The 501(c)4 "... groups are less interested in pursuing social welfare and more interested in pursuing partisan politics -- while keeping their donors hidden"

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Darrell Issa Hearing Reveals IRS-Targeted Groups Prefer To Be Political
By Michael McAuliff, March 27, 2014

Rep. Darrell Issa's latest oversight hearing into the Internal Revenue Service's botched enforcement against tea party and other "social welfare" groups has revealed a dirty little secret: Many of those groups actually want to preserve the option to run as "dark money" political operations.

That revelation came primarily from the prepared testimony of IRS Commissioner John Koskinen, who spent much of his time Wednesday before the House Oversight and Government Reform Committee sparring with Republican lawmakers over the pace of releasing documents.

But Koskinen also explained that the IRS had implemented all nine recommendations of the inspector general's report that first flagged the so-called targeting scandal. One of those recommendations was to clear up an unacceptable backlog in processing applications for tax-exempt status from groups that had been waiting months.

There was a simple way to clear that logjam: All any group had to do to be granted tax-exempt status as a social welfare nonprofit under section 501(c)4 of the U.S. tax code was to swear that it was, in fact, primarily engaged in social welfare work. To make it easy, the IRS decided that groups had to pledge they would confine their political activity to less than 40 percent of their work.

Several dozen did so, but 19 declined, Koskinen said.

What that suggests to proponents of increased campaign finance disclosure is that such groups are less interested in pursuing social welfare and more interested in pursuing partisan politics -- while keeping their donors hidden.

"It says the same thing as the fact that so many of these organizations swore under oath that they wouldn't do things that were political at the same time that they were spending millions of dollars on advertisements," said Sen. Sheldon Whitehouse (D-R.I.). "There was a lot of dishonesty in what was told to the government about what the purpose of these organizations was," he said.

Whitehouse sponsored the proposed Disclose Act, which would mandate that such 501(c)4 groups reveal donors who give more than $10,000. Currently, these groups are not required to identify their contributors at all.

The number of supposed social welfare groups ducking a pledge to do social welfare work highlights the underlying problem that the IRS bungled so terribly in addressing: Many of these groups were abusing the rules, and the vast majority of them were conservative (though liberals are trying to catch up).

According to data compiled by the Center for Responsive Politics, conservative social welfare nonprofits and other non-disclosing groups poured some $260 million into the 2012 elections, compared to $35 million from their liberal counterparts.

Although the IRS inspector general found that those processing tax-exempt applications erred in screening for names of groups that sounded political -- rather than screening for actual political activity -- the ratio of conservative to liberal groups that were flagged for additional scrutiny in 2010, when the scandal began, was probably not too far off the ratio of conservative to liberal independent spending in the last election. While the inspector general found that the IRS flagged 298 groups for added scrutiny overall, about 20 of them were liberal and only about one-third of them were conservative.

Democrats at the Oversight Committee hearing suggested that the problem really goes back to a step the IRS took decades ago when it decided to re-interpret the law that Congress passed. The law said that such groups had to be "exclusively" involved in promoting social welfare. The IRS in the late 1950s decided to require such groups only to be "primarily" focused on social welfare work. And it defined "primarily" to mean more than half the group's activity.

Rep. Gerry Connolly (D-Va.) poked fun at that definition in the hearing.

"Now, if I said to my spouse, 'Honey, we have an exclusive relationship, and I mean by that 49 percent,' I'd probably have problems in my relationship to her," Connolly told Koskinen. "To me, exclusively means just you, all the time, 100 percent."

"Exclusively ought to mean exclusively," Connolly added. "I don't remember Congress investing the IRS with the authority to actually decide to interpret it radically different -- not just, well, kind of a little fudge factor here -- this is radically different. And it seems to me therein is the problem. Because clearly some of these organizations are not exclusively social welfare agents."

And as the hearing revealed, at least 19 groups trying to get tax-exempt status don't want to pledge that they will even be 60 percent devoted to social welfare.
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