Fresh Voices in the Discussion
The period for comments on the IRS’s proposed regulations for Section 501(c)(4) social welfare organizations’ politically related activities closed last month. Over 140,000 comments were filed, reportedly more than ten times the regulatory runner-up. Next up: public hearings and legal challenges to the proposals. Among the many notable comments were two from current and former Federal Election Commissioners. The Commissioners strongly emphasized the importance of keeping political campaign activity within the FEC’s recognized domain, expertise, and built-in bi-partisan structure, and away from IRS’s demonstrated lack of capability and potential for abuse. Their comments are fresh voices in the discussion; the Commissioners addressed the significant differences and benefits between the FEC’s and IRS’s regulatory authority, capability, and safeguards.
FEC and IRS Distinctives
First, the three current Commissioners (Chairman Goodman, Petersen, and Hunter) observed that among all federal agencies, the FEC is uniquely tasked with regulating political speech under the First Amendment. Because political expression is the very “essence of self-government” and lies at the “very heart of the organism which the first amendment was intended to nurture and protect,” regulation thereof is highly sensitive and therefore requires both “specialized knowledge and cumulative experience.” Accordingly, as the Commissioners explained, Congress created the FEC in 1974 to administer the Federal Election Campaign Acct of 1971 (FECA), which – due to the fundamental First Amendment rights at stake – contains a delicately balanced scheme of procedures and remedies.
On the other hand, as the Commissioners noted, the IRS is vastly different. The IRS’s mandate is to focus on tax revenues and fiscal policy. Accordingly the Commissioners advised, “Because the IRS’s mission has not been defined by reference to First Amendment values or sensitivities, it would be prudent for the IRS to defer to FEC regulations and relevant court precedents when its rules venture into politically sensitive areas, absent a compelling policy reason to diverge.” The Commissioners concluded that the IRS has failed to so defer with its proposed 501(c)(4) regulations; consequently, the proposed regulations impose confusing standards and jeopardize free speech values under the First Amendment.
The IRS Is Out of Its Depth
Second, eight former Republican FEC Commissioners warned against the IRS’s proposed regulations, basing their comments on “a combined 55 years of experience” administering and enforcing federal campaign laws. They asserted the proposed regulations would interfere with the current campaign finance system established by Congress and would “needlessly embroil the IRS in an area in which the Service lacks both professional expertise and the structure and safeguards necessary to assure the confidence of the American people that their government will not discriminate against them on the basis of their political belief and activities.”
The former Commissioners noted that the FEC has exclusive jurisdiction regarding enforcement of federal election law and related policy development. To the extent flaws may exist, they opined, it is not for the IRS to stretch its regulatory authority and fix them. Indeed, the IRS’s lack of expertise and inappropriate role here is illustrated by the fact that its 30/60 day scheme for regulating political speech has already been struck down by the U.S. Supreme Court in Citizens United.
A Lack of Statutory Authority
The former Commissioners further argued that the IRS lacks statutory authority to restrict political activity by 501(c)(4) social welfare organizations. These organizations, by definition, are legally allowed to engage in political campaigns – at least to a limited degree. Moreover, while the term “social welfare” itself is not statutorily defined, “in a democracy, political involvement and participation are certainly within the definitions of ‘social welfare.’” Proposed IRS regulations would likely “turn IRS officers into arbiters of ‘social welfare.’ In such non-statutory roles, offcers would have to pass judgment on what is, and is not, in the best interests of the people.” As courts have already determined, however, that is beyond the legal pale for the IRS. Indeed, as the former Commissioners observed, “Promoting the common good and general welfare of the people for the purpose of bringing about civic betterments and social improvements must include advocacy in the election process,” particularly in our modern times of extensive government scope.
Case In Point: Donor Identities
The former Commissioners honed in on one more controversy underlying the proposed IRS rules – namely, whether (and which) organizations should be required to disclose their donors’ identities. As they observed, despite the IRS’s proposals to the contrary, it is not the Service’s role to channel certain political activity to Section 527 organizations, for which donor disclosure is required.
Given the plethora of far-ranging negative public comments on the IRS’s proposed regulations, it seems unlikely that they will be approved – at least in their original form. Continued attentiveness and public investment is warranted, however, to protect the vital constitutional and regulatory interests at stake.
