Renewed GOP Focus on the IRS Scandal

by Eliana Johnson
Republicans slam new rules that could limit conservative nonprofits in 2014, but not unions.

Republicans do not agree on much these days, but they are united in their view that the Obama administration’s response to the Internal Revenue Service’s targeting of conservative groups has been lethargic at best. With the midterm elections around the corner, some even say new rules proposed by the IRS to govern nonprofit groups threaten to exacerbate the original problem, clamping down on the political activity of the tea-party groups that proved so crucial in the victories over Democrats in the 2010 midterm elections.  

So, while the president may have declared the scandal dead, House Republicans this week are on the case again, holding back-to-back hearings on the matter in an attempt to refocus public attention on the controversy that enveloped the IRS last May.

The first hearing, slated for this morning and led by Ohio’s Jim Jordan, will feature as a witness newly installed IRS commissioner John Koskinen. Republican lawmakers will interrogate him on the agency’s response to targeting of tea-party groups.

News that Barbara Bosserman, the Justice Department lawyer leading the investigation into the targeting scandal, has donated generously to President Obama also prompted an outcry from Republicans. “Is it your position that of the 117,000 employees at the Department of Justice, the only lawyer available to head this investigation was a major Obama donor?” Texas senator Ted Cruz asked attorney general Eric Holder at a hearing in early February. He called on Holder to appoint a special prosecutor to investigate the scandal. “No one would have trusted John Mitchell to investigate Richard Nixon,” Cruz said.

Louisiana’s Charles Boustany, the chairman of the House Ways and Means Committee’s Oversight Subcommittee, will lead the second hearing tomorrow. He requested that Bosserman appear but was rebuffed; the Justice Department has said it cannot comment on ongoing investigations.

Instead, Boustany’s hearing will focus on rules proposed by the IRS in November — they have not yet been finalized — that would govern 501(c)(4) organizations, including tea-party groups. When the targeting scandal emerged last year, the lack of clarity surrounding the IRS’s 501(c)(4)-approval process contributed to the controversy.

The existing rules offer guidance that is more subjective than objective: Groups must promote “social welfare” and can’t “primarily” engage in political activity. IRS agents have used “over 50 percent” as the mark by which to measure whether a group is primarily engaging in political activity, and the new rules aim to define more precisely which activities are political. The IRS has said the rules are intended to “ensure that the standards for tax-exemption are clear and can be applied consistently.”

The agency proposes to classify activities such as voter-registration drives, the production of voter guides, issue advocacy, and donations to other groups that spend money on elections as political activity. Critics see that as an attempt to kneecap the 501(c)(4) groups that have opposed the president and his agenda. “They’ve taken almost everything that is a normal 501(c)(4) activity, and they are now redefining it as a candidate-related political activity,” says Cleta Mitchell, an attorney with the firm Foley & Lardner who represents several tea-party groups that claim to have been targeted by the administration. “I think really what they want to do is make sure that all those little tea-party groups that campaigned against Obamacare in 2010, that they can’t do that again.”

To be sure, the regulations would hit large 501(c)(4) groups, too, which conservatives have used to funnel millions into the electoral process. The primary example is Karl Rove’s Crossroads GPS, which alone spent over $70 million on the 2012 election. Indeed, National Public Radio reported that of the 28 501(c)(4) groups that spent $1 million or more in the 2012 election cycle, 20 were conservative and just 7 liberal (one was independent).

The new rules would apply only to 501(c)(4) social-welfare groups. 501(c)(3) charitable organizations, which are not permitted to engage in political activity, could continue to register voters and produce voter guides, which are not classified as political activities under existing 501(c)(3) guidelines.

Critics say the new classification puts conservatives at a disadvantage. Mitchell points to liberal groups such as the Sierra Club and the League of Conservation Voters that conduct voter registration and education. “The liberal (c)(3) groups are very well-funded, active, and there are a million of them,” she says. Neither would the IRS’s proposed restrictions apply to labor unions, which are governed and receive tax exemption under 501(c)(5) regulations.

Republicans say all of this is by design and that the agency reverse-engineered the rules in an attempt to codify the targeting that, in the run-up to the 2010 and 2012 elections, occurred behind the scenes. Conservative leaders – including the Faith & Freedom Coalition’s Ralph Reed, Heritage Action’s Michael Needham, and the Club for Growth’s Chris Chocola — penned a letter to members of Congress arguing that the rules would “muzzle” their groups while exempting liberal labor unions, and urging them to intervene.

Ways and Means Committee chairman Dave Camp has introduced legislation that would prohibit the Treasury Department from finalizing the rules for a year, until the Department of Justice and Congress have completed their investigations of the scandal. Camp said it is “premature” to complete new rules before all the facts are known, and argues that the legislation “will provide some much-needed assurance that IRS targeting and surveillance will not continue.”

House Oversight Committee chairman Darrell Issa on Tuesday called on the IRS chairman to withdraw the rules, calling it a “continuation of Lois Lerner’s efforts to curb conservative political speech.” Issa warned that the rules would “codify and systematize targeting of organizations whose views are at odds with those of the administration.”

Senate minority leader Mitch McConnell has been perhaps the most aggressive critic, thrashing the rules on the Senate floor last month and arguing that they are an attempt by the president to “use the IRS to drive conservatives right off the playing field.” The rules, he said, are the president’s means of “kicking the ladder out from anybody who disagrees with him.”

As the midterm elections near, expect to hear more talk about the IRS, and more rhetoric like that.

— Eliana Johnson is media editor of National Review Online.