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.

"These bills have a simple goal: removing fear from an individual's interactions with the IRS," said Roskam. "People should not have to be concerned about unfair and unjustified harassment at the hands of their own government. Widespread reports of IRS abuse have had a chilling effect on the American people."

"This week, the House is working to give people peace of mind that their government is not running roughshod over their rights," Roskam added. "We can reassure individuals that they will not be left in the dark about the looming threat of IRS action, and protect them from offensive, big-brother questioning from the federal government."

"The egregious abuses of trust at the IRS beg the need for more transparency and oversight and the House will continue to act to ensure that oversight on the American people’s behalf," House Majority Leader Eric Cantor (R-Va.) said. "The IRS cannot be trusted, nor do they have sufficient reason to possess, an individual’s religious, political, or social beliefs."

But that IRS rulemaking still looms large.

In passing the bill out of his committee earlier this month, Camp said it's inappropriate to be rulemaking when the probe into IRS targeting isn't even complete.

“We need to finish our investigation into the IRS’s abuses and receive the Inspector General’s final report,” Camp added. “This legislation will ensure that Treasury does not rush to put this rule into effect, which it can do as soon as the end of this month, and can process the over 23,000 public comments already received.” That had climbed to more than 70,000 comments by today.

Citizens United warned Friday that it's ready to go to court over all rules regarding spending by 501(c)(4) organizations.

“Ever since Citizens United’s landmark victory for free speech at the U.S. Supreme Court, President Obama’s stated goal has always been to use every lever of government to thwart political speech. From the failed attempts to pass the DISCLOSE Act, to now using the IRS like a Chicago political hit squad, President Obama and other liberals want to chill the First Amendment so that any dissenting views to the Obama agenda are snuffed out," said David N. Bossie, president of Citizens United. "As we have done in the past in Citizens United v. FEC, Citizens United is prepared to litigate any rules changes that infringes on the rights of Americans to speak freely about the political process.”

The Senate version of the House bill to stop the IRS rule is sponsored by 40 senators including GOP leaders Mitch McConnell (R-Ky.), John Cornyn (R-Texas), and John Thune (R-S.D.).

A week ago, 29 senators sent a letter to IRS Commissioner John Koskinen urging that he drop the proposed regulations.

"The IRS is not the appropriate agency to regulate political activity as the proposal delineates given its lack of subject-matter expertise and role as impartial administrator of our nation's tax laws," the letter said. "At a minimum, the IRS should not finalize any regulations related to political activity that would jeopardize the rights established by the First Amendment or be applied selectively to tax-exempt organizations."