Democrats Push IRS To Limit Dark Money's Political Power With Strict New Rules

WASHINGTON -- A group of 13 Democratic senators sent a letter to the Internal Revenue Service on Thursday urging the agency to adopt stringent new limits on the level of political spending allowed for social welfare nonprofits.

The letter comes on the day the IRS will close public comments on its proposed new rules to rein in political activity by those nonprofits, organized under section 501(c)(4) of the federal tax code.

Political spending by independent groups has surged since the Supreme Court's 2010 Citizens United decision. In the 2012 election, nonprofit spending on specific federal races soared past $400 million. Looking more closely at such political activities, the IRS found itself embroiled in controversy over its targeting of nonprofits aligned with tea party and progressive groups.

With their nonprofit status, the 501(c)(4) organizations are also exempted from certain disclosure laws. The resulting secrecy surrounding their donors has earned them the "dark money" label.

The senators' letter calls on the IRS to draw clear lines.

“New IRS regulations must put an end to the use of 501(c)(4) status as a means of evading campaign finance disclosure requirements,” the senators write. “In particular, the new rules must make clear that it is impermissible for political operatives to create what are for all practical purposes PACs, obtain 501(c)(4) status for those PACs, and then spend essentially unlimited money to influence elections without disclosing their donors, as is now common practice.”

The problem with current IRS rules governing 501(c)(4) nonprofits, according to the letter, is that they diverge from the language of the statute. The law passed by Congress states that 501(c)(4) nonprofits must be operated "exclusively" to promote their social welfare function and not to engage in express political activity. The current IRS rules, however, state that these nonprofits need only be "primarily" focused on their social welfare function. Lawyers and nonprofit groups have interpreted the word "primarily" to mean they need spend just 51 percent of their time and resources on social welfare efforts.

The senators propose a new "bright line" rule allowing only an "insubstantial" level of political activity by nonprofit groups -- between 5 percent and 15 percent of an organization's total time and expenses.

The letter further urges the IRS to count financial transfers from one 501(c)(4) group to another that ultimately spends money on political activity as political activity by the first group as well.

Sen. Sheldon Whitehouse (D-R.I.) is the lead author on the letter. He is joined by Sens. Chuck Schumer (D-N.Y.), Patrick Leahy (D-Vt.), Tom Carper (D-Del.), Bob Menendez (D-N.J.), Bernie Sanders (I-Vt.), Jon Tester (D-Mont.), Tom Udall (D-N.M.), Chris Coons (D-Del.), Richard Blumenthal (D-Conn.), Mazie Hirono (D-Hawaii), Martin Heinrich (D-N.M.) and Elizabeth Warren (D-Mass.).

Since the 2010 Citizens United ruling, Democrats have pushed for greater disclosure by nonprofit groups with both proposed legislation and legal challenges. During congressional hearings on the IRS targeting scandal, Democrats urged the agency to adopt clearer rules for political activity by nonprofits.

The draft rules have already received more than 116,000 comments from the public, driven in part by tea party and progressive groups calling on their supporters to oppose different aspects of the proposal.

The Huffington Post examined the rules in greater depth here.

See the letter below:



2014 Election: $500,000-Plus Super PAC Donors