Common Cause Urges New, Clear Rules for Political Activity by 'Social Welfare' Nonprofits

The Internal Revenue Service should write new rules to clarify what constitutes political activity under the tax laws and clearly state that social welfare groups can spend no more than an insubstantial amount of their resources on political activity, Common Cause told senators today.

"Congress never intended for tax-exempt social welfare organizations to exist as conduits for secret political spending," Stephen Spaulding, Common Cause's senior policy counsel and legal director, said in a statement for the record submitted to the Senate Finance Committee. But thanks to flawed, ambiguous regulations and a lack of enforcement, along with the "brazen willingness of political operatives" to exploit those weaknesses, such groups have become pipelines for the infusion of hundreds of millions of dollars - supplied by secret donors - into federal and state elections, he asserted.

"Ultimately, it is the secrecy that social welfare nonprofits provide to donors that makes them attractive vehicles for political spending, and all the more reason why Americans expect the IRS to do its job and enforce the law," Spaulding wrote.

"As of today, the IRS has done little to hold the most flagrant violators accountable, despite reams of evidence that their overriding purpose appears to be to provide anonymity to donors eager to spend unlimited amounts of money supporting and attacking candidates for public office."

The Finance Committee's scheduled hearing today on the IRS's handling of politically-active social welfare groups comes in the wake of announcement on Friday that the Justice Department will not prosecute agency officials who had been accused of harassing conservative groups seeking the social welfare designation. The Department said there was no evidence that groups were illegally targeted.

"It was wrong for the IRS to subject some 'social welfare' nonprofit applications to extra scrutiny based solely on their names and identified interests... the agency should take action to ensure these mistakes are not repeated," Spaulding said.

But "the real scandal" is "hundreds of millions of secret dollars in our elections funneled through a handful of social welfare organizations," he added.

The IRS has announced plans to draft new rules for the social welfare groups. Unless it moves ahead, "major political groups will continue to masquerade improperly as social welfare nonprofits under Section 501(c)(4) - solely to keep political spenders anonymous. This deprives the American people of the information they need about who is trying to influence their votes, and to whom their elected officials may owe a debt of gratitude after Election Day," Spaulding said.