House Speaker Paul Ryan (R-Wis.) heralded the measure as a win, telling reporters Wednesday that with the budget deal, Congress is “stopping the IRS from suppressing civic participation in 501(c)(4) organizations.”
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But advocates for greater transparency of political donations said the ban would make it harder for voters to know who is behind politically active groups.
“It’s outrageous that lawmakers are interfering with the most modest measures to increase disclosure of political spending,” Lisa Gilbert, who directs the watchdog group Public Citizen’s Congress Watch division, said in a statement. “The American people want – and deserve – to know who is trying to buy our elections.”
Originally a designation used by civic leagues and homeowner associations, social welfare groups have emerged as major players in campaigns in recent years. Unlike political committees, these nonprofits do not have to reveal the names of their contributors. And little governs their activities aside from a 1959 regulation that states that such groups must be “primarily engaged in promoting in some way the common good and general welfare of the people of the community.”
That has been interpreted by many tax lawyers to mean that a 501(c)(4) nonprofit has the freedom to spend up to 49 percent of its money on political activity, giving social welfare groups huge leeway. This year, one of the biggest spending groups in the 2016 presidential contest has been Conservative Solutions Project, an advocacy group that has run ads supporting Sen. Marco Rubio of Florida.
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The IRS has been working on clearer rules since revelations in 2013 that employees had been singling out for extra scrutiny nonprofits with names that included words such as “tea party” or “patriot.” IRS officials acknowledged that using such criteria was inappropriate, but said front-line employees had resorted to such measures because the agency did not have a clear standard in place to assess whether an advocacy group had veered too far into campaign activities.
But the effort to develop new rules has been fraught. The agency had to withdraw an initial proposal after it was lambasted as overly broad by groups on both the left and right. IRS Commissioner John Koskinen told a Senate committee in July that officials had taken that feedback into consideration and were focused on trying to provide more clarity about what activities constituted political spending.
An IRS spokesman did not immediately respond to a request for comment.
This week’s budget deal also includes language that would prevent the Securities and Exchange Commission from advancing a regulation that would require public corporations to disclose their political donations, a rule Democrats have been prodding the agency to implement.
Both so-called riders were supported by Republicans, who also sought to insert several other measures loosening campaign finance rules that did not make it in the final package. Among them was an effort by Senate Majority Leader Mitch McConnell(R-Ky.) to remove a cap on how much money political parties could spend in coordination with candidates.
That move was fiercely opposed not only by House Democrats but also by conservatives, who feared it would strengthen party committees at the expense of independent groups, according to GOP congressional leadership aides.
Rep. John Sarbanes (D-Md.), a leading House advocate for campaign finance reforms, said in an interview that the spending deal was, on the whole, a win for opponents of big-money politics — more because of what it did not include than what it did include.
Not only did they manage to keep out the rider to expand party spending, but they also headed off an effort to hamstring the longstanding system of public financing for presidential campaigns.
“Washington increasingly seems to be captured by big money donors and special interests, and the public wants us to draw the line,” Sarbanes said. “And I think we were able to do that in a significant way by keeping those riders out. Obviously we would have like to have the other two riders excluded as well. … We’ll continue to fight that battle.”
Paul Kane and Mike DeBonis contributed to this report.