VAUGHN: IRS scandal overlooks larger issue

June 1, 2013

Julia VaughnCommon Cause founder John Gardner once said, “We share the conviction that as citizens we have every right to raise hell when we see injustice done, or the public interest betrayed, or the public process corrupted.”

That attitude has persevered at Common Cause, so we join those who have condemned the IRS for its apparent uneven and biased treatment of some conservative groups and their applications for non-profit status.

While we encourage an independent, credible investigation to get to the bottom of the Tea Party scandal, this kerfuffle threatens to overshadow an even bigger injustice. The White House and Congress should be asking why a major federal agency was wasting time, energy and resources on small, grass-roots groups while ignoring blatant violations by political heavyweights both Republican and Democrat.

It is disappointing that the agency’s credibility has been so deeply damaged, because it absolutely must crack down on the 501(c)4 groups that have proliferated since the disastrous U.S. Supreme Court Citizens United decision. Immediate action is needed to implement strong standards of review for all not-for-profits that engage in political activity, along with a process for monitoring compliance.

The number of groups seeking tax-exempt status under Section 501(c)(4) has exploded since the 2010 Citizens United decision, rising from 1,500 that year to approximately 3,400 in 2012. Political spending by these groups amounted to $254 million in 2012, just $1 million less than what the major political parties spent.

While the political parties must disclose where their money comes from, 501(c)(4) groups do not have to reveal their donors. This disparity is casting a giant shadow of dark, anonymous money over federal and state elections.

It’s infuriating to learn that, while the IRS was going over some small-fish applications with a fine-tooth comb, experienced political operatives like Karl Rove were blatantly using 501(c)(4)s to hide millions in election spending. The “social welfare” 501(c)(4) that spent the most in 2012—Rove’s Crossroads GPS— spent more than $70 million on communications explicitly calling for the election or defeat of specific candidates.

Watchdog groups, including Common Cause, have filed complaints with the IRS against Crossroads GPS and others like them because they are primarily operating for political, not charitable, purposes, in violation of the laws the IRS is supposed to enforce. Our complaints received no response from the agency.

The worst possible outcome of this controversy would be for the IRS to back off from enforcing the law and grant a free pass to groups across the political spectrum that seek to use their tax-exempt status to hide the identity of their donors. Instead, we need more enforcement based on clear and viewpoint-neutral criteria to prevent evasion of campaign, disclosure and tax laws.

To make it clear who can do what, Congress and the IRS must adopt a bright-line test for deciding when political activity by not-for-profits requires a group to form a “527” political organization and disclose its donors.

Since Citizens United, we’ve seen a dramatic increase in the misuse of not-for-profits to hide political spending by billionaires and corporations, and the IRS must take decisive action to crack down on this abuse. Targeting groups for additional scrutiny because they appear to have an electoral motive is proper, but only if the same criteria is applied to all groups evenly.

The bottom line? Special interests should not be allowed to use front groups to evade disclosure laws designed to inform voters and prevent corruption.•


Vaughn is policy director for Common Cause/Indiana, a nonpartisan citizens lobbying organization that works for open, honest and accountable government. Send comments on this column to ibjedit@ibj.com.


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