Why the GOP Loves Tax-Exempt Organizations—Until It Doesn’t

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May 16 2013 6:35 PM

Tax-Free Like You and Me

The GOP wants to protect tax-exempt organizations—until it realizes that it may want to target liberal groups one day.

U.S. Speaker of the House Rep. John Boehner (R-OH) pauses during his weekly news briefing May 9, 2013 on Capitol Hill in Washington, DC.
Sen. Mitch McConnell (R-KY) was for harsher scrutinization of tax-exempt groups before he was against it.

Photo by Alex Wong/Getty Images

A little more than a year ago, around the time nascent Tea Party organizations started getting Proust-length questionnaires from the IRS, there emerged a scandal about political groups winning tax-exempt status. Left-wing groups. The Daily Caller shared pages of memos and anecdotes from Media Matters for America, then shared quotes from Republicans asking why a liberal press-watching organization deserved 501(c)(3) tax-exempt status.

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics

“The standards for tax exemption deserve review as a matter of good stewardship on the part of Congress,” Iowa Sen. Chuck Grassley told the website, “and should be considered as part of any comprehensive tax reform.”

At least! “The collaboration that they talk about on a weekly basis with the White House means this is a political operation,” shuddered Sean Hannity on his Fox News show, in one of many conservative kibitzes about the Media Matters stories. “This is not a 501(c)(3)—you know, tax-exempt organization. This sounds like a political organization and close collaboration with the White House.”

And this is how politicos used to talk about tax-exempt groups. Until last Friday, actually, it was ordinary to hear them decry or ridicule the 501(c)(3) and 501(c)(4) exemptions intended for “social welfare” but used pretty nakedly for politics. In the George W. Bush era, the NAACP was investigated on those grounds, and some conservatives executed mid-air high-fives. During the 501(c)(4) explosion of 2010, when Americans for Prosperity and American Crossroads started taking Democrats out at the knees, President Obama derided them for “posing as non-profit, non-political groups.”

You can watch Obama say that now, if you’re not too busy, because the Washington Free Beacon has compiled the president’s 501(c)(3) and 501(c)(4) zingers into ominous video. Oh, and the Washington Free Beacon is a project of the Center for American Freedom, a 501(c)(4) group whose mission statement is a word-for-word parody of the Center for American Progress, the progressive 501(c)(4) created by exiled Clintonites. Again: This is how it used to work. People agreed that the tax-exempt system was a joke. If everybody told the same joke at once, the damage and the shaming could be spread around.

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That’s not true anymore. The IRS scandal (or its spinners) is quickly creating a new right, a right no politician should take away—the right to start a tax-free organization that can play in politics. For the moment, anyone on the left who challenged this status quo is being retconned into an accomplice of the most hated Cincinnati IRS office in American history.

And so, every few hours this week, the National Republican Senatorial Committee has hit out at the Democrats’ 2014 incumbents and candidates. In the past, many of these finks had criticized political-acting 501(c)(4)s. “Why did the IRS target these people?” asked NRSC spokesman Brad Dayspring in a Thursday jeremiad typical of the genre. “Because [New Hampshire Sen.] Jeanne Shaheen and [New York Sen.] Chuck Schumer pressured them to. Today, Shaheen and Schumer pretend to be outraged by [their] OWN actions.”

Shaheen and Schumer never told the IRS to go after, say, the Kentucky 9/12 Project. They were panicking about groups like Crossroads Grassroots Policy Strategies. According to its mission statement, it was “a non-profit public policy advocacy organization that is dedicated to educating, equipping, and engaging American citizens to take action on important economic and legislative issues that will shape our nation's future.” According to observable reality, it and other Crossroads groups spent around $300 million to attack Democratic candidates.

Democrats, awkwardly, have attempted to use the new IRS scandal to remind everyone of why they feared the new 501(c)(4)s. “These so-called social welfare organizations must make their goal social welfare and not politics,” said Nancy Pelosi on Thursday, at her weekly press conference. She made a pitch for the DISCLOSE Act, which withered in 2010, but would have (in a manner yet untested by courts) required tax-exempt groups engaging in politics to disclose their donors.

Republicans have stuck to the new script—and it really is new. The Huffington Post’s Michael McAuliff made a good catch at the start of the week, noticing an old interview with Sen. Mitch McConnell full of the old “the left abuses tax-exempt status” gospel. “Most of the so-called charitable organizations who are involved in political activity in this country,” said the senator, “who are, in my judgment, involved in arguable violations of their tax-free status and violations of the campaign laws, happen to be groups on the left.”

But when McAuliff followed up, McConnell declared that “people are entitled not only to petition the Congress for redress of grievances under the First Amendment, but to say whatever they choose to in criticism or praise about any of us.” Money is speech. Even secretive money is speech. Demanding disclosure, or audits, was a threat to that speech.

All manner of political-looking groups are crying havoc now, citing the new standard. The conservative Thomas More Society has produced evidence that a pro-life group couldn’t get tax exemption unless and until it promised not to protest Planned Parenthood clinics. The Leadership Institute has just revealed the details of a 2011 audit; complying with that cost them $50,000. Actually, the Leadership Institute audit gives us a perfect example of the shift on 501 status and the rights of man. Here’s how WFB reporter CJ Ciaramella reported it.

“The IRS’ indefensible behavior is worse than we first thought, as it targeted both new and existing conservative groups in politically motivated attacks,” said Morton Blackwell, president of the Leadership Institute, in a statement. “Fortunately my Leadership Institute had the resources to stand up to the government’s bullying and intimidation. Other groups, including grassroots and tea party groups we’ve helped train, did not.”

Blackwell’s a member of the Republican National Committee, but that’s not the point. Here’s how the campaign finance lawyer C. Boyden Gray described the possible offenses of Media Matters, back in February 2012, zeroing in on the group’s “political training” program.

The political training Gray refers to is the Media Matters “Progressive Talent Initiative,” a program designed to instruct left-leaning pundits on how to effectively bring the liberal gospel to the airwaves.

Gray said trainees could easily bring these newly acquired talents to Democratic campaigns, which he believes could be problematic for the legal status of their training organization.

What’s the difference between the Leadership Institute training young politicos on the right and Media Matters training young politicos of the left? Nothing. There’s no difference. The campaign finance scolds were standing on solid ground, until in one week it shifted about 1,000 miles to the right.

You could see the shift on Thursday, when conservative Republicans (led by Rep. Michele Bachmann) gathered outside the Capitol with Tea Party leaders who’d been hassled by the IRS. Speaker after speaker decried the IRS for trampling on free speech—by holding back on tax-exempt “social welfare” status for groups that would eventually show up outside the Capitol, next to conservative Republicans.

Some Republicans still wrestled with the tax issue. Maybe it would make more sense to scrap the system—ideally, to dynamite the whole IRS—and let people engage in politics without worrying about for-profit status or nonprofit status or being accused of violating one or the other. “Once they force you into this funnel to have that legal status,” said Texas Rep. Louie Gohmert, “then you're hassled and abused.”

But a lot of activists want or need to jump into that funnel. For that reason, said Georgia Rep. Paul Brown, “The IRS needs to be nonpartisan.”

Be nonpartisan, sure—but how?

“They need to look at any group that qualifies for 501(c)(3) or 501(c)(4) status and give it to him.”

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