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The First Amendment and a phony foreign threat

Those opposed to free speech are once again threatening to use the Internal Revenue Code and the IRS to chill First Amendment freedoms. This time they raise the imaginary specter of election involvement by “foreigners.” The battleground is a little-known, burdensome and unnecessary IRS form, Schedule B of Form 990, filed by nonprofits.

No law requires it, but the IRS makes all tax-exempt organizations provide the names and addresses of their major contributors on Schedule B. It is illegal for the IRS to disclose this information, for good reason – donors to politically unpopular organizations rightly worry that if their identities become public they could be subject to threats or harassment in today’s charged ideological climate. And the recipient non-profits reasonably fear that even the possibility of disclosure would reduce donations, lessening their ability to participate in the marketplace of ideas.

{mosads}It is widely recognized that disclosure of financial support can lead to intimidation of donors, and an impairment of free speech and association. In NAACP v. Alabama (1958), a unanimous Supreme Court declared that “compelled disclosure of affiliation” may constitute an “effective restraint on affiliation…particularly where a group espouses dissident beliefs.” The Court has also recognized, in McIntyre v. Ohio Elections Commission (1995), that this type of “anonymity” has been “a shield from the tyranny of the majority” since the beginning of the Republic.

Unfortunately, the IRS has failed to keep Schedule Bs secure. Some forms have been accessed and donor information publicly released. Intentional or not, those leaks are of a piece with the IRS’s shameful and highly publicized effort to discriminate against conservative non-profits. Opportunities for partisanship are particularly dangerous when they creep into the tax collector’s offices.

The dangers of donor disclosure are not limited to the IRS. In April, a federal court ruled that the Attorney General of California could not demand that a public interest group hand over its Schedule B to the State, after finding that more than 1,700 such forms already had been improperly disclosed and every form was put online without password protection.

A list of donors to tax-exempt groups is irrelevant to the IRS’s function. In light of these abuses, the House Ways and Means Committee recently voted to protect donors by abolishing Schedule B. So far the vote has been along party lines, with all Democrats seeking to preserve Schedule B, but that could change, and should.

Those favoring retention of Schedule B invoke a familiar bogeyman – “foreign money.” Without Schedule B, they assert, foreign donors could funnel cash to politically active non-profit organizations to influence American elections.

In fact, it has always been legal for foreign citizens to contribute to non-profits, and there is simply no evidence that foreigners are using tax-exempt organizations to influence our politics. Foreign contributions to election campaigns are already unlawful. If the government has credible evidence of foreign entities evading campaign finance law by donating to tax-exempt organizations, it has powerful investigative tools. And under the Bank Secrecy Act, federal regulations already require that “Every bank shall file with the Treasury Department … a report of any suspicious transaction relevant to a possible violation of law or regulation.”

Public corruption involving foreign money can be a serious concern. The Department of Justice is investigating foreign contributions to Virginia Governor Terry McAuliffe now. But Schedule B, however, has had nothing to do with rooting out this or other actual cases of corruption—and it is not designed for that purpose.

The IRS does not need Schedule B to administer the tax code. Indeed, those opposed to the bill are not really worried about foreign money infecting American politics – a Mexican billionaire is the largest shareholder of the New York Times, which reliably endorses Democrats. The real goal of demanding donor information is to chill speech using carefully timed leaks to embarrass and often harass donors. The mere threat of such leaks can make donors reluctant to take a positions on controversial issues such as climate change, for example, out of fear that they will be shamed, or subject to official or unofficial harassment, for holding unpopular views.

Let’s not waste more time on Schedule B. There are better means to prevent foreign contributions from illicitly supporting American politicians. First Amendment principles extend to all Americans, whatever their ideology and however unpopular their views might be. To protect the First Amendment’s guarantees of free speech and free association, Congress should pass the bill and abolish Schedule B.

Mr. Smith, a former chairman of the Federal Election Commission, is the chairman of the Center for Competitive Politics.


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