This article originally appeared in The Washington Spectator.
A defanged IRS means never having to say you’re accountable.
In the United States, money spent on candidates, politics, or public policy is protected speech under the First Amendment. What happens when protected speech is wrapped in a cloak of secrecy?
How to reconcile Citizens United, which gave corporations the same rights as individuals with regard to political speech while shielding them from any accountability for that speech?
This is the story of how one government agency struggled with these questions and how it was defanged before it could implement rules to force nonprofit organizations that are spending on political campaigns to disclose donors.
It is also a story about the unbridled freedom given to political nonprofits in the absence of campaign-finance laws or Internal Revenue Service rules regulating disclosure.
In late 2013, after years of consideration, the Internal Revenue Service proposed a rule regarding the political activity of social welfare organizations classified by the agency as 501(c)(4) organizations: If tax-exempt organizations engage in direct campaign activity, they must disclose the identity of donors funding that activity in a format similar to what is required of political action committees. Disclosure would be required in a more compressed time frame than the current 18-month delay, providing voters the ability to understand who is paying for the blizzard of political ads and literature on their doorsteps and televisions, and in their mailboxes.
When the IRS released the proposed rule for public comment, a political firestorm erupted over the definition of “political activity.” More than 150,000 comments regarding the rule were filed with the agency, as groups such as the American Conservative Union claimed the IRS was plotting to suppress conservative political activism. The proposed rule was quickly withdrawn, so the definition could be narrowed to one that targeted all groups—liberal and conservative—that spent a large portion of their revenue on direct campaign activity.
While liberal advocacy groups had pushed for rules on campaign financing and “dark money”—political contributions from undisclosed sources—conservatives manufactured a crisis to pressure IRS Commissioner John Koskinen into delaying a transparency rule that would apply to dark money in the 2016 election cycle.
The rule the agency had put on hold was intended to mitigate the impact of the Supreme Court’s Citizens United v. Federal Election Commission decision, which permits corporations to spend unlimited funds on political campaigns. In the majority opinion, Justice Anthony Kennedy wrote: “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” (Emphasis added.)