Two blocks from the White House, a think tank, a Super PAC and a 501(c)(4) outside spending group share the fifth floor suite of an office building. A powerful trio, indeed. But new rules the Obama administration proposed could be a real buzz kill to their operation.
The rules specifically seek to rein in 501(c)(4) nonprofit groups, which are organized under a section of the law meant for “social welfare” but have become increasingly popular vehicles for influencing elections without disclosure. Perhaps most well known for this “dark money” spending is the Koch-backed Americans for Prosperity, which has spent tens of millions of dollars in federal elections without disclosing donors.
But the rules stand to change how myriad nonprofits operate, including think tanks.
Upon publication of the proposed rules in November, the Treasury asked for comments and guidance on the extent to which they also could be applied to 501(c)(3) “charitable” groups—the tax status of most think tanks. Widespread criticism ensued from an array of groups across political and ideological spectrums. Many said the rules would stifle civic engagement, create even more corruption or simply prompt donors who want anonymity to find other vehicles.
Reminiscent of the letter blitz surrounding the Volcker Rule, a key part of Wall Street reform efforts, the Treasury has received an unprecedented 146,037 public comments on the proposal. That’s an average of about 1,600 a day.
At least five think tanks and their 501(c)(4) affiliates commented on the rule, including the Bipartisan Policy Center, American Action Forum, Center for Security Policy, Competitive Enterprise Institute and Heritage Action for America.
The Rockefeller Brothers Fund, an international philanthropic organization that gives to a variety of nonprofits, including think tanks, said that while it supports the intent, the rule “does little to address the corrupting influence of money in politics.”
It is concerned about the scope of what would constitute political activity and “the impact the proposed rule could have on groups such as our grantees, and more generally, on democratic practice in the United States.”
Like other commenters who supported the intent but took issue with specifics, the Rockefeller Fund urged the Treasury to develop “a single, clear definition of political activity that can apply to all tax exempt categories (and all tax categories where possible) so that donors and others do not game the system.”
So how could the rules change the way think tanks behave?
Significantly, it could prohibit them from mentioning candidates on their websites or other public forums during election seasons. It’s not hard to imagine how this would make it difficult to publish papers seeking to influence public policy and discourse.
The rules also would prohibit them from inviting officeholders to parties, meetings and other events during election season. This could cut a key part of many think tank’s donor privilege programs, which give corporations, foreign governments and others access to lawmakers in exchange for certain sums of money
Another change could involve a think tank’s ability to recommend people for federal office.
The Competitive Enterprise Institute, a free-market public policy organization, wrote in opposition to the rule, saying among other things that groups including “think-tanks, commonly propose qualified people with specialized expertise, sometimes even their own staff, for positions that require such expertise, in fields such as international trade regulation.”
Another letter, which the presidents of the Bipartisan Policy Center and American Action Forum co-signed, said the rules would create a sea change with “disastrous consequences” and turn “the historically tax-favored activity of think tanks into a minefield.”
They also pointed to how the rule would prohibit mentioning candidates within 30 days before a general election and 60 before a primary election, among other things.
“Rather than treating any and every policy discussion as a potential attempt to influence elections or legislation, the law has quite consciously been shaped to ensure that the restrictions on lobbying and political campaign intervention do not unduly infringe on this traditional area of charitable and educational activity,” they stated.
They also said the rules would be a burden to think tanks who have 501(c)(3)s and 501(c)(4)s operating in tandem, often sharing office space, staff and other resources. But they didn’t disclose the fact that their own groups fall into this category.
Rather they said, the think tanks submitting this letter “may receive contributions from 501(c)(4) organizations to help sponsor conferences or fund policy work on issues of common concern.”
Nor did they mention that the American Action Forum has a 501(c)(4) arm that has spent more than $31 million on federal campaigns since the 2010 election cycle without disclosing donors, according to data available from the Center for Responsive Politics.
The American Action Network also shares an office and a president with the Congressional Leadership Fund, a Super PAC that spent $9.4 million in the 2012 election cycle opposing Democratic candidates. (As the Sunlight Foundation noted the return on investment in 2012 was around 60 percent for both groups.)
As a Super PAC, the Congressional Leadership Fund is required to disclose donors. However, one of them is its office-mate, the American Action Network, meaning the original source of that money remains anonymous. (American Crossroads/Crossroads GPS, a 501(c)(4) and Super PAC duo linked to Karl Rove, also has been known to share an office with the group.)
So what is next?
The Treasury must continue wading through hundreds of thousands of comments—many of them form letters or statements totally unrelated to the issue at hand (or any issue, for that matter).
There also have been lawsuits and congressional hearings. An internal audit last year found the IRS had improperly targeted tea party and conservative groups using key words to scrutinize them specifically.
On February 5th, IRS Commissioner John Koskinen was called to testify about the proposed rules before the House Means and Ways subcommittee on Oversight.
Republican Congressman Dave Camp of Michigan, who chairs the committee, introduced a bill in January to block rules. In the two hour hearing, Republican members pressed him to explain why the IRS proposed the rules and demanded correspondence leading up to that decision. They were concerned the rules would affect this year’s midterm elections and were intended to do so.
Koskinen said the rules wouldn’t be finalized in the near future.