House panel moves bill to ban IRS from tracking donors to tax-exempt groups

House panel moves bill to ban IRS from tracking donors to tax-exempt groups
© Cameron Lancaster

The House Ways and Means Committee approved three bills Thursday it says are aimed at protecting taxpayers and children.

“Simply put, these proposals put the best interests of children and taxpayers first,” Chairman Kevin BradyKevin BradyRyan drops border-tax proposal as GOP unifies around principles CBO survives two House amendments targeting funding White House, GOP close to releasing joint tax-reform principles MORE (R-Texas) said.

The most controversial of the measures, which passed on a party-line vote, would generally ban the Internal Revenue Service from collecting the identities of donors to tax-exempt organizations.

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Under current law, such organizations have to disclose to the IRS the identities of donors who give more than $5,000. The bill would prevent the IRS from requiring this disclosure, with the exception of donations of more than $5,000 from officers, directors and certain employees.

Rep. Peter Roskam (R-Ill.), who introduced the bill, said that while the information on the disclosure form is not supposed to be released to the public, it has been improperly released it in the past.

He added that the current disclosure document is “burdensome” and not needed for tax administration. The IRS has indicated that it was considering eliminating the requirement.

“Tax-exempt groups should not be forced to expend precious resources on unnecessary documentation and tax administration, rather than focusing on their missions,” Roskam said.

But Democrats expressed concerns that the bill would open the door for drug traffickers and foreign governments to illegally contribute money to U.S. elections.

“We just saw what happened with the Panama Papers where a whole bunch of folks were looking for ways to hide their money,” Rep. Xavier BecerraXavier BecerraCalifornia Dem sworn in as House member after delay Party leaders spar over swearing in of Becerra replacement State politics hold up California's new congressman MORE (D-Calif.) said. “No need to go offshore anymore. You could just put it in a not-for-profit organization in any quantity because your name would never be disclosed by that organization if this bill were to take effect.”

House Ways and Means Committee ranking member Sandy Levin (D-Mich.), said that the donor disclosure requirement is the only real protection against tax-exempt 501(c)(4) organizations illegally using foreign money in elections.

He said “it’s no secret” why Republicans are working to keep donor information hidden, because groups affiliated with Karl Rove and Charles and David Koch were top spenders in the 2012 election cycle.

“What this bill does, to put it simply, is to solidify the secrecy around the role of big money in campaigns,” Levin said.

Koch Companies Public Sector called for support of the bill, saying it “provides a much needed fix to the system and protects the First Amendment.”

“Prohibiting the IRS from collecting the identity of voters who contribute to non-profits will curtail the agency from any new attempts to target non-profit organizations,” the company said.

But a group of outside organizations that includes the Brennan Center for Legal Justice, Public Citizen and the Sunlight Foundation urged committee members to vote against the bill.

“If donor disclosure to the IRS is eliminated, no one will know whether a 501(c)(4) group has received foreign funds and is illegally spending them in our elections, other than the foreign donors and 501(c)(4) groups involved,” the groups said in a letter. “There will be no way to hold them accountable for illegally spending foreign money in federal elections.”

The Ways and Means Committee also passed two bipartisan bills by voice vote.

One, authored by Rep. Erik Paulsen (R-Minn.), would authorize the IRS to share taxpayer information with state and local police in order to help locate missing and exploited children.

The other bill includes a number of provisions aimed at preventing identity theft. These include requiring the Treasury Department to set up procedures to implement a centralized point of contact for victims of ID theft, requiring the IRS notify victims as soon as practicable and directing the IRS to study the feasibility of allowing victims to elect to prevent the agency from accepting returns filed electronically in their name.

The identity theft bill was introduced by Ways and Means members Jim Renacci (R-Ohio) and John Lewis (D-Ga.). Renacci, who was a victim of tax-related identity theft last year, said the bill is an important “first step” to fighting ID theft.

The committee also approved an amendment offered by Lewis to remove a provision that creates a new criminal penalty for using a stolen identity for tax purposes. The penalty would be up to $250,000 and five years in prison.

Lewis did not provide a reason for the amendment, but outside groups have previously expressed concerns that provisions criminalizing the fraudulent use of Social Security numbers for tax purposes would hurt undocumented immigrants.

Brady said the House Judiciary Committee has shared jurisdiction on the provision and has sole jurisdiction on a related provision.

Two amendments introduced by Rep. Bill Pascrell (D-N.J.) also were approved. One would create a local law enforcement liaison at the IRS, and the other would require the Treasury Inspector General for Tax Administration to issue a report on potential solutions to combatting phone scams in which people pretend to be IRS employees.