Tuesday, August 24, 2010

Is the IRS the New FEC?

The Washington Post reports that in the wake of the Supreme Court's Citizens United decision the burden of regulating political activity has shifted from the Federal Election Commission to the Internal Revenue Service.  While some groups will operate as either registered political committees - and so still subject to the disclosure rules administered by the FEC - or 527 groups - and so subject to the disclosure rules administered by the IRS - the article notes that many politically involved groups will claim Internal Revenue Code section 501(c)(4) status, which allows them to keep the identity of their donors secret.  Unions, tax-exempt under section 501(c)(5), and trade associations, tax-exempt under 501(c)(6), also are not required to disclose their donors.  All of these groups must have a "primary" purpose other than engaging in political activity, but as the article notes this is a vague and unclear standard.  Moreover, the IRS is by its very nature an after-the-fact regulator, poorly suited to acting quickly during the rush of an election season.  (Shameless self-promotion: a point I noted in arguing in a 2007 article that the FEC and not the IRS should oversee disclosures by 527s.)



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