FEBRUARY 27, 2014
“… given the Service’s targeting of conservative non-profits, the Service cannot claim authority to overturn 53 years of consistent interpretation with regulations that target these very same groups in the middle of an election year.”
(Washington, DC) – Judicial Watch announced today that on February 26, 2014, it sent a letter to the Internal Revenue Service (IRS) requesting that it direct the Treasury Department to withdraw a new IRS proposal to change the rules governing nonprofit First Amendment activity. The watchdog group criticizes the new “plainly unconstitutional regulation that arbitrarily reverses 53 years of administrative and judicial precedent.” Judicial Watch is the nation’s largest government watchdog organization.
Judicial Watch specifically objects to the proposed rules concerning First Amendment-protected activity of nonprofit (exempt organizations) organized under Section 501 (c)(4) of the Internal Revenue Code. Conservative “(c) (4)’s” have been improperly targeted by the IRS under the Obama administration. Indeed, the letter details Judicial Watch concerns about IRS abuse:
[Judicial Watch] is very concerned about both the opaque process by which the proposed regulations were developed, as well as the context—the apparent abuse of authority and potentially unconstitutional and criminal conduct by IRS employees with respect to the review of applications for exemption under §501(c)(4) filed by hundreds of organizations, the vast majority of which were “tea party” or other organizations supporting conservative policy principles and opposing many of the initiatives promoted by President Obama and his liberal allies—out of which the proposed regulations apparently arose. The secret manner in which these proposed regulations were developed, and the substantive provisions that would overturn more than 50 years of settled precedent regarding what is “intervention in a political campaign,” only increase the suspicion that the IRS is not attempting to administer the law as it is, but is attempting to arrogate to itself the making of the law, a function belonging solely to Congress, and not to the IRS.
The Judicial Watch letter notes that the Obama IRS’s recent “targeting of conservative non-profits” made the new “regulations that target these very same groups during an election year” particularly suspect, adding:
Although the Service has alleged that its true motivation behind promulgating these rules is not to shut down the speech of conservative § 501(c)(4) organizations in the middle of an election year, the timing, overbreadth, and under-inclusiveness suggest otherwise. Further, this would not be the first time that the impetus for a tax statute or regulation was to shut down the speech of opponents.
Under a new Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities (NPRM), the IRS seeks to replace the decades-old definition – “participation of intervention in political campaigns on behalf of or in opposition to any candidate for public office” – with a new term – “candidate-related political activity.” Judicial Watch notes that the new rules violate the First Amendment and would censor free speech.
The groups targeted by these new rules have a First Amendment right to “fully contribute to the debate and thereby foster our democratic system. Associational activity should be encouraged, rather than prohibited, because it protects citizens from overreaching by the government.”
The Judicial Watch letter, which included a request for a public hearing, concludes with a call for the IRS to withdraw the Notice of Proposed Rulemaking:
- The Notice of Proposed Rulemaking violated the Paperwork Reduction Act by failing to include all of the new recordkeeping that will be required by §501(c)(4) organizations if the proposed regulations are adopted.
- The Service has no authority to adopt a regulation that departs so radically from its prior, long-standing interpretation of the definition of intervention in a campaign for public office.
- The proposed regulation also arbitrarily creates a separate definition of “intervention in a political campaign” that irrationally applies only to §501(c)(4) organizations.
- If adopted, the proposed regulation would violate the constitutional rights of §501(c)(3) organizations that, as noted by Justice Blackmun in Regan v. Taxation with Representation of Washington, must depend on affiliated §501(c)(4) organizations to engage in substantial lobbying.
- The proposed regulation arbitrarily defines certain activities as “candidate-related political activities” even when they are conducted on a nonpartisan basis. These arbitrary definitions reverse 53 years of administrative and judicial interpretations regarding “intervention in a campaign for public office,” and would improperly cause many nonpartisan activities and issue advocacy conducted by §501(c)(4) organizations in support of their civic and social welfare objectives to be treated as political activity.
- The proposed regulation’s definition of “candidate” is impermissibly broad, because the Service has no authority to overturn Congress’ decision to effectively ratify the definition in Treas. Reg. §1.501(c)(3)-1(c)(3)(iii) by not amending that definition when it enacted §527 in 1976, and by re-enacting §501(c)(4) without amendment in 1986.
- In addition, the proposed definition of candidate will create additional complexity for §501(c)(4) organizations that do engage in candidate-related political activity, because they will have to keep one set of records for purposes of measuring and reporting on Form 990, Schedule C, the extent of their “candidate-related political activity,” and a second set of records for purposes of reporting and paying any tax due on exempt function expenditures pursuant to §527(f), using Form 1120-POL.
The letter to the IRS was signed for Judicial Watch by attorneys Alan P. Dye, Charles M. Watkins, Heidi K. Abegg, and Sarah Moone, recognized national experts in nonprofit law, First Amendment law and government regulation, of the law firm Webster, Chamberlain & Bean, LLP.
Judicial Watch is part of a coalition of conservative and liberal groups, including the ACLU, opposed to the rules.
“These new IRS rules are a dagger aimed at the heart of the conservative movement,” said Judicial Watch President Tom Fitton. “These unconstitutional rules are a continuation of the IRS scandal that saw the entire Tea Party movement suppressed by the IRS to help President Obama’s reelection. President Obama and his partisan allies in Congress want to stifle the speech of Americans opposed to their policies. This abuse of the IRS is every bit as much of a crisis for this Republic as anything Nixon did.”