A Novel Approach to Campaign Finance Reform

It turns out that 501(c)4 groups aren’t supposed to engage in any political activity at all.

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Rep. Chris Van Hollen, D-Md., ranking member on the House Budget Committee, speaks about the budget at the 2013 Fiscal Summit in Washington, Tuesday, May 7, 2013.

Rep. Chris Van Hollen, D-Md., has hit on a novel way to get at the issue of secret money flowing into political campaigns: following the law. It seems that the Internal Revenue Service's rules regarding how much political activity a 501(c)4 group can engage in and still retain tax exempt status doesn't actually comply with how the relevant law is written. So Van Hollen and a couple of campaign finance reform activist groups are suing the IRS and the Treasury Department to get them to do what the law says.

This is, of course, the crux of the IRS scandal, the fact that the agency was obliged to judge how much political activity the 501(c)4 applicants were engaged in.

"There's been a lot of attention to the recent investigations into the IRS review of applications of organizations seeking 501(c)4 tax exempt status," Van Hollen, the ranking Democrat on the House Budget Committee, told reporters on a conference call. "Those investigations have gained substantial notoriety but for the wrong reasons."

[See a collection of editorial cartoons on the IRS Scandal.]

The real problem, he said, is that while "the law as it was written by Congress could not be more plain," it's not being executed. "It says that 501(c)4 tax exempts status is reserved for organizations that are 'exclusively' – that's a quote – exclusively engaged in social welfare" activities, he said. In the late 1950s, however, "that plain English meaning somehow got tortured, somehow got twisted" when the standard was set at being primarily involved in political activities.

So this morning Van Hollen, along with the groups Democracy 21 and the Campaign Legal Center filed suit, he said, in the hopes that the IRS will follow "the plain meaning of the law."

Their ultimate purpose is to bring greater transparency to the political process – 501(c)4 groups aren't obliged to disclose their donors – in the wake of the Citizens United v. FEC decision which prompted a dramatic increase in the number of applications for 501(c)4 status. According to Van Hollen, the number of applicants increased from 1,745 in 2010 to 3,256 in 2012 and the amount of money they spent ballooned from $82.7 million in 2008 to $256 million in 2012.

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