New IRS Rules Called 'Campaign Finance Regulation Disguised as Tax Regulation'

“I have not been aware until I got involved in this, the extent to which the IRS contends on a regular, customary basis that federal laws that have been enacted by Congress just simply do not apply to [them],” Mitchell said.

Mitchell sent a letter to the Office of Management and Budget (OMB) in January on behalf of tea party groups requesting that the IRS and the Treasury Department look into whether the proposed rules comply with the Paperwork Reduction Act, Regulatory Flexibility Act, and other related executive orders.

“Such things as the Administrative Procedures Act, which all federal agencies are supposed to be bound by, guarantees notice and hearings and due process rights to the citizens. The IRS says that doesn’t apply to them,” Mitchell said. “‘The Paperwork Reduction Act doesn’t really apply to us’ -- that’s what they told the OMB. They did no analysis under the Regulatory Flexibility Act.”

Bradley A. Smith, chairman of the Center for Competitive Politics, said the new rules are “campaign finance regulation disguised as tax regulation.”

“These rules have nothing to do with raising federal revenue. If these rules were adopted revenue will not go up, it will not go down. The tax burden of particular groups will not go up, it will not go down, or at least it doesn’t need to,” he said.

In 2010, the U.S. Supreme Court decided Citizens United v. Federal Elections Commission, which overturned many previous restrictions on campaign spending and allowed nearly unlimited spending by corporations and other groups to influence elections.

After Citizens United, the Senate was unable to pass the Democracy Is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, sponsored by Sen. Charles Schumer (D-N.Y.). This led Democrats to turn their attention to the tax code to push their campaign finance reform through the IRS and circumvent Republicans, Smith said.

He said these rules would likely force many organizations to file under Section 527 of the tax code, which provides for political organizations.

“That would give them more reporting burdens and most importantly it would require that they disclose the name of their donors,” Smith said.

Eliana Johnson, media editor at the National Review, argued that the burden of these regulations would fall on Republican groups more than Democratic groups.

“The Republicans have an enormous advantage in 501(c)(4) giving,” Johnson said.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) has introduced legislation that would halt the rules process for one year until the committee wraps up its investigation of the scandal. The House is set to vote on the bill this week.