Expressing Concern Over New IRS Rules for Non-Profits


Internal Revenue Service
1111 Constitution Avenue NW
Washington, DC 20224


Pete Sepp
Executive Vice President
National Taxpayers Union
108 N. Alfred Street
Alexandria, VA 22314

Subject:    IRS REG-134417-13; Docket ID IRS-2013-0038 -0001; RIN 1545-BL81

        On behalf of the 362,000 members of National Taxpayers Union (NTU), I write to express our concerns regarding the proposed rule, “Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities.” The new rule would significantly restrict the ability of (c)(4) organizations, including NTU, to educate citizens. Harsh measures such as barring the mention of candidates’ names or parties, even in a non-political context and forcing organizations to hide past references to candidates online and off, would chill legitimate communications over issues that incumbents in Congress happen to be debating during an election year. Together with other burdensome new regulations, the rule would severely impair the ability of organizations to continue holding elected officials accountable and ultimately constitutes a profound infringement of our First Amendment rights.

        The new rule would make it very difficult, if not impossible, for NTU to execute its mission to “mobilize elected officials and the general public on behalf of tax relief and reform, lower and less wasteful spending, individual liberty, and free enterprise.” Founded in 1969, NTU is the nation’s oldest taxpayer advocate organization. We are a nonprofit, nonpartisan citizen group that works for lower taxes and limited government at the federal, state and local levels. To achieve our goals, NTU works with Congressional offices on both sides of the aisle on an issue-by-issue basis by endorsing legislation, lobbying, and organizing our grassroots members without regard for party politics. Off Capitol Hill, NTU works closely with a number of organizations from across the political spectrum on issues including national defense expenditures, federal flood insurance, and Congressional ethics.

        On a day-to-day basis, this means writing letters to Members of Congress or state legislatures urging them to support or oppose specific bills or amendments. At the federal level one of our most effective tools is our annual “Rating of Congress.” Published every year for decades, this is a scorecard that grades Representatives and Senators based exclusively on how they vote on every roll call regarding taxes, spending, and regulation. Alerts are sent prior to important votes advising what position will be considered “pro-taxpayer.” We also engage in many of the typical activities of other 501(c)(4) organizations including communicating with our members and the public via email, newspaper, and the radio.

        Under the new guidelines proposed by the IRS these basic activities would soon be considered “candidate-related,” and thus forbidden, simply due to the fact that many incumbent officials run repeatedly for elected office. In order to avoid compromising our tax status, we would be forced to severely curtail or eliminate the principal tools by which we educate our members and the public on what exactly the people they chose to represent them  (who are often far removed from their constituents) are doing in Washington. For example, complying with the “blackout” period described in the proposed rule constitutes an enormous technological hurdle in and of itself. Given the public nature of our website and the way search engines and other websites cache and share information, it would be virtually impossible to hide all past references to candidates at any given time.

        In our opinion, current political speech standards promulgated by the Federal Election Commission – while not always ideal – adequately distinguish between citizen education and electioneering. It is not all that daunting to differentiate between a scorecard that evaluates all legislators against the same yardstick, using publicly available voting records, and an advertisement or statement urging voters to support a specific candidate or party. Indeed, as other legal minds have pointed out, the IRS’s proposed rule would introduce vagaries and tests that would be far more capricious and cumbersome than the FEC’s regime, to an uncertain effect. As an organization whose members have taken an active, keen interest in efficient tax administration, we continue to question the wisdom of involving the IRS in the minutiae of political speech and activity questions when another federal agency, FEC has long policed such matters. 

        One of the tasks officials faced in implementing the IRS Restructuring and Reform Act of 1998 was ensuring that the agency remained focused on key strategic planning goals (such as reprioritizing customer service) that would help citizens comply voluntarily with complex tax laws. This task is ongoing, as demonstrated by the technical aspects the IRS has faced with the Affordable Care Act, among them a new definition of income and interaction with private insurance companies on a massive scale. Meanwhile, in her most recent report the IRS Taxpayer Advocate pleaded for resources to provide better contact with taxpayers, amid news the agency could barely answer more than 60 percent of the telephone calls it received from taxpayers last year. In this environment, an expansion of election-related law under the rubric of the IRS should be the last thing under consideration. Even as NTU and other 501(c)(4) organizations would find our speech restricted under the edicts of the proposed rule, the same cannot be said of other groups who often participate in the very same spheres and social welfare activities that we do, including the keeping of scorecards, endorsement of legislation, issue advocacy, and grassroots mobilization using all manner of communication vehicles. Selectively limiting the activities of one particular type of organization is a giant thumb on the free-speech scale in favor of unions, trade associations, and rent-seeking special interests. The loss of issue advocacy organizations could mean a boon to the for-profit lobbying industry, elements of which may be bound by far different considerations than those of citizen groups.  

        There are also practical aspects to this issue – as the Center for Competitive Politics recently noted, the proposal violates the Paperwork Reduction Act (PRA) owing to “excessively low and wildly off the mark” estimates of compliance burdens. The onerous record keeping involved in fulfilling the terms of the new rule would greatly add to the time, personnel, and financial obligations of (c)(4) organizations. Using PRA parameters, current regulations require an estimated 22 hours to comply with, whereas the figure for complying with the new rule is listed to be a mere 2 hours. Even though this issue falls more within the purview of the Office of Management and Budget, NTU agrees that this figure is absurd and has relevance to these comments to the IRS. The requirements for new kinds of record-keeping are complex and onerous. For instance, keeping track of volunteer hours and placing a value on that time is practically impossible in an organization comprised of thousands of individuals taking action on their time and under their own auspices. Curiously, and ironically, this challenge is one reason policymakers cite for not permitting charitable tax deductions based on a donor’s contribution of his or her personal time. How strange that on one hand the IRS would enforce this disallowance of a tax deduction while on the other it would impose a rule involving such an intricate procedure.

        Another major concern is the “off-plan” manner in which this new rule seemed to be  concocted. Congressional investigations have brought to light strong indications that administration officials strove to keep news that the rulemaking was under active contemplation off the public schedule. These were the very same investigations being conducted in regard to the potential targeting and political discrimination on the part of the IRS in determining the tax status of not-for-profit social welfare organizations. Furthermore, by our reading of the Administrative Procedure Act (APA), the IRS is proposing a package of rules that are mainly legislative in character rather than simply interpreting or clarifying existing statutes. This ought to have triggered APA’s notice and comment requirement under the law.

        While it has been claimed that the new rule is necessary in order to prevent the kind of “poor decision making” that gave rise to the recent scandal, the timing of the behind-the-scenes rule planning and lack of transparency raises questions of further discrimination. Rushing through a radical new rule change is not the proper response to an ongoing examination of the matter.

         IRS Commissioner John Koskinen recently said, “Taxpayers need to be confident that they will be treated fairly, no matter what their background or their affiliations. Public trust is the IRS’ most valuable asset.” Restricting speech is far from fair and imposing burdensome new regulations targeting taxpayer allies is hardly a trust-building exercise. It certainly violates public trust to impede their access to information and opinions on the issues that affect their lives and families. Likewise, the public expects and deserves an IRS whose priority is administering laws that pertain to tax collection. We urge you not to finalize this proposed rule on the grounds that it is neither clear nor appropriate.

        Included, please find the comments of 1203 NTU members, consumers, and taxpayers, who share these views. I hope the IRS will find these comments useful in its deliberations.


Pete Sepp
Executive Vice President