IRS rules already clear on 501(c)(4) political activity

May 17, 2013, Fairfax, VA—In testimony before the House Ways and Means Committee, outgoing Internal Revenue Service (IRS) Commissioner Steven Miller suggested that the targeting of tea party and other groups was in part caused by Congress’ failure to provide “clear rules” on what constitutes political activity.

“With respect to political activity, it would be a wonderful thing to get better rules,” Miller said, stating the rules needed to be “more clear.”

But those rules are already clear, Americans for Limited Government President Nathan Mehrens noted.

“IRS rules already stipulate that political activity is electioneering, that is, express advocacy for or against a candidate standing for public office and direct contributions to candidates or candidate committees. And it is already clear based on IRS rules that 501(c)(4) organizations are allowed to engage in a limited amount of political activity provided it does not constitute a majority of its activity, plus an unlimited amount of lobbying and issues advocacy, that is, advocacy in favor or against legislation or regulations or court rulings, provided that it furthers its tax-exempt function,” Mehrens stated.

“Miller may not agree with those rules, but to suggest they are not clear is incorrect,” Mehrens explained.

Miller explained the targeting: “What happened here was someone saw some tea party cases come through. They were acknowledging that they were going to be engaged in politics. This was the timeframe in 2010 when Citizens United was out. There was a lot of discussion in the system about the use of [501](c)(4)s.”

Except, Citizens United clarified that organizations are allowed to engage in politics, Mehrens explained. “If anything, Citizens United made things more clear, not less. The Supreme Court simplified the rules and stated that organizations have a First Amendment right to engage in political activity, period.”

Miller continued in his testimony, explaining the process for centralizing these cases: “People in Cincinnati decided let’s start grouping these cases, let’s centralize these cases.” This meant quarantining the applications and sending them to Exempt Organizations (EO) Technical, based in Washington, D.C. for special scrutiny.

“The way they centralized it, troublesome. The concept of centralization, not,” Miller said, suggesting that targeting political activity of groups was permissible. Elsewhere in testimony, he agreed that the agency was targeting political activity: “the litmus test if anything was political activity.”

Mehrens blasted the practice, “The IRS processes thousands of tax-exempt applications a year that engage in issues advocacy, lobbying, and yes, political activity without any hassle or special scrutiny. They are allowed by law to engage in these activities. Yet, these tea party cases were selected for special scrutiny. This created inconsistency in the processing of applications, when the revenue procedures state that centralization is supposed to establish uniformity. Liberal groups doing the same thing as tea party groups were not centralized.”

But, even if liberal groups had been targeted too would not have helped, Mehrens added, “Targeting organizations for special scrutiny on the belief that they might exercise their First Amendment protected rights to engage in political activity in is an egregious violation of the freedom of speech. If it had been done consistently for groups of all stripes would not have made it better.”

Miller suggested the practice was “not illegal,” but Mehrens said, “Of course it was illegal. These actions violated the First Amendment to the Constitution which is the ‘supreme Law of the Land’.”

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