White House Vows to Kill Bill That Would Block New IRS 501(c)(4) Rules

WASHINGTON -- The White House threatened to veto a House bill that would block the Internal Revenue Service from issuing a rule that would narrow the definition of who qualifies for a 501(c)(4) exemption as a social welfare organization.

Ways and Means Committee Chairman Dave Camp's (R-Mich.) Stop Targeting of Political Beliefs by the IRS Act, which was in the Rules Committee on Tuesday evening, would freeze the finalization of the rule for one year and restore the 501(c)(4) standards and definitions that were in place before conservative groups started to come under extra scrutiny in 2010.

Shortly after the Rules Committee meeting began, the Office of Management and Budget issued a statement warning that the administration "strongly opposes" the bill, which has 66 co-sponsors.

"Under current law, organizations qualify as tax-exempt organizations 'operated exclusively for the promotion of social welfare' if they are primarily engaged in promoting in some way the common good and general welfare of the people. The relevant Treasury and IRS rules have been in place since 1959 and are broadly recognized as unclear," the OMB said in the veto threat. "The proposed legislation would prevent any revisions or clarifications to those rules. Thus, it could prevent the IRS from administering the tax code more effectively and from providing greater clarity to organizations seeking tax-exempt status."

The proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity, according to the IRS, which said the intention is to “reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.”

Activities that would disqualify an organization seeking 501(c)(4) status include “communications that expressly advocate for a clearly identified political candidate or candidates of a political party,” “any contribution that is recognized under campaign finance law as a reportable contribution,” hosting a candidate at an event within 60 days of a general election, and voter registration or “get-out-the-vote” drives.

The OMB called the IRS proposal "the first step in a standard rulemaking process intended to clarify the rules and to provide greater certainty for organizations seeking tax-exempt status."

"The notice and comment process allows for all concerned parties to provide input and comments before any changes to the rules are effected. Treasury and the IRS will carefully consider any and all such comments before issuing any further guidance, and they will follow standard agency rulemaking procedures," the OMB said. "If the President were presented with H.R. 3865, his senior advisors would recommend that he veto the bill."

Public comments close on Thursday, and can be submitted here.

The bill is being brought to the House floor as part of the Republican Conference's Stop Government Abuse Week, which is also highlighting the Unfunded Mandates Information and Transparency Act of 2013 and the Regulatory Flexibility Improvements Act.

On Tuesday the House passed Rep. Pete Roskam's (R-Ill.) Taxpayer Transparency and Efficient Audit Act, which would require the IRS to alert taxpayers when their information is shared with other federal agencies, and the Protecting Taxpayers from Intrusive IRS Requests Act, which bars the IRS from inquiring about a taxpayer's religious, political or social beliefs.