IRS Backs Down on Strict Limits on Tax-Exempt Groups

As the IRS targeting scandal grew, in an effort to help the taxing agency put an end to political activism, government operatives decided it was necessary to put more limits on what tax-exempt organizations were allowed to do. However, the proposed changes brought criticism from both the left and the right. Now the IRS has announced that it is again re-writing the rules.

On April 15, IRS Commissioner John Koskinen told USA Today that the agency was looking at re-proposing “a redefined rule and [asking] for more public comment.” Koskinen went on to say that he felt the process would take at least the rest of the year and maybe longer.

“There are very thoughtful comments and concerns, and one of the questions that has evoked a lot of comment is, once you define what political activity is, to what organizations should it apply in the 501(c) context and how much of it should be allowed? All of that is going to be very important,” Koskinen said.

Liberals and conservatives alike complained that the originally proposed changes seeking to define “political activity” were overly broad. Groups that fall under 501(c)4 rules of the tax code would have faced a whole new set of banned activities with a new category called “candidate-related political activity.” Banned activities would include registration drives, distributing voter guides and other literature, and issue advocacy – all things currently allowed. The original proposal drew a record 150,000 public comments.

Early this year, conservatives launched a major effort to shine a light on the changes to pressure the IRS to withdraw the rules.

“Every American needs to know about this abuse of power,” Senate Minority Leader Mitch McConnell (R-KY) said on January 30. “Let me be clear: What the administration is proposing poses a grave threat to the ability of ordinary Americans to freely participate in the Democratic process.”

The President of the Family Research Council, Tony Perkins, echoed that, saying, “We have seen that this administration cannot be trusted with the authority they have. Why give them more?”

Koskinen also complained to USA Today that the IRS was under-funded by the federal government, making his job “more difficult.”

The IRS chief was critical of the loss of “$500 million of our sequester funds” and noted that the agency has fewer employees than it did four years ago.

On a side note, Koskinen said that the IRS may soon find itself in a worse mess next year than it is now once it is required to involve itself in Obamacare enforcement. “If we keep going at this level, with the increased responsibilities, at some point we risk crippling the agency, and that won’t be good for the government, and it won’t be good for taxpayers,” he said.

Follow Warner Todd Huston on Twitter @warnerthuston or email the author at igcolonel@hotmail.com.