I.R.S. Will No Longer Force Kochs and Other Groups to Disclose Donors – The New York Times

I.R.S. Will No Longer Force Kochs and Other Groups to Disclose Donors – The New York Times

The Internal Revenue Service will no longer require labor unions, social clubs and many political groups like the Koch network’s Americans for Prosperity to disclose their large donors.Associated Press, left; Bo Rader/The Witchita Eagle, via Associated Press

The Trump administration will end a longstanding requirement that certain nonprofit organizations disclose the names of their large donors to the Internal Revenue Service, a move that will allow some political groups to shield their sources of funding from government scrutiny.

The change, which has been long sought by conservatives and Republicans in Congress, will affect labor unions, social clubs and, most notably, many political groups like the National Rifle Association and the Koch network’s Americans for Prosperity, which collect what is known as “dark money.”

Treasury officials said the reporting change would protect privacy and reduce compliance costs for nonprofits, and that the I.R.S. could still request donor information from groups in the rare event that it was needed for tax scrutiny.

“Americans shouldn’t be required to send the I.R.S. information that it doesn’t need to effectively enforce our tax laws, and the I.R.S. simply does not need tax returns with donor names and addresses to do its job in this area,” Steven Mnuchin, the Treasury secretary, said in a statement on Monday evening.

But critics denounced the measure, saying it increases the likelihood of illegal donations from both domestic and foreign contributors.

“There’s a lot to this administrative rule under the semblance of reducing paperwork,” said Steven Rosenthal, at the nonpartisan Tax Policy Center in Washington. “It adds another layer of opaqueness to the tax-exempt funding.”

Political nonprofits will still have to collect the information, but will not be required to turn it over to the government unless they are audited.

Previously, nonprofits such as unions and organizations classified as 501(c)(4) groups were required to report to the government the names of donors who contributed more than $5,000 in the span of a year. That information was redacted on the publicly viewable forms the groups file annually, though amounts of donations remain visible.

Nonprofits that exist primarily to influence political campaigns, including so-called 501(c)(3) and 527 organizations, will still be required to report the names of large donors, as will charities that accept tax-deductible contributions.

Officials with the Treasury Department said the move was driven in part by the I.R.S.’s inappropriate targeting of political groups during the administrations of Presidents George W. Bush and Barack Obama. The I.R.S. inspector general found that both conservative and progressive groups were targeted and that I.R.S. officials inappropriately sought information on donors to Tea Party groups as well as to liberal groups.

But conservative groups have also expressed concern that the donor information could fall into the wrong hands and be released for partisan reasons.

“The requirement to report such information increases compliance costs for some private parties, consumes I.R.S. resources in connection with the redaction of such information, and poses a risk of inadvertent disclosure of information that is not open to public inspection,” it concluded.

There are many examples of inadvertent disclosure of donor information from federal forms in recent years. In 2013, the I.R.S. posted a list of donors to an arm of the Republican Governors Association. In 2016, a federal judge cited a pattern of such disclosures when ruling against the State of California’s request for donor information from Americans for Prosperity.

The ruling noted that the state had posted more than 1,700 confidential donor lists on the internet, including the names and addresses of hundreds of donors to Planned Parenthood.

The rule’s elimination will limit the data that the government collects, but will not affect public disclosure: The I.R.S. will now be able to see those groups’ lists of big donors only if it specifically requests them. The public has not been able to see those lists under existing rules, unless the government disclosed them inadvertently.

Republicans hailed the move, with Mitch McConnell, the Senate majority leader, on Tuesday calling the decision “particularly welcome news to those of us who intently are focused on defending the First Amendment, for those of us who over the years have raised concerns during the last administration about activist regulators punishing free speech and free association. It’s a straightforward, common sense policy decision.”

Representative Kevin Brady of Texas, the chairman of the Ways and Means Committee, similarly said it would prevent political targeting of organizations.

“For years, Members of the Ways and Means Committee have fought for an I.R.S. that is accountable to the taxpayer and does not target or single-out any person or entity based on their political beliefs,” Mr. Brady said.

But Democrats blasted the move en masse, with Senator Ron Wyden, an Oregon Democrat and the ranking member on the Finance Committee, saying the decision would allow “anonymous foreign donors to funnel dark money into nonprofits.”

Senator Jon Tester, the Montana Democrat, called it “the swampiest, darkest, dirtiest decision.”

In guidance late on Monday, administration officials limited reporting requirements for most nonprofits organized under Section 501 of the tax code, using a past federal regulation that allows the I.R.S. commissioner to do so if he or she “determines that such returns are not necessary for the efficient administration of the internal revenue laws.”

The guidance said that the agency did not need personally identifiable donor information “in order for it to carry out its responsibilities.”

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