Democrats Not Budging on New IRS Rules

by Eliana Johnson
Harry Reid is set to kill a compromise that would delay them in order to get a Ukraine bill passed.

Republicans will have to go back to the drawing board in their attempts to delay proposed Internal Revenue Service regulations if Senate majority leader Harry Reid drops provisions affecting the International Monetary Fund from a bill before Congress right now, as he is reportedly considering.

The IRS regulations, which would limit the political activity of 501(c)(4) social-welfare groups, have drawn heated criticism from nonprofits on the right and left who claim the IRS is unduly infringing on their right to free speech.

In the ongoing negotiations over a bill to fund aid to Ukraine, Republicans in both chambers told Democrats privately that they would cede ground on the IMF provision — which gives more influence within the organization to developing countries and, Republicans say, diminishes that of the United States — if Democrats agreed to delay the proposed rules.

The horse-trading was never intended to become public. If Democrats agreed to the delay, they would quietly add language to the Federal Register officially delaying the IRS regulations for a year while Republicans compromised on the IMF language. The two issues were not supposed to be publicly connected, sources familiar with the negotiations say.

That changed when Tennessee senator Bob Corker, the ranking Republican on the Senate Foreign Relations Committee, told Politico on March 11 that Republicans might give in to Democratic demands on the IMF if Democrats yielded on the IRS rules. “For Republicans, especially in the House, to even be willing to deal with the IMF issue, I know [the IRS rules are] very important, and for many Republicans in the Senate,” Corker said.

Democrats this week have put the Republicans’ demand on the IRS rules in the context of a larger offensive against the billionaire Koch brothers, whose 501(c)(4) groups have already spent millions on attack ads against vulnerable Democratic incumbents. These are the same groups whose political activities would be curtailed by the proposed IRS regulations the GOP is seeking to forestall.

“Republicans objected to moving forward with this aid package in order to protect the ability of the Koch brothers and other GOP donors to hide behind shadowy front groups — groups that spend millions on misleading political attack ads,” Reid said on the Senate floor on Monday. “Republicans objected to moving forward with this aid package unless Democrats agreed to allow the Kochs and billionaires like them to continue to anonymously spend millions trying to buy America’s democracy. It’s hard to believe, but that’s the truth.”

Senate minority leader Mitch McConnell on Tuesday tacitly acknowledged that the deal was off, insisting that Democrats drop the IMF provision. “This bill cannot pass the House or become law in its current form—it must be amended,” he said. “And in order for it to become law, the controversial IMF provision must be removed.” 

The backroom negotiations over the Ukraine funding bill isn’t the first time Republicans have pushed Democrats on the IRS regulations behind the scenes.

The rules were also the subject of fierce debate during negotiations over the omnibus spending bill passed in January. Appropriations Committee chairman Hal Rogers quietly sought a one-year delay on the IRS rules and some protection for groups and businesses — like Hobby Lobby, which has a case before the Supreme Court right now — that are morally opposed to Obamacare’s requirement that employers cover contraception. Democrats wanted approval for new IMF rules and more funding for the president’s pre-kindergarten program, among other things, but were unwilling to give in on the IRS regulations: Democrats and the administration rejected Rogers’s offer to trade increased funding for the IMF for an amendment that would have delayed them.

“The spin is that Republicans are so petty, but the truth is that Democrats are willing to sacrifice everything, including the IMF reforms they wanted, to keep them,” says a senior Republican aide.

The battle over the proposed regulations occurs as the House Oversight Committee and its chairman, Darrell Issa, are struggling to hold former IRS official Lois Lerner accountable for her role in the targeting of right-leaning organizations. Lerner has refused to testify before lawmakers.

When Lerner invoked her Fifth Amendment rights in a March 5 hearing, there was momentum behind a push to hold her in contempt of Congress. Much of that was lost in the spat between Issa and ranking committee member Elijah Cummings that occurred at the end of the hearing, when Issa denied Cummings the opportunity to speak and ordered committee staff to turn off his microphone. The resulting uproar, says one GOP congressman, took attention away from the issue at hand and made House leadership skittish about moving ahead on Lerner, at least for the moment.

Boehner spokesman Mike Steel tells NRO that the intentions of House leadership have not changed. “Speaker Boehner has been clear, both publicly and privately, that if Lois Lerner does not testify fully and truthfully, she will be found in contempt of Congress,” he says.

— Eliana Johnson is media editor of National Review Online.

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