In response to headlines about foreign actors interfering in U.S. elections, the U.S. House Committee on Ways and Means last month issued a Request for Information (RFI) inquiring about how foreign nationals might be using nonprofits to skirt election disclosure laws and about the IRS’s oversight role. In the weeks since, a diverse group of organizations across the ideological spectrum have weighed in with the overwhelmingly popular response: there is no evidence of systemic abuse, the constitutional right to donor privacy must be upheld and giving the IRS more authority is the wrong direction.
Though the IRS is fundamentally responsible for tax enforcement, the agency has also been tasked with defining “political activity” as it relates to an organization’s tax-exempt status. The IRS currently uses an ambiguous and imprecise 11 step test to make this determination.
Many organizations responded to the RFI by calling for the IRS to be relieved of its responsibilities in defining political activity, rather than give it more authority in this area. In the words of the National Taxpayers Union Foundation’s Tyler Martinez, “The IRS is ill-equipped to navigate these rough constitutional waters.” He argues the IRS functions primarily as a tax agency and lacks both the necessary expertise and organizational structure to effectively oversee political activities, all while traversing the complex terrain of First Amendment rights and donor privacy concerns. Other groups, including People United for Privacy, say existing campaign finance law “already includes a regulatory scheme to address foreign nationals making contributions to affect U.S. elections, whether directly or indirectly.”
Sadly, the IRS has already proven its inability to keep confidential information private. The Institute for Free Speech details many such shortcomings in its RFI response, which says granting the IRS access to more donor names and addresses only increases the risk of inadvertent or deliberate donor disclosure – a direct violation of First Amendment donor privacy laws. After all, donor privacy remains paramount as donors continue to face “damaging consequences from disclosure, including harassment, adverse government action and reprisals by an employer, neighbor or community member.”
But if Congress insists on the IRS defining the term, the agency should, at a very minimum, “be required to establish bright-line definitions of ‘political campaign intervention’… as they are used to define 501(c)(3) and 501(c)(4) organizations,” as the James Madison Center for Free Speech argues. Besides, the Center says, the First Amendment necessitates objective, speech-preserving tests – not the “facts and circumstances” approach the IRS is currently employing.
As the Roundtable has stated previously, a crucial piece of any new test or definition is that nonprofits must be free to advocate for policy change. Helping to shape public policy has been a key role of nonprofits throughout our history – from abolition to women’s suffrage to the school choice movement. Unfortunately, the current muddled definitions of what constitutes “political” activity versus legitimate policy advocacy and arbitrary enforcement by the IRS has already caused a steep decline in nonprofits who report engaging in advocacy efforts.
By increasing ambiguity through vague IRS descriptions and increased IRS authority, nonprofits would likely be further deterred from engaging civically – an entirely permitted nonprofit activity and one distinguishable from “political campaign intervention.” A group of philanthropy organizations — the Council on Foundations, Independent Sector and the United Philanthropy Forum – correctly notes that “Fear and confusion around legitimate campaign activity have stunted entirely legitimate nonprofit engagement with policy and advocacy.”
For the longevity of civic engagement, it is essential the IRS not be given further leeway to arbitrarily punish those nonprofits with whom a current administration disagrees. In a separate response, a handful of academic tax professors proposition that ensuring the diversity of viewpoints we value as a society rests on nonprofits’ power to voice their beliefs freely. That further underscores why an increasingly muscular IRS with new donor disclosure rules would pose an unnecessary barrier to philanthropic activity and nonprofit advocacy.
As House Ways and Means Committee Chairman Jason Smith and Oversight Subcommittee Chairman David Schweikert investigate concerns that foreign actors may seek to influence American politics illegally and inappropriately, the response – for the sake of our democracy and the guarantee to associate freely – cannot be an erosion of the Constitutional right to donor privacy. The outcome of such government overreach would hardly convince nefarious foreign actors to fill out new IRS forms, but instead would surely stifle charitable giving that supports a wide range of causes and communities.
Forcing donor disclosure for fear of where foreign dollars might flow ultimately hinders our own citizens’ philanthropy. Furthermore, Philanthropy Roundtable’s Director of Policy Research Jack Salmon’s research suggests that cases of abuse in our nonprofit system by malicious foreign nationals are limited and do not warrant blanket disclosure rules for all givers. Where there is abuse, the Roundtable supports the investigation and enforcement of existing campaign finance laws.
Ultimately, along with a chorus of other voices, the Roundtable believes the IRS lacks the structure or expertise to regulate political activity and should not be given more disclosure mandate authority. It is the view of various organizations representing diverse perspectives that the IRS should focus on revenue collection rather than wade into campaign laws.
As members of Congress consider how to address concerns surrounding election activities, the comment letters reaffirm the importance of protecting free speech and association. Therefore, any law that encroaches upon Americans’ privacy and discourages their involvement in civic life is simply unfit for our democracy.