May 2, 2017; Wall Street Journal
The $1.1 trillion, 1,662-page “Consolidated Appropriations Act of 2017” omnibus spending bill to fund government operations until September 30th is expected to be approved this week. This follows weeks of speculation and drama over whether there would be a government shutdown over budget priorities, culminating in a last-minute agreement last Friday to extend government operations by one week, which delay allowed for the completion of negotiations over the current spending bill. The House approved the bill Wednesday by a vote of 309-118, and the Senate is expected to approve the measure on Thursday and forward it to the president before Friday’s spending deadline.
As with any large federal legislation, there are surprises buried in the text of S. 244, and those surprises include a provision prohibiting the IRS from developing regulations affecting 501(c)(4) social welfare nonprofit organizations, many of which are sometimes referred to as “dark money” groups because they can participate in political campaign activities without publicly disclosing the identities of their donors and other sources of funding.
From the bill’s text on pages 494-495 (PDF version):
SEC. 126. During fiscal year 2017—
(1) none of the funds made available in this or any other Act may be used by the Department of the Treasury, including the Internal Revenue Service, to issue, revise, or finalize any regulation, revenue ruling, or other guidance not limited to a particular taxpayer relating to the standard which is used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4) of the Internal Revenue Code of 1986 (including the proposed regulations published at 78 Fed. Reg. 71535 (November 29, 2013)); and
(2) the standard and definitions as in effect on January 1, 2010, which are used to make such determinations shall apply after the date of the enactment of this Act for purposes of determining status under section 501(c)(4) of such Code of organizations created on, before, or after such date.
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NPQ has been following the issues associated with regulation of 501(c)(4) groups for a long time, including the regulations proposed by the IRS in 2013 that attracted more than 143,000 public comments, with almost all being negative and spread across the political spectrum.
In two related provisions of the spending bill, “None of the funds made available under this Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States” and “None of the funds made available in this Act may be used by the Internal Revenue Service to target groups for regulatory scrutiny based on their ideological beliefs.” In context, these injunctions appear to be an attempt by Congress to further restrict the ability of the IRS to regulate, investigate, or enforce tax code provisions involving religious or political activity.
In an apparent effort to stem leaks of confidential tax return information, including donor information, by the IRS, the bill provides that “None of the funds made available by this Act may be used in contravention of section 6103 of the Internal Revenue Code of 1986 (relating to confidentiality and disclosure of returns and return information).” NPQ readers may remember allegations that donor lists from the nonprofit National Organization for Marriage were leaked by the IRS and reported by the Huffington Post.
Interestingly, the bill also prohibits the Executive Office of the President (i.e., the White House) from requesting the IRS to determine whether an organization is a tax-exempt entity, thereby bypassing or short-circuiting the standard application and review process.
NPQ reported earlier this week that “The federal government is now prohibited from requiring federal contractors to disclose campaign contributions. The Securities and Exchange Commission will be required to stop demanding information on political contributions, gifts to tax-exempt groups, or dues paid to trade associations.”
The cumulative effect of these provisions indicates that neither Congress nor the Trump administration has any interest in enacting campaign finance reform that would restrict access to funding or activities by nonprofit groups such as 501(c)(4) “dark money” social welfare organizations. Further, the fact that these provisions weren’t highlighted by either political party in the run-up to the budget agreement indicates that this issue isn’t one that attracts much passion relative to other issues and priorities. It’s safe to say at this point that the 2018 campaign season, and perhaps even the 2020 campaigns, will be governed by existing rules, and perhaps even more permissive ones.—Michael Wyland