Would Wealthy Donors Be "Muzzled" if They Had to Disclose Their Donations?

Reporting on Politics and Policy.
Jan. 17 2014 4:45 PM

Would Wealthy Donors Be "Muzzled" if They Had to Disclose Their Donations?

No mainstream media journalist has seized onto the IRS scandal of 2013—the "IRS targeting" story, to use her term—like Wall Street Journal columnist Kim Strassel. When the story broke last spring, when an IG report (spoiled, like a movie plot, by then-IRS Commissioner Lois Lerner) revealed that the IRS demanded sheaf after sheaf of evidence before giving tax exemption to Tea Party groups, Strassel declared that the scandal "started at the top," because the president had publicly critized groups like David Koch's Americans for Prosperity, and because some Romney donors were audited. The IRS, she wrote, "got its heading from a president, and his party, who did in fact send it orders—openly, for the world to see." The next month, Strassel offered readers a timeline of the story to prove "that the IRS's first BOLO list coincided with their own attack against 'shadowy' or 'front' conservative groups that they claimed were rigging the electoral system."

Strassel's continued in that vein ever since. Her argument involves just a little sleight of hand. The Tea Party groups that had the loudest grievances against the IRS were the small, new, prayer-circle-sized organizations set up in early 2009. The groups criticized by the president were 501(c) organizations, like AFP, that had the tax-exempt status of charities and used that to rain untraceable money into swing-state ad campaigns. So the American Issues Project, a group founded and funded by Swift Boat Veterans for Truth strategists/donors to run ads against Obama, became a mere "conservative outfit" that Obama wanted "targeted." An investigation of the group's tax status became a post-hoc Obama effort to nail conservatives:

The Obama campaign takes its vendetta against a political opponent to the FEC. The FEC staff, as part of an extraordinary campaign to bring down AIP and other 501(c)(4) groups, reaches out to Lois Lerner, the woman overseeing IRS targeting.
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Strassel's reporting is solid—she just follows it to conclusions that escape everyone else. This long preamble is my way of introducing her current argument, that a proposed IRS rule would codify the "targeting" for all time. As Strassel wrote, it was dropped during the sleepy Thanksgiving news cycle, though it can be read in full here. The gist: The IRS would redefine "social welfare," the supposed cause of 501(c)4 groups, so that "the promotion of social welfare does not include direct or indirect candidate-related political activity."

Alerted by Strassel, Republicans spent the month between the introduction of the budget and the passage of an attendant spending bill trying to block this rule. Strassel's reporting:

Congressional sources tell me that House Appropriations Chairman Hal Rogers (R., Ky.) had two priorities in the omnibus negotiations. One was getting in protection for groups that morally oppose ObamaCare's contraception-coverage requirement. The other was language that would put a hold on the IRS rule.
The White House and Senate Democrats had their own wish list, including an increase in funding for the International Monetary Fund, the president's prekindergarten program and more ObamaCare dollars.
Yet my sources say that throughout the negotiations Democrats went all in on keeping the IRS rule, even though it meant losing their own priorities. In the final hours before the omnibus was introduced Monday night, the administration made a last push for IMF money. Asked to negotiate that demand in the context of new IRS language, it refused.

And here, the framing is everything. To Strassel, the Democrats' insistence on keeping the rule is pure 2014 politics. Their plans:

"ensure that... conservative groups are silenced"

"counting on the tax agency to muzzle its political opponents"

"shut up hundreds of groups that pose a direct threat by restricting their ability to speak freely in an election season"

It's unfair, writes Strassel, because "Mr. Obama's union foot soldiers—which file under 501(c)(5)—can continue playing in politics." That's what I mean about the framing. Strassel creates a binary universe in which Democrats get to spend unlimited money via their unions and conservatives spend unlimited money via the 501(c)4s.

Left unsaid is that the second kind of spending is sort of an accident, and a joke. Donors like 501(c)4s because they don't have to disclose where the money comes from, and because the old guidelines only say the groups have to be "primarily" focused on social welfare That's lead to unprecedently huge "educational" organizations that spend all their time on politics but don't admit it. As ProPublica reported in 2012, the "educational" wing of American Crossroads, Crossroads GPS, asked for tax exemption on the premise that when it wandered into politics, "any such activity will be limited in amount, and will not constitute the organization's primary purpose." (GPS stands for "Grassroots Policy Strategies.") Crossroads GPS spent $70 million on campaigns.

In the Strassel version of things, to prevent a group like Crossroads from spending its money this way is to "muzzle" the speech of conservatives. But a new rule would apply equally to liberal 501s, which might very well spring up once Chris Christie (or Marco Rubio, or Peter King, or whoever) is president. The FEC's law department found in 2012 that Crossroads GPS had abused the rules, but because the FEC is composed equally of Democrats and Republicans, the vote to punish the group was a tie. We're not talking about some constitutional right to free speech being thwarted because of liberal thuggery. We're talking about a loophole being exploited by wealthy donors, and kept open by the built-in impotence of the FEC.

What would happen if the rule went into effect? How would donors be silenced? Well, they wouldn't be prevented from giving exactly as much money to a 527 as they now give to a 501(c)4. They'd only be aware that their donation to the 527 would, eventually, be disclosed. Current campaign finance law is pretty clear on this: In Citizens United, Anthony Kennedy cited precedent to affirm that disclosure rules do not "prevent anyone from speaking."

I'm not naive. Right now, the change to the IRS's rule on "social welfare" would weaken, mostly, groups set up to spend big against Democrats. This rule would be good for the Obama administration. That doesn't mean it's meritless, or that to deny some donors secrecy while allowing them all sorts of ways to give infinite sums is "muzzling" or "targeting."

David Weigel is a Slate political reporter. 

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