The IRS’s new proposal to crack down on nonprofits was in the works a year before the tea party targeting scandal broke, according to a Treasury Department official who told congressional investigators it was spurred by pressure from outside parties.
The revelation follows earlier testimony from former IRS Commissioner Steve Miller, who told investigators that they started “brainstorming” ways to crack down on nonprofits while under pressure from a senior Democratic senator who was “complaining bitterly to us” about the way groups were engaging in politics while organized as social welfare nonprofits.
House Oversight Committee Chairman Darrell Issa and subcommittee Chairman Jim Jordan recounted the testimony in a letter sent this week to IRS Commissioner John Koskinen, who now must decide what to do about the proposed crackdown.
The two lawmakers said the evidence proves the IRS crackdown was under way well before the revelation last May that the tax agency had improperly targeted tea party and conservative groups for scrutiny, and delayed many of their applications for nonprofit status.
“One email from June 2012 demonstrates that the IRS and the Treasury Department considered privately ‘addressing’ 501(c )(4) organizations well before the public awareness of the IRS targeting,” the two congressmen said in their letter to Mr. Koskinen.
According to their letter, Ruth Madrigal, a Treasury Department official, was on an email chain with Lois G. Lerner, the former IRS official who has been painted as a key figure in the tea party scandal, said that “in 2012, there were conversations between my office, Office of Tax Policy, and the IRS regarding guidance relating to qualifications for tax exemption under (c )(4).”
Asked by investigators during the Feb. 3 interview if those conversations were in reaction to requests from outside groups, she responded affirmatively.
IRS officials have publicly characterized their push to rein in the kinds of political activities 501(c )(4) organizations can engage in as a response to an inspector general’s report in May 2013 that exposed the tea party targeting.
The tax agency has floated an outline of new rules that would limit those groups’ ability to host candidates, distribute voter guides or conduct voter registration or get-out-the-vote drives.
A three-month period for public comments closed on Thursday, and the IRS had posted more than 115,000 comments.
They were overwhelmingly opposed to the proposed rules, with both conservative and liberal-leaning groups saying the rules would stifle their ability to participate in important public debates.
One joint comment, filed by a dozen groups ranging from the immigration advocacy America’s Voice and the liberal American Civil Liberties Union to the right-leaning American Conservative Union and tea party-aligned FreedomWorks, asked the Obama administration go back and start over on the rules.
They wrote: “The proposed rules treat as political a host of activities that are now and should continue to be defined as non-political, rather than discarding years of IRS rulings, guidance and precedent: nonpartisan voter registration; nonpartisan get-out-the-vote efforts; nonpartisan voter guides; candidate debates and forums; events prior to an election that feature government officials who are candidates; lobbying and other communications near an election that mention a candidate or political party in a non-election-related context (including old references still available on an organization’s website).”
Mr. Koskinen, testifying to Congress on Wednesday, said there are a number of steps in place before any final rule is written — including reading through the flood of comments and holding a public hearing. He said the agency might even release a written rule and put that back out to the public for more comments before finalizing anything.
“I think the chances of it getting finalized before the November election are fairly slim,” he told the House Appropriations Committee.
Mr. Issa and Mr. Jordan had written Mr. Koskinen earlier in February asking him about Mr. Miller’s statement that the IRS began considering new rules under pressure from Congress. Mr. Koskinen had not replied as of the middle of this week.
In a letter to congressional Democrats on Tuesday, Mr. Koskinen said his agency has had to spend at least $14 million responding to investigations into the tea party targeting.