Tea Party Warns of 'Permanent Damage' from Proposed IRS Rules

WASHINGTON – A co-founder of the nation’s largest Tea Party organization told a House panel Thursday that proposed regulations limiting the political activity groups can engage in and still meet tax-exempt status will inflict “permanent damage” on the advocacy efforts of grassroots organizations.

Jenny Beth Martin, president of the Tea Party Patriots, told the House Subcommittee on Economic Growth, Job Creation and Regulatory Affairs that the rules proffered by the Internal Revenue Service to limit political activity will “silence” organizations and lead to an “infringement on the rights of the American people to freely associate, speak their minds and petition their government.”

“We have produced voters' guides, hosted candidates' debates, encouraged voter registration, supported get-out-the-vote efforts and assisted local groups in lobbying on specific local and national legislation,” Martin said. “We have invited members of Congress to speak at our rallies and events not as candidates but as experts on important topics. We have posted news about national events on our social media sites.”

“The current rules recognize all these activities as non-political,” she said. “The proposed rules would classify them all as political.”

Should the regulations ultimately meet with approval from the Obama administration, grassroots organizations will have to, among other things, disclose the identity of their donors, a requirement that could inhibit fundraising. Outfits largely funded by unidentified contributors have emerged as a significant political power in the last few years. The Center for Responsive Politics reports that such donations have gone from $87.2 million in 2008 to $256.3 million in 2012.

The new IRS initiative, announced in November, has left organizations on both sides of the political divide distressed. The agency is looking to update and clarify rules regarding the type of political activities various “social welfare” groups operating under section 501(c)(4) of the federal tax code can engage in while maintaining their status. The agency decided to review the section dealing with tax-exempt organizations in wake of an ongoing controversy involving political groups, most of which lean conservative, that have had their tax-exempt applications delayed, rejected or subjected to probing questions.

Under current law, groups seeking status under 501(c)(4) can only operate “exclusively for the promotion of social welfare." But they are permitted to engage in additional activities as long as their “primary” emphasis remains on social welfare.

The proposed regulations would prohibit social welfare groups from involving themselves in get-out-the-vote drives or printing voters’ guides. They would be prohibited from contributing money or other items of value to a candidate or a political party and they face a limited time period when they can directly cite a candidate in a campaign ad or on a website.

Thursday marked the final day of a three-month public comment period on the proposed rule changes. More than 100,000 individuals and groups, ranging from the American Civil Liberties Union to Martin’s Tea Party Patriots, have weighed in, with many expressing strong objections.