IRS backtracks on 501(c)4 rule after flood of negative comments

posted at 10:41 am on May 23, 2014 by Ed Morrissey

Will the IRS retreat from managing political speech through the tax code? One might have thought that the scandal that erupted a year ago this month would have discouraged the tax agency from pressing forward again, but they still proposed a more extensive enforcement mechanism for 501(c)4 groups just months after the targeting of conservative groups was exposed. After an avalanche of negative comments in the public-review period, though, the IRS is rethinking their approach (via Instapundit):

The U.S. Internal Revenue Service said today that it will revise proposed rules governing nonprofit groups’ involvement in politics.

The rules, released last year, were an attempt to provide guidance for how much political activity groups organized under section 501(c)(4) of the U.S. tax code could engage in without risking loss of their tax exemption or being forced to reveal their donors. …

After the IRS released the new rules, groups across the political spectrum objected with more than 150,000 comments, calling them too broad and an attack on free speech. Opponents included the American Civil Liberties Union and the American Family Association.

Republicans called on the IRS and the Treasury Department to start over. Until today, the IRS had said it was planning a public hearing in the next few months.

“It is likely that we will make some changes to the proposed regulation in light of the comments we have received,” the IRS said in a statement today. “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.”

Note that they’re not dropping the matter altogether, either. The flood of criticism has only forced them into a tactical retreat, not into a full surrender. A delay buys them more space between the scandal and the expanded enforcement that new rules will bring, and hopefully (from their perspective) short memories will allow them to proceed in time for the 2016 cycle rather than the 2014 cycle.

The Wire’s congratulatory message may therefore be premature:

The IRS proposed deleting the clause’s reference to “direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office,’’ and replacing it with the supposedly clearer “[t]he promotion of social welfare does not include direct or indirect candidate-related political activity.’’ Similarly, the agency wants to replace ‘‘participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office,” with “‘candidate-related political activity.”

Apparently, people are not happy with the changes. Last month, IRS CommissionerJohn Koskinen told the Washington Post that the high volume of comments was making it difficult to forge ahead with the proposed rule …

Finally, an issue the right and left both hate enough to try to successfully derail. Good job, team.

It’s not derailed, at least not yet. It’s merely sidetracked until the political winds shift in a more favorable direction.

The underlying problem isn’t really at the IRS anyway, but in Congress. By erecting a Byzantine structure for campaign and issue donations and mixing them with tax-free statuses, Congress has forced IRS into the speech-police business. The real solution to this would be to eliminate the hard/soft money categories altogether, allow for unlimited donations with full and immediate disclosure over an aggregate amount to campaigns and political parties, and to eliminate tax-exempt status for all political donations. That would get the IRS and the federal government out of the speech-police business and put an end to the massive hypocrisy of the incumbency-protection racket that “campaign finance reform” has become.

Don’t expect the next formulation of 501(c)4 rules to fix anything, so the lesson is to stay vigilant.


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…politics?

KOOLAID2 on May 23, 2014 at 10:44 AM

A delay buys them more space between the scandal and the expanded enforcement that new rules will bring…

…the scandal is dead!…and Lois Lerner is alive!

KOOLAID2 on May 23, 2014 at 10:48 AM

The purpose of the rule is legalize the law-breaking they are currently engaged in.

If the rule is enacted, then Lerner’s statement about having done nothing wrong will be true.

BobMbx on May 23, 2014 at 10:48 AM

Grandpa,
What was America like before the IRS backed State Department took control of our country?

mjbrooks3 on May 23, 2014 at 10:50 AM

People react negatively to the IRS?

Who knew?

Bitter Clinger on May 23, 2014 at 10:50 AM

They’ll lay low until the furor dies down, then quietly enact the new regulations.

rbj on May 23, 2014 at 11:00 AM

You incredible thugs…the picture is perfect.

Who pays your idiotic livelihoods?

Get rid of the mafiosos, all of them.

Make it an automated flat-rate, simple, payment.

Schadenfreude on May 23, 2014 at 11:01 AM

Another ex post facto law in the wings from the most open, honest and forthright administration in the history of the world.

vnvet on May 23, 2014 at 11:05 AM

They’re not retreating…they’re reloading.

Left Coast Right Mind on May 23, 2014 at 11:10 AM

What part of “Congress shall make no law” that appears in the first amendment do these people not get? I already know the answer but still.

Political solutions are no longer possible in our country and it’s only going to get worse.

bgibbs1000 on May 23, 2014 at 11:12 AM

“It is likely that we will make some changes to the proposed regulation in light of the comments we have received,” the IRS said in a statement today.

calling them too broad and an attack on free speech.

We will revise them to just Republican applicants, then it won’t be too broad. The ACLU will then give its blessing.

txdoc on May 23, 2014 at 11:22 AM

not a smidgeon!

rjoco1 on May 23, 2014 at 11:31 AM

When are conservatives going to realize that power that is abused once will be abused again, regardless of any new safeguards that are put in place?

Staying vigilant against the progressive onslaught isn’t really possible, as this IRS-speech-rule saga illustrates. The Left pushes for what it wants, retreats tactically (as you note) when necessary, cements its gains, and then moves to the next item on its agenda.

Foolishly, conservatives fight to stop or roll back the latest progressive advance. Tactically, this is makes some sense; but the GOP simply settles for tactical victories. It will occasionally fight to roll back Progressive advances, but never attacks the root of the problem. In this case, its the power of the IRS and the taxation of corporations. The solution is to end the taxation of all corporations and to disband and replace the IRS with a non-partisan agency.

And if the GOP was really serious about halting progressive advances, they would fight to radically simplify the tax code and end income tax withholding of any kind. The mere possibility of a tax revolt would work wonders to keep the progressive agenda in check in a way the elected GOP officials never will.

jog267 on May 23, 2014 at 11:34 AM

Left Coast Right Mind on May 23, 2014 at 11:10 AM

Exactly! The IRS is the MAIN source of power for congress and with the criminal progs in control, they will use their power to continue to oppress. In fact, the only point of a bureaucracy, in all its forms, not just the IRS, is to expand their turf/power. They have the wind behind them – welcome to the New Dark Ages?

But I digress ….

Chuck Ef on May 23, 2014 at 12:00 PM

“A Government of the people Government, by the people Government, and for the people Government…”

I seem to recall this quotation, but when I heard it I think it was different. Well, that was a long time ago. Maybe my memory is not so good anymore.

NOMOBO on May 23, 2014 at 12:02 PM

What is should say is:

“… the IRS backtracks temporarily on proposed rules…”

Ya, gotta give cover to the D’s for the 2014 midterm…

Tard on May 23, 2014 at 12:18 PM

“It is likely that we will make some changes to the proposed regulation in light of the comments we have received,” the IRS said in a statement today. “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.”

Translated from lib lawyer-speak:
“While we’re not giving up on this, we’ll see if we can re-word the rule to give wiggle room to our socialist masters so they have free reign and nobody else.”
“Honestly we don’t care about the concerns of most citizens, but holy shit we’re getting nasty tweets from democrat front groups now too. Don’t worry, we’ll retract this now, tweak a couple words and then push it out after making it clear to the libs that *wink-wink* this won’t apply to them.”

smfic on May 23, 2014 at 12:31 PM

The underlying problem isn’t really at the IRS anyway, but in Congress. By erecting a Byzantine structure for campaign and issue donations and mixing them with tax-free statuses, Congress has forced IRS into the speech-police business. The real solution to this would be to eliminate the hard/soft money categories altogether, allow for unlimited donations with full and immediate disclosure over an aggregate amount to campaigns and political parties, and to eliminate tax-exempt taxable status for all political donations. That would get the IRS and the federal government out of the speech-police business and put an end to the massive hypocrisy of the incumbency-protection racket that “campaign finance reform” has become.

Agreed, with one little change.
Why should any non-commercial organization have to pay tribute on its donations (which are not “income”) just because it exists, regardless of whether or not it explicitly wants to influence elections?

AesopFan on May 23, 2014 at 12:49 PM

The IRS is only good at sneek early moring attacks while the men are gone from the camp seeking food, only women and children in the camp so they attack the weak and defenseless.

Only know the way of the low coyote and back stabing.

It is their way.

APACHEWHOKNOWS on May 23, 2014 at 12:57 PM

Me thinks 150,000 unwarranted and egregious audits will be conducted by tax gestapo in the very near future.

StubbornGreenBurros on May 23, 2014 at 1:17 PM

Me thinks 150,000 unwarranted and egregious audits will be conducted by tax gestapo in the very near future.

StubbornGreenBurros on May 23, 2014 at 1:17 PM

…and I have a .40 Glock that says unwarranted searches are to be handled the way of Notes 28 & 29 in the Federalist Papers per Alexander Hamilton.

Turtle317 on May 23, 2014 at 2:46 PM

The problem doesn’t boil down to the limits on political donations (though there shouldn’t be any), or political activity on the part of non-profits (isn’t taxing political activity of any kind a violation of the Constitution?)….

No, the problem is with the selective enforcement, which is the only thing at issue here.

It matters not one bit what law gets passed, it will only be enforced against people who want smaller govt. These people admitted to the corruption, that’s what started this whole thing. And they’re getting away with it, because we’ve allowed them to change the subject to “campaign finance laws”, which have NOTHING to do with what happened here.

And yet, here we are, crying about details. Not one of these details will fix the problem we are supposed to be addressing.

Make it a life sentence for selectively enforcing the law, see how seldom it happens. Of course, leftists will find a way to selectively enforce that law too, corrupt bastards.

runawayyyy on May 23, 2014 at 3:44 PM

FOOLS,

any regulation is an affront to the 1st Amendment.

Remember “Congress shall make NO law”

conservatives view this as a victory?? FOOLS

the Democrats in control of the IRS ask for the moon, then backtrack 2 get regulations limiting, FOOLS

mathewsjw on May 23, 2014 at 6:31 PM

Do remember, this cuts both ways. It would shut down the 501(c)4s on the left as much as on the right – if it was fairly applied.

Abolishing the 501(c)4 status would be the better approach to that, though.

Hm, maybe a flat tax and an IRS that is a thin shade of its current self would do the trick. If a dollar crosses into your possession then some percentage of that dollar must be sent to the government, no exemptions, no special deals, just send it in.

{^_^}

herself on May 24, 2014 at 2:45 AM

fIRSt we take their money, then their rights.

ronco on May 24, 2014 at 5:24 PM