The IRS' Tea Party blunder | Arkansas Blog

Monday, May 13, 2013

The IRS' Tea Party blunder

Posted By on Mon, May 13, 2013 at 8:34 AM

I tried to say this the other day, but Ezra Klein at Wonkblog says it better.

Let’s try to keep two things in mind simultaneously: The IRS does need some kind of test that helps them weed out political organizations attempting to register as tax-exempt 501(c)4 social welfare groups. But that test has to be studiously, unquestionably neutral.

I would go further and say that past screening and enforcement of the 501c4 law has been poor to non-existent. Too many of these putative "social welfare" groups are nothing but overt political operations. Why should they get favorable tax treatment for political advocacy? They shouldn't. It so happens that the Right has dominated the use of this loophole, but there are liberal groups using it, too.

I still fear the worst fallout from this will be a hands-off approach to the abuse. Writes Klein:

It is worth remembering an important fact here: The IRS is supposed to reject groups that are primarily political from registering as 501(c)4s. If they’re going to do that, then they need some kind of test that helps them flag problematic applicants. And that test will have to be a bit impressionistic. It will mean taking the political rhetoric of the moment and watching for it in applications. It will require digging into the finances and activities of groups on the left and the right that seem to be political even as they’re promising their activities are primarily non-political.

If we’re not comfortable with that, then we need to either loosen the definition of 501(c)4s or create a new designation that gives explicitly political groups the benefits of the 501(c)4s (namely, they don’t have to pay taxes and they can keep their donors anonymous). But either way, as I wrote on Friday, the only way to make sure this doesn’t keep happening is for the IRS — or the Congress and White House that control it — to make some tough decisions about 501(c)4s.

Tough decisions by Congress? Tough decisions that might limit tax breaks for stealth political campaigns? Don't hold your breath.

UPDATE: More analysis from Josh Marshall.

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