Broad Support for Clear Rules on Nonprofits’ Political Spending

The IRS has the power and the responsibility to limit the use of the nonprofit form to hide the sources of election spending.

September 30, 2014
IRS

It seems obvious that the agency that enforces our tax laws needs to follow clear rules so that its actions are consistent, fair, and comprehensible. In fact, a new bipartisan poll by Lake Research Partners and Chesapeake Beach Consulting reveals that 86 percent of voters agree clear rules are important when it comes to the political activities of tax-exempt organizations.

But in the world of nonprofit organizations spending to influence elections, there are no clear rules. The IRS decides whether to grant these groups tax exemptions using a fuzzy “facts and circumstances” test—in a sense, the IRS says, “I know it when I see it.” This approach is inefficient and can lead to arbitrary actions or inadequate enforcement.

Nonprofit organizations are increasingly being used to mask the sources of big spenders in our elections. This August, political spending by groups that don’t disclose their donors hit $50 million, seven times the amount reached at that point in the last midterms. A Brennan Center analysis found that fully half of the independent spending in the nine most competitive Senate races this year comes from groups that hide some or all of their donors—the vast majority are nonprofits. And these figures don’t capture tens of millions more in spending by secretive groups on ads that attack or promote a candidate without explicitly calling for a vote, because those expenditures aren’t required to be reported to the government. All this leaves members of the public in the dark about who’s trying to influence their votes and their elected representatives.

To its credit, the IRS has begun the process of reforming its rules. It issued a proposed rule late last year that would give clear guidance about what nonprofits can and can’t do in electoral politics. The proposal generated a record number of comments. Two-thirds of the organizations that commented wrote in support of the rule, although many, like the Brennan Center, recommended changes. In response, the IRS decided it will revise the proposal and give the public a chance to weigh in on the new version.

And the public is on the side of increased clarity and transparency. The new poll reveals that a bipartisan 49 percent are in favor of changing the rules, with only 10 percent opposed (41 percent are unsure). And 63 percent look more favorably on a rule change that would also increase disclosure. The poll also shows that the rule’s opponents aren’t changing many minds with their overblown rhetoric about the IRS shutting down free speech. Voters reject those arguments in favor of clarity by a 2:1 margin. They understand that clear rules will be fairer for everyone. As the Supreme Court has said in upholding election spending disclosure, “transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

The IRS has the power and the responsibility to limit the use of the nonprofit form to hide the sources of election spending. The Brennan Center looks forward to reviewing the agency’s next proposal for clearer rules and weighing in along with the rest of the public.

(Photo: Thinkstock)