May 22, 2014; Washington Post

The IRS received 150,000 comments in response to its proposed rules on political nonprofits. We’re guessing that there might have been a straggler comment here or there in support of the draft rules, but the overwhelming message to the IRS was “start over.”

As nearly everyone expected, the IRS is going to rework the proposed rules. However, it has decided to postpone the idea of a public hearing until after it has a new draft of the guidelines to pitch.

Republicans like Ways and Means Chair Dave Camp predictably denounced the draft regulations as a plot to silence conservative political organizations, a narrative that connected with conservatives already suspicious about the IRS in the wake of the scandal involving the improper scrutiny of 501(c)(4) applications of conservative political groups prior to the 2012 elections.

Democrats were also displeased with the draft regulations, concerned that they went too far in restricting the ability of 501(c)(4)s from engaging in political activity. However, Senator Charles Schumer of New York inexplicably criticized the IRS’s announcement of the delay as “a real setback for democracy and faith in government.”

Come again? Someone should explain to Senator Schumer that democracy would have actually been set back by the enactment of the draft guidelines and a delay might be a step toward protecting and supporting the remnants of democracy that still function in U.S. politics. And the more than 150,000 comments received by the IRS—the most ever on a proposed tax regulation—represent the desirable functioning of a democracy, with the IRS actually listening to the comments and withdrawing the draft.

“Consistent with what Commissioner Koskinen has previously stated, it is likely that we will make some changes to the proposed regulation in light of the comments we have received,” the IRS said in a written statement. “Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation.”

The IRS plan had been to hold hearings before proceeding with the guidelines, but now, with the guidelines withdrawn, the idea of reworking a draft before new hearings makes some sense. It might have been difficult for the IRS to line up large enough hearing rooms to accommodate all of the interests that might want to expound on their ideas for 501(c)(4)s in the absence of a new proposal.

There are, however, cogent, relatively comprehensive proposals available from nonprofit groups. One good example is the Bright Lines Project, which explains both regulatory and legislative changes that might be needed. Most proposals we have seen, for all their good points and their weaknesses, are pretty thin on their approaches to disclosure of political donors, but hopefully this IRS reset will get the Service and the nonprofit sector to examine the fixes that are warranted by the mess that the American electoral process has become.—Rick Cohen