Appropriations Bill ‘Handcuffs'IRS on Political Group Activities

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By Colleen Murphy

June 10 — The House Appropriations Committee shouldn't bar the IRS from addressing confusion over permissible political activity for 501(c)(4) organizations, 43 House Democrats said.

Future funding bills shouldn't include language that “handcuffs the IRS in issuing, revising, or finalizing guidance on permissible political activity” on the topic, according to a release accompanying the letter.

The committee approved a fiscal year 2017 funding bill June 9 that blocks the Internal Revenue Service from any activity on tax code Section 501(c)(4) regulations and cuts the agency's funds by $236 million (112 DTR G-2, 6/10/16).

IRS's Authority

The group said the language should also be removed from that funding bill, and said its inclusion was concerning. During the appropriations markup, some Democratic lawmakers on the committee criticized riders attached to the $21.7 billion bill, which funds the Treasury Department and several federal agencies.

“Congress should not use an appropriations measure to impede the IRS's legal authority to improve upon this area of the law,” the group, led by Democratic Caucus Chairman Xavier Becerra (D-Calif.), said in the letter released June 10.

The 2016 Consolidated Appropriations Act banned any final IRS guidance on 501(c)(4) organizations—social welfare organizations—for the remainder of the fiscal year. The IRS has come under fire from Republican lawmakers over the last few years, after targeting conservative groups applying for tax-exempt status.

Beyond the Pale

In the letter—addressed to Committee Chairman Harold Rogers (R-Ky.) and Rep. Nita Lowey (D-N.Y.), the committee's ranking member—the group said 501(c)(4) organizations have recently increased political activities “beyond what was envisioned by the law and Treasury regulations.”

Social welfare organizations under 501(c)(4) are allowed to participate in political activity as long as it doesn't make up the majority of their activity.

The group noted that, according to the Center for Responsive Politics, 501(c)(4) organizations spent $257.24 million in the 2012 presidential election—a substantial increase from the $1.26 million spent in 2006.

“This evidence raises the question of whether these organizations exist primarily to promote social welfare or if their primary objective is to participate in political campaigns,” the group said.

The IRS began to revise its 2013 proposed rules (REG-134417-13) on “candidate-related political activity” and permissible activities before they were barred from addressing the topic further (229 DTR GG-1, 11/27/13).

Additional guidance is still needed, the group said. “Efforts to impede the IRS's ability to do its job ultimately harm American taxpayers and have no place in the appropriations process,” it said.

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bna.com

To contact the editor responsible for this story: Brett Ferguson at bferguson@bna.com

For More Information

Text of the Becerra letter is in TaxCore.