Rep. Chris Van Hollen has a proposal he says can assuage both the tea party's concerns over IRS overreach and progressives' fretting over the flood of anonymous campaign cash unleashed by the Supreme Court's Citizens United ruling.
His plan: Sue the IRS.
The Maryland Democrat announced Wednesday that he is suing the agency, as well as the Treasury Department, to demand a change in the way they evaluate nonprofits that proclaim themselves to be "social-welfare" organizations.
The IRS currently allows such organizations — a class of power players known as "tax-exempt 501(c)4s," whose ranks include Karl Rove's Crossroads GPS and the Obama-aligned Priorities USA — to dabble in political advocacy, so long as they keep such activities secondary to their general charitable work.
But Van Hollen says that such a "primary charitable, secondarily political" arrangement leaves open a loophole for overtly political organizations to exploit benefits intended to be reserved for charities. Chief among those benefits is that 501(c)4s do not have to disclose their donors, and so corporations, unions, and other groups can pour money into advocacy efforts without fearing public backlash, or indeed any public scrutiny at all.
Hoping to lift the curtain on political spending, Van Hollen wants the IRS to rewrite its rules to require 501(c)4s to engage exclusively in social-welfare activities, and keep out of political spending entirely. If the groups want to get into politics, they should register under a different nonprofit classification — known as 527s — that would protect the groups from taxation but require them to disclose all of their donors.
"You can spend the money, but the law does require, as Congress intended, that you [tell] the public where the money is coming from," Van Hollen said Wednesday.
The fight over political spending has taken on new urgency since 2010, when the Citizens United decision struck down campaign finance laws that had previously checked outside groups' political spending.
Outside political spending has exploded since the decision, as have the number of groups seeking 501(c)4 status. More than 3,200 groups sought the status in 2012, as opposed to 1,735 in 2010.
Van Hollen said that his primary goal in the suit was campaign finance transparency, but he hoped that the suit's ancillary consequences could pull in allies from the opposite end of the political spectrum.
Congressional Republicans have been outraged over the IRS's campaign finance role since the agency admitted earlier this year that some of its employees had used criteria that targeted tea-party groups seeking 501(c)4 status for closer scrutiny.
Van Hollen rejected Republicans' claim that the IRS was engaged in politically motivated attacks, echoing Democrats' recent claims that liberal groups were also in the agency's crosshairs. But he said the problem could be rendered moot by removing the IRS's obligation to judge where groups stand along the blurred line between social welfare and political advocacy.