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July 06, 2015

I.R.S. roles over...

I.R.S. Expected to Stand Aside as Nonprofits Increase Role in 2016 Race

By ERIC LICHTBLAU

As presidential candidates find new ways to exploit secret donations from tax-exempt groups, hobbled regulators at the Internal Revenue Service appear certain to delay trying to curb widespread abuses at nonprofits until after the 2016 election.

In a shift from past elections, at least eight Republican presidential candidates, including leading contenders like Jeb Bush and Senator Marco Rubio of Florida, have aligned with nonprofit groups set up to raise hundreds of millions of dollars. Hillary Rodham Clinton’s supporters are considering a similar tactic.

Some of these so-called social welfare nonprofit groups are already planning political initiatives, including a $1 million advertising campaign about Iran by a tax-exempt group supporting Mr. Rubio.

The groups are able to carry out many of the same political activities as candidates and their affiliated “super PACs” but do not have to disclose where they get their money, allowing total anonymity for donors.

While the nonprofit groups are supposed to limit their political activity, the I.R.S. appears powerless to stop the onslaught of money coursing through them.

The tax agency remains deeply wounded by the scandal that began two years ago over its scrutiny of nonprofits tied to the Tea Party and other political causes, both conservative and liberal.

“It’s anything goes for the next couple of years,” said Paul Streckfus, a former nonprofit specialist at the I.R.S. who now edits a newsletter on tax-exempt groups. “The whole system has really collapsed.”

Under an exemption established more than a century ago, the nonprofit groups — known as 501(c)(4) organizations for the section of the tax code that created them — are supposed to be devoted to “social welfare,” with an aim “to further the common good and general welfare of the people of the community.” But there is disagreement over just how much politicking the nonprofits can do.

I.R.S. officials concede that the rules are vague and difficult to enforce. Audits for excessive campaign work are extremely rare, even for groups spending huge chunks of their budgets to support candidates. Complaints about abuses can languish for years, records show.

With scant enforcement, some nonprofits have become huge political operations. Groups tied to the Republican strategist Karl Rove and the industrialist brothers Charles G. and David H. Koch have emerged as major political forces.

The nonprofit arms of the National Rifle Association, Planned Parenthood and the Humane Society also spent millions on campaigns. In all, nonprofits spent more than $300 million on political activity in 2012 — up from just $5.8 million eight years earlier.

With candidates now customizing their tax-exempt groups — making them, in effect, unofficial extensions of their campaigns — that figure is likely to rise.

The Treasury Department recently squashed speculation that new rules would soon be put into effect to limit the political activity of nonprofits. The I.R.S. commissioner, John Koskinen, drew criticism this year when he said nonprofits could spend up to 49 percent of their money on political activities. Watchdog groups have said Congress meant for those groups to work “exclusively” on social welfare and not politics.

The I.R.S. put out its first proposal for regulating nonprofits’ political work in 2013, just as the controversy was building over the targeting of Tea Party groups. Both liberals and conservatives attacked the move as chilling political speech, and the agency shelved the proposed rules.

“Because of the way the I.R.S. has been attacked, they’ve become extremely hesitant to act,” said Miriam Galston, a campaign finance specialist at George Washington University who believes tougher restrictions are needed.

For nonprofits active in politics, she said, “it’s going to be pretty much open season.”

That would not disappoint conservatives who oppose stricter campaign-finance regulations. “The I.R.S. shouldn’t play political referee,” said Donald F. McGahn, a former Republican commissioner on the Federal Election Commission, “and if they attempt another rule-making, they run the risk of looking partisan, ideological, or worse.”

Democrats on the commission have sought to regulate tax-exempt groups like Mr. Rove’s Crossroads GPS as “political committees” and to force them to disclose their donors. But with the commission gridlocked, Republicans have blocked those efforts, leaving any hope for action with the I.R.S.

So far, eight Republican contenders and their supporters have set up nonprofits: Mr. Bush (Right to Rise Policy Solutions), Mike Huckabee (America Takes Action), Gov. Bobby Jindal of Louisiana (America Next), Gov. John R. Kasich of Ohio (Balanced Budget Forever), George E. Pataki (Americans for Real Change), Rick Perry (Americans for Economic Freedom), Mr. Rubio (Conservative Solutions Project) and Rick Santorum (Patriot Voices).

On the Democratic side, Mrs. Clinton’s backers said they were considering raising money through a nonprofit affiliated with Priorities USA Action, a super PAC. Although Mrs. Clinton says she wants to overhaul the campaign finance system, “she will not unilaterally disarm,” a campaign official said.

A $1 million advertising campaign opposing a nuclear deal with Iran by the Conservative Solutions Project — the nonprofit aligned with Mr. Rubio — gives a hint of what is to come. The “Bad Deal” campaign, which includes advertisements on TV, radio and the Internet, features Mr. Rubio warning against a possible nuclear deal with Iran and a narrator assuring that “Marco Rubio is fighting to stop it.”

Conservative Solutions was set up by J. Warren Tompkins, a Republican operative also leading Mr. Rubio’s super PAC. A spokesman, Jeff Sadosky, said the group was “a separate and distinct organization” from Mr. Rubio’s campaign, “but clearly Mr. Rubio is one of the most persuasive voices in opposition to the deal on Iran, and we’re aligned with a number of his positions.”

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