 

“I also find the timing somewhat suspect – we never heard a peep from the other side in previous elections when they were reaping the benefits of these types of organizations,” Hatch said. 

Generally speaking, super PACs can accept unlimited contributions and spend unlimited amounts of money, as long as their efforts aren’t coordinated with candidates. 

Super PACs do, under current law, have to disclose their contributions. But campaign finance experts like Trevor Potter of the Campaign Legal Center have noted that there have been efforts to use 501(c)(4) and other tax exempt groups to conceal donors to super PACs.  

For its part, Citizens for Responsibility and Ethics in Washington (CREW) filed a Thursday complaint with the IRS about Americans for Job Security, a tax-exempt group whose work cannot be primarily political.

But CREW, in 50 pages worth of records, says that AJS put close to three-quarters of its 2010 spending into political campaigns, and that the IRS should revoke the group’s tax-exempt status. 

In its complaint, CREW said that then-Reps. Rick Boucher (D-Va.) and Michael Arcuri (D-N.Y.) were among the candidates that AJS, a 501(c)(6) group which bills itself as a “pro-business issue advocacy organization,” had targeted in 2010. CREW had previously filed a complaint against the group in 2004.

William McGinley, a Patton Boggs attorney who represents AJS, said he was confident the government would dismiss what he dubbed “the latest step in CREW’s harassment campaign against free-market, pro-economic growth organizations.”

“The latest frivolous complaint filed by CREW, a liberal soft-money group, is simply wrong on the facts and the law,” McGinley, a former general counsel to the National Republican Senatorial Committee, said in a statement.

As it stands, Republican and conservative leaning “super PACs” have been outpacing their counterparts on the left in the money race. 

But some Republicans have also been targeted by the groups. The Campaign for Primary Accountability, a group going after incumbents from both parties in safe districts, played a role in Rep. Jean Schmidt’s (R-Ohio) primary loss this week.

The group has also put Rep. Spencer Bachus and Jo Bonner, both Alabama Republicans, in their sights in advance of the state’s primary next week. 

Outside groups are also playing a role in Hatch’s race for re-election, with the Utah senator facing a potentially difficult path to a seventh term. 

On the other side of the aisle, House Democrats and Minority Leader Nancy Pelosi (D-Calif.) have made campaign finance reform a priority, in large part due to the influence of super PACs.