Conservatives on Tuesday hailed a move by the Treasury Department to stop requiring certain politically active nonprofit groups, including the National Rifle Association and the U.S. Chamber of Commerce, to identify their financial donors.
The rule, announced late Monday, should prevent the IRS and partisan state attorneys general from targeting conservative groups, Republicans say, such as the government scrutiny of tea party groups during the Obama era.
Senate Majority Leader Mitch McConnell, Kentucky Republican, said the move was a victory for free speech and a “straightforward, common-sense policy decision.”
“It’s particularly welcome news to those of us who are intently focused on defending the First Amendment, for those of us who raised concerns during the last administration about activist regulators punishing free speech and free association,” Mr. McConnell said on the Senate floor. “The IRS will no longer pointlessly demand private contributor lists from whole categories of tax-exempt organizations.”
But some government watchdogs on the left said the administration’s move creates a loophole for foreign donors to influence U.S. elections without being detected.
“This decision is an unmitigated disaster for our political system and will make it easier for Russia and Russian agents, for example, to get away with spending huge amounts of illegal, undisclosed money through 501(c)(4) advocacy groups to manipulate our elections,” said Democracy 21 President Fred Wertheimer.
The government previously required nonprofit groups, including charities, to list contributors who give at least $5,000 on a form known as IRS 990 Schedule B. The IRS would keep the completed form, and the groups would publicly release redacted versions that shielded the identities of donors.
The new rule no longer requires information about larger donors from 501(c)(4) nonprofit groups, including social welfare groups that can engage in political activity. Among those organizations are the NRA, Planned Parenthood, the NAACP, the Chamber of Commerce and Americans for Prosperity, an advocacy group affiliated with the Koch network.
Some conservatives have objected to revealing the names of private donors to the government because of the risk of leaks.
Freedom Partners, another Koch-backed advocacy group, called the decision “a positive step toward protecting the First Amendment rights of Americans.”
“This was the right decision because citizens shouldn’t fear harassment or persecution over their beliefs,” said Executive Vice President Nathan Nascimento.
The Treasury Department said the policy change will maintain donor disclosure requirements for traditional charity groups organized under section 501(c)(3) of tax law. But it frees labor unions, veterans organizations and other nonprofits that do not receive tax-deductible donations from complying with the disclosure rule, which has been in place since 1971.
“Americans shouldn’t be required to send the IRS information that it doesn’t need to effectively enforce our tax laws, and the IRS simply does not need tax returns with donor names and addresses to do its job in this area,” said Treasury Secretary Steven T. Mnuchin.
He said the change “will in no way limit transparency.”
“The same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected,” Mr. Mnuchin said.
Republican lawmakers have targeted the disclosure requirements, saying donors’ privacy could be violated if the information was released accidentally. In 2013, the Center for Public Integrity reported that the IRS posted unredacted tax forms revealing donors to the nonprofit Republican Governors Association Public Policy Committee.
The House passed a bill in 2016 to eliminate the requirement, but the Obama administration opposed it and Senate Democrats blocked it.
Congressional Democrats who opposed the Treasury Department’s decision said it would remove an investigative tool from the IRS when determining tax compliance.
“President Trump’s late-night giveaway to shady donors and interest groups makes dark money even darker,” said House Minority Leader Nancy Pelosi, California Democrat. “The NRA and other special interest groups can now fully operate in the shadows and push their corrupt agendas without any transparency or accountability.”
Sen. Ron Wyden, Oregon Democrat, vowed to vote against Mr. Trump’s nominee to lead the IRS, Charles Rettig, unless Mr. Rettig promises to reinstate the disclosure requirements.
Sen. Kamala D. Harris, California Democrat, demanded the donor list of Americans for Prosperity for investigative purposes when she was state attorney general in 2016. A federal judge blocked her request, saying the state’s “pervasive, recurring pattern” of accidental Schedule B disclosures to the public made it impossible to believe she would keep the group’s donor list confidential.
Mr. McConnell pointed to the IRS scandal involving tea party groups in 2012 as an example of the rule’s necessity.
“We know exactly what happens when the government stockpiles private data about the donations through which Americans participate in the public discourse,” he said. “We know exactly why many on the left are keen for bureaucrats to have this confidential information. Where it leads is Americans being bullied for exercising their First Amendment rights. This bullying is enabled by bureaucrats and, in some cases, by elected officials. Sometimes government itself does the bullying.”
In the tea party furor, he said, the IRS “slow-walked the applications of groups that appeared conservative, including some of my own constituents.”
“Donors and groups faced unusually aggressive questioning,” Mr. McConnell said. “Unreasonable deadlines followed by unreasonable delays. This was federal authorities using the weaponry of government to punish Americans for supporting speech they didn’t like.”
Reacting to the new policy, some progressives expressed concern that foreign agents will now have a secret method to disrupt or influence U.S. elections.
Mr. Wertheimer said the Treasury “opened a massive loophole that will, as a practical matter, allow Russia, Russian oligarchs and other foreign interests to launder unlimited amounts of undisclosed, illegal contributions into federal elections.”
“Furthermore, Treasury has opened this massive loophole for foreign money at a time when the [special counsel Robert] Mueller investigation has just publicly documented in meticulous detail the role that Russia played in manipulating the 2016 presidential election,” he said. “We should be strengthening our protections against these efforts, not weakening them.”
Under current law, foreign governments, businesses or individuals can donate unlimited amounts to 501(c)(4) advocacy groups. But the advocacy groups can’t spend any money received from foreign nationals to influence federal elections.
“But now, thanks to this irresponsible move by the Treasury Department, nonprofit advocacy groups no longer have to report their donors to the IRS,” Mr. Wertheimer said. “As a result, there is no way to determine if a 501(c)(4) advocacy group that is spending money to influence federal elections is taking that money from Russia, from Russian agents, from China or from any other foreign interest.”