The IRS is Doing Its Job - Or More Accurately - Contemplating Doing Its Job After Years of Dereliction (The Wall Street Journal LTE)
Bradley A. Smith ("The Latest IRS Power Grab," op-ed, Dec. 9) asks the question: "Why is the IRS regulating political activity at all?" He attributes IRS regulation to "Democratic politicians and progressive activists" when, in fact, the IRS has long limited the extent to which many types of tax-exempt entities can engage in electoral politics. The IRS is doing its job—or more accurately—contemplating doing its job after years of dereliction. Mr. Smith attributes "three myths" to the Campaign Legal Center, but it is he who's ginned up myths.
Regarding "Myth No. 1," the Legal Center knows that 501(c)(4)s aren't "charities" and does not refer to them as such. Indeed, the Legal Center itself is tax exempt as a 501(c)(3), the tax code section covering "charities," religious and educational organizations.
Regarding "Myth No. 2," despite Mr. Smith's claims, Section 501(c)(4) of the tax code does require organizations claiming tax exemption to be operated "exclusively for the promotion of social welfare." IRS regulations state explicitly: "The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office."
Finally, regarding "Myth No. 3," all tax-exempt organizations enjoy a "tax break"—they are not required to pay federal income tax for funds raised and spent to advance their exempt purpose. Even candidate and party committees get a tax break, but under Section 527 of the tax code, which requires disclosure of donors. By contrast, 501(c)(4)s aren't required to disclose their donors publicly.
What's really at stake here is disclosure of money spent by tax-exempt groups on candidate-related election activity. There are no limits on how much these groups can spend on election activity. The question is whether such groups are subject to donor disclosure. The Legal Center sides with the Supreme Court that voters are entitled to know whose money is being spent to influence their votes. Mr. Smith's Center for Competitive Politics believes in denying voters this crucial information, allowing special interests to dominate our electoral discourse by hiding behind 501(c)(4) tax status.
This piece originally ran in the Wall Street Journal as a Letter to the Editor on December 16, 2013 under the headline "The IRS Is Finally Doing the Job It Is Supposed to Do."