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Editorial: Donation loopholes need to be resealed

As the courts continue to strike down campaign contribution limits, disclosure becomes increasingly important. But political parties are only interested in that if it gives them an advantage.

On Monday, Internal Revenue Service Commissioner John Koskinen said his agency will rewrite proposed rules that would regulate the political activities of groups that have a 501(c)(4) nonprofit designation, which interest groups prize because they do not have to disclose the names of their donors. Anonymity makes it easier to raise money.

The IRS produced draft rules in November that were the subject of public comment through February. Based on that feedback, Koskinen said the agency will do a rewrite. A revision is needed because the draft could have impeded the work of social welfare groups for whom that section of the tax code was written.

The charge that this rule change blocks free speech is preposterous. Anonymous donations to clearly partisan activities are not protected under the First Amendment. The IRS has a 527 designation that grants politically active groups tax-free status but not anonymity. The free speech rights of these groups are not being trampled.

At present, it’s Republicans who are complaining loudest about disclosure because they’ve benefited more from the secret money funneled into nonprofits such as Crossroads GPS and Americans for Prosperity. But back in 2006, when Congress debated disclosure rules for 527 groups, it was Democrats who squealed the loudest because they were having more fund-raising success with large contributors such as George Soros. So each party has found a favorable loophole, and defended it. The 527 loophole on disclosure has been closed. Now, it’s time to close the one for 501(c)(4)s.

The simplest solution would be to shift all groups engaged in partisan activities into a single disclosure category, leaving the 501 (c)(4) designation as it was originally intended: to promote civic engagement and social welfare. These are groups that host debates, panel discussions and run educational programs; not groups that run slashing partisan ads.

Because the IRS selected some tea party groups for extra scrutiny last year, Republicans claim the agency is furthering its goal of intimidation. But the courts have defended disclosure against the presumption of harassment. The 9th U.S Circuit Court of Appeals upheld a Washington state court ruling that the names on ballot petitions are a public record. The Washington attorney general’s office says it has not received any harassment complaints from petition signers after names were disclosed as a result of a public records request.

The intimidation argument is a diversion from the real issue: Partisan political groups should not be handed a way to conceal donations. The U.S. Supreme Court has already explained why.

In its Citizens United ruling, the court wrote: “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”


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