IRS Rule Change Could Aid Foreign Election Meddling, Critics Say

Transparency advocates are looking for a legislative fix after the IRS approved a rule they say opens the door to allow politically active nonprofits to take foreign money to influence U.S. elections, without being detected.

“At a time when over $10 billion total is expected to be spent during this election season, the requirement that organizations (like the National Rifle Association) report their donors to the IRS was key to ensuring that the foreign-money ban on elections was enforced,” Campaign Legal Center President Trevor Potter said in a statement.

“Congress must now step up and strengthen our transparency rules to ensure foreigners aren’t using opaque tax-exempt organizations to meddle in our elections,” Meredith McGehee, executive director of the nonprofit Issue One, said in a statement.

Others hailed the move, which was announced Tuesday, saying it would prevent accidental disclosure of information always meant to be confidential.

“Everyone has the right to support social causes without being harassed,” David Keating, president of the nonprofit Institute for Free Speech, said in a statement.

Photo by Andrew Harrer/Bloomberg
The IRS altered its disclosure rules for some nonprofit political groups.

Under the new rule, the IRS will stop routinely collecting information identifying specific donors to tax exempt groups, except for charities, for which donations are tax deductible. Previously, the IRS collected this information but didn’t make it public.

The rule change means entities such as so-called Section 501(c)(4) groups that spend money to influence elections no longer will have to tell the government who their donors are, though they will have to keep records of donor information. Unlike candidates, political parties and regulated political action committees, these groups aren’t required to disclose their finances, including donors, to the Federal Election Commission.

Nonprofits known to critics as “dark money” groups have spent nearly $1 billion to influence federal elections over the last decade, according to reports filed with the FEC. And much of their election-related spending isn’t reported because groups skirt campaign finance rules by avoiding specific words of advocacy or spending during certain time periods not covered by the rules.

Watchdog groups and Democrats in Congress have long advocated for legislation known as the DISCLOSE Act (H.R. 2977), which would require all groups spending money to influence federal elections to publicly disclose donors funding their campaign messages. This legislation has been opposed by Republicans and blocked in the GOP-controlled Senate.

McGehee said opponents of tougher disclosure rules for nonprofit groups have argued that rules aren’t needed because the government collected donor information to prevent improper influence, such as foreign money.

“It is deeply concerning that many of those same organizations have now helped convince the IRS that collecting detailed information about the donors to politically active nonprofits is unnecessary, even as dark money groups pump huge sums of secret money into our elections,” she said.

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bgov.com

To contact the editors responsible for this story: Kyle Trygstad at ktrygstad@bgov.com; Bennett Roth at broth@bgov.com

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