Weaponizing the IRS

New IRS rules will restrict free speech.


Just shy of a decade ago, a retired rector named George Regas stepped into the pulpit at All Saints Episcopal Church in Pasadena, California, a few days before the November election and let fly with some good, old-fashioned fire and brimstone. The targets of his passion: President George W. Bush and the war in Iraq. Also, "conservative politicians." Not to mention "the religious right." Regas described war as "the most extreme form of terrorism." Speaking in the voice of Jesus Christ, he said, "The killing of innocent people to achieve some desired goal is morally repudiated by anyone claiming to follow Me as their savior and guide." He went on to condemn poverty, defend abortion rights, and so on.

What happened next will surprise you only if you just fell off a turnip truck: The IRS came knocking. It threatened the church's tax-exempt status, demanded all kinds of paperwork, and carried on an investigation that lasted more than two years—and cost the church $200,000.

The saga of All Saints could soon be coming to a community near you. Thanks partly to the scandal surrounding the IRS' targeting of conservative groups, the agency has proposed a new set of rules for a huge number of social-welfare groups that claim tax exemption under Section 501(c)4 of the tax code. That includes groups such as the Sierra Club, the Brady Campaign to Prevent Gun Violence, the League of Conservation Voters, and the Alliance for Justice (a coalition of more than 100 liberal organizations). It also includes many conservative groups, from Karl Rove's Crossroads GPS to grass-roots tea party groups—the ones the IRS scrutinized by demanding, e.g., old fundraising letters and all Facebook posts.

Under a finding that dates back to 1959, those social-welfare groups can remain tax-exempt so long as they are "primarily engaged in promoting in some way the common good and general welfare of the people of the community." Politicking cannot be their primary focus, and "primary" in this case means "51 percent or more."

The new rules would vastly expand what constitutes "candidate-related political activity" by including such practices as handing out voter guides, holding candidate forums, printing or airing advertisements, and even criticizing a politician on a website posting in the two months before a general election.

If, say, a blog post by Friends of the Earth blasts a Republican for voting against new air-quality rules in 2015, and the Republican runs for re-election the next year, Friends of the Earth would have to go back and scrub the post from its site—or risk the IRS' wrath. Many groups would probably decide to post nothing in the first place.

A blog post about a politician is, of course, quintessentially political speech of the sort the First Amendment expressly protects—or is supposed to protect. Under the new IRS rules, the government effectively would be rationing how many such items a group can post. The ACLU says the new restrictions would "pose a significant chilling effect" on the advocacy of countless nonprofits. First Amendment scholars warn they would "impose serious burdens on free speech."

To watch these rules emanate from a liberal Democratic administration is doubly ironic. Liberals howled in outrage when the Supreme Court's Citizens United decision overturned decades of campaign-finance law. Now the IRS proposes to do the same thing. What's more, the idea that you can separate social welfare from government activity does not usually win much applause on the left. To the contrary, conventional liberal wisdom holds that government often is the only means by which any meaningful advance in social welfare can be made. Private charities, churches, volunteer organizations—those are nice, but they can't do the heavy lifting of social reform, in the liberal view. But in that case, political activity by social-welfare groups should be encouraged, not penalized.

Granted, some liberal social-welfare groups have objected to the IRS proposal, for many of the same reasons conservative groups cite. Nobody should have to worry that spending a little too much time registering people to vote will lead to a ruinously expensive legal fight.

Unfortunately, many other liberals are sitting on the sidelines—or, worse, defending the IRS—because of the blatantly partisan nature of its abuse. That abuse began when President Barack Obama criticized conservative groups for "posing" as nonprofit social-welfare organizations and several Democratic senators demanded an IRS investigation of such groups.

The IRS crackdown on tea party organizations did catch some liberal outfits, the way tuna nets catch an occasional dolphin. But two other data points render the partisan nature of the scandal indisputable.

First, Barbara Bosserman, the person the Obama administration named to investigate the IRS targeting, is not only a member of the administration, she also gave more than $6,000 to Obama's election campaign and the Democratic National Committee. Welcome to the henhouse, Ms. Fox.

Second, the new IRS rules do not lay a finger on the biggest donors by far to political campaigns: unions, which are organized as 501(c)5 entities. How much do unions give? The Wall Street Journal's Kimberley Strassel notes that "the Center for Responsive Politics' list of top all-time donors from 1989 to 2014 ranks Koch Industries"—the infamous Koch brothers—"No. 59. Above Koch were 18 unions, which collectively spent $620,873,623 more than Koch Industries ($18 million)." Unions, of course, almost uniformly support Democrats.

Liberals on the sidelines need to join their more long-sighted brethren and make common cause with conservatives in this debate. The IRS' new rules might give Democrats an advantage for the next election cycle or two. But eventually a Republican administration will take over. Do liberals really want it to take control of an IRS that has been so dangerously weaponized?

NEXT: Happy St. Patrick's Day, You Nihilists

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  1. You’re churning out the articles too quick Reason! Some of us are trying to drink here!

    1. I’ll raise a kindle to that!

  2. How about just ending tax-exempt status for all organizations, including churches? Treat the lot of them like the for-profit businesses that most of them actually are. That takes care of government interference of both speech and actions, as well as greatly broadening the tax base.

    1. I’ve always been baffled by how a tax exemption for churches isn’t an “establishment of religion”, myself.

      1. Non-religious charities also have tax exemptions.

        I think that the assumption is that all religious organizations are charitable, which isn’t totally true.

        1. It’s mighty charitable of them by contracting w/ local builders to put up larger and larger churches.

          1. It’s mighty charitable of them by contracting w/ local builders to put up larger and larger churches.

            IMO, it pales in comparison to the general raping of taxpayers that occurs from generally tax exempt non-profits.

            It’s pretty much SOP for hospitals in major metropolitan areas to administer healthcare at a level far below the tax exempt status of the land the hospital sits on and then leverage the land held to expand the campus.

            It’s not clear whether this gets better or worse under ACA…

        2. I think it is possible for a religious organization to lose its tax exempt status if it acts too much like a for profit business or engages in too obvious electioneering. Not sure how often it happens.

      2. Because not taking is giving?

      3. I’m pretty sure any religious group can get tax exempt status. I assume that if all religions are treated the same then you’re not considered to be establishing any one of them.

        1. That’s not the modern test for “establishment of religion”.

          Besides, I’d be curious to see if the IRS has ever denied an application because it wasn’t a “bona fide” religion.

          Non-religious charities also have tax exemptions.

          Not for being a church. That’s a specific category. Charities have a separate set of requirements they have to meet.

          1. See my question above. Since we’re not likely to abolish the IRS any time soon, would a reasonable compromise be treating all religious groups like non-profits?

            1. I don’t think so. They are still in a sense subsidizing religion over irreligion. They should just treat churches, etc. exactly as they would any social/charitable organization without an explicitly religious purpose.

              1. It’s rather hilarious to see all of you employ the shreeek definition of “subsidy” in reference to something you find icky.

          2. Besides, I’d be curious to see if the IRS has ever denied an application because it wasn’t a “bona fide” religion.

            Yes. Fringe sorts. Scientology comes to mind as the most famous

            1. Though that was reversed and most of the records regarding it are kept out of the public eye despite repeated FOIA requests.

      4. if they preferred one church over another then it would be an establishment of state religion. As it is any nut who can get his church recognized can be tax exempt.

        To that end the government recognizes Jedi as a religion…

    2. The vast majority of churches are charitable organizations, so I don’t think you know what you’re talking about. Oh, and I’m saying this as an atheist by the way.

      1. You get tax-exempt without having to fill anything out if you claim to be a religious outfit. You get it for being a church, not being charitable.

        But that’s OK because no matter how completely distortionary the tax exemption regime is, less taxes = good, right?

        1. That’s a compelling rebuttal to an argument I did not make. *golf clap*

          1. Watch out, he’s gonna come at ya like a whirling dervish, all fists and elbows!

    3. One question I’ve never had answered is “is there any other country that has decided to start taking taxes from churches?”

      Can we say “We need to be more like the Smorgian Government” and point to the country and say “that is what we want!” the way we can point to England or Canada with regards to healthcare as justification for the PPACA?

      Because I imagine that the answer to the question is illuminating.

      1. Appeal to majority is a fallacy anyway. It’s easier to just debate tax policy on the merits.

    4. Even better, how about we stop trying to tax organizations who by definition never actually pay taxes and instead just tax the individuals who those organizations pass the tax costs on to.

      1. ^This. Zero out corporate taxes and watch businesses flock to the US.

      2. The average senior pastor pulls down $83k a year, so the churches can’t be hurting too bad. That’s irrelevant anyway though. The head of United Way pulls in a mil a year. Non-profits are allowed to pay their staff pretty much anything they want. They just don’t get to disburse a dividend to shareholders. Which simply means that when there’s excess cash lying around it goes out as bonus checks to the executive officers instead of “profits”.

        1. That was meant to go under Raven Nation’s comment below.

        2. Average pastor earns about $28K/yr. You must be confused with a median salary, which would factor in the mega Churches Of The Feel Good.

    5. Just curious: how are you defining “for profit.” Most churches take in enough money to pay their bills and one or two staff. That would make them equivalent to a non-profit like a museum.

      I’m not clear on all the codes but I assume that the way a non-profit is treated (e.g. museum) is different to tax exempt status for churches? Would treating religious groups like non-profits be a reasonable compromise?

      1. I’ve forgotten the rules, but yes, non-profits are allowed to “make profits.” It all depends on how they are handled.

    6. If an organization is taxed then you are not free to exercise what ever religion you choose which as I recall was gaurantted by the constitution. Now if they do make money from anything other than donations then that should be taxed.

      1. If an organization is taxed then you are not free to exercise what ever religion you choose

        I’m not sure I follow you there. Would that not also apply to taxing individuals? If I have to pay taxes, then I can’t practice my religion which requires that I spend every cent I earn on fine whiskey and choice cuts of beef.

        1. are you being sarcastic I’m not sure but to further along it’s the same reason poll taxes are not allowed if your taxed to vote then I’m not free to vote. I would also state that taxing ammo means my right to bear arms is no a right since I would have to pay for it. Your right to exercise your rights is limited if it is taxed.

          1. By this logic churches should be taxed but your donations to them should be tax exempt. Right now its the opposite. You are taxed on your income but churches are not taxed upon receiving a portion of your income.

            following your examples the exemption should go to the individual, not the organization.

            Otherwise ammunition manufactures should be exempt because they enable you to practice your rights.

  3. But eventually a Republican administration will take over. Do liberals really want it to take control of an IRS that has been so dangerously weaponized?

    These fuckers are honestly stupid enough to think that they’ll be in charge for ever and won’t have to worry about those EVUL RETHUGLIKKKANZ using the IRS against them. And besides, even if a Republican ever gets elected president again, the media will proceed to bitch and moan at the first hint of IRS abuse.

    1. to think that they’ll be in charge for ever

      Given the political leanings of federal bureaucrats, in a sense they are correct.

      1. I was about to type a similar comment when I saw yours.

        Bureaucrats tend to be Democrat because big government means job security and promotions for even the most incompetent ( among other reasons I’m sure).

        You can appoint the most rabid conservative to head a Federal Agency and he would have no clue what goes on in the bowels of that organization.

    2. But eventually a Republican administration will take over

      I’m assuming that ONE of the goals of supporting the IRS is to try to prevent a Republican administration.

    3. It’s more or less irrelevant anyway, because if they do start getting picked on by a Republican administration it will be front page news in every information outlet in America and we’ll all be helpfully reminded that Nixonian abuse of our cherished political institutions is the price we pay for allowing Republicans to get elected. So the same policy under a Republican president will last about a week, and then it’s just a matter of biding time until you get back into power so you can tilt the scales in your favor again. Rinse and repeat.

  4. Now come and witness the power of this fully weaponized revenue Service my young libertarian

    1. I wonder if the IRS has any exposed exhaust ports?

      1. even if they did who would want to skim that trench looking for an opening…

  5. Any organization that never earns a net profit paid to individual owners shouldn’t be taxed.

    1. Unless you manufacture medical devices for some reason.

    2. Unless you manufacture medical devices for some reason.

  6. But in that case, political activity by social-welfare groups should be encouraged, not penalized.

    Are you… *gasp* … are you accusing the left of being hypocritical when it comes to which social-welfare groups should be permitted to perform political activity?

    Say it ain’t so, Shoeless! Say it ain’t so!!!

  7. As far as I’m concerned you should be able to associate with anybody and talk about anything you want and the IRS shouldn’t have any input at all or did I read the constitution wrong again.

    1. The problem is that like marriage its only an issue because the government has positioned itself to show favoritism.

  8. First, why are we trying to figure ways to increase revenues when when should be done is to cut spending by 50%?
    Second, why do people who want to run an organization that is an advocacy group bother with the IRS classifications at all. Fuck ’em, you collect and spend what you collect each year. My point is more about he mechanics of “non-profits”. If the organization sells stuff or provides services, then that income may be taxable. But otherwise how is taxing a political advocacy group’s donation receipts NOT a first amendment violation? It provides a chilling effect on free speech if you have to ask permission from the tax agencies to engage in advocacy.
    Also why is “speech” not spelled like “speak”?

    1. And WHY isn’t there an edit function?

    2. The tax is paid by the donor. That is why they desire tax free status, so that their donors gifts are deductible by the donor.

      When donations aren’t tax deductible donation amounts go down.

      1. But that isn’t true of 501 C4 and 527s is it? The organization itself is tax exempt not the donation.

  9. It is just better to form an LLC and make sure it doesn’t have a profit every year than go through the NPO-designation bullcrap; then, at least, you can do whatever the hell you like with your group. But as long as the “non-profit organization” designation by the IRS means something to the uninformed masses out there, that’s not going to happen.

    So just get rid of the NPO designation in the Tax Code. The corporations can then actually tell its donors what it’s doing with the donated funds instead of just saying it’s an “IRS non-profit”. There, everybody wins.

  10. The key difference between Citizens United and what’s described in this article is that Citizens United reinforced the liberty of people banding together while this IRS activity reinforces the states supremacy. Liberals hate Citizens United because it takes power away form government while this assumes more power for the government, one of their primary objectives.

  11. Yet another ObamaFail. This happens enough times and people might notice.

  12. You have to pay for those inalienable rights. Of course, the currency used to be the blood of patriots and tyrants. Today, you better pay your taxes, insurance premiums, and just to be safe, make a few political donations.

  13. Friends of the Earth would have to go back and scrub the post from its site?or risk the IRS’ wrath.

    Nope. The left has nothing at all to fear from the IRS. They know who their friends are.


  14. Yabut. Undoubtedly the IRS is using its powers to target and control speech. Undoubtedly this is evil. But what business does the government have giving out tax exemptions to churches, charities, social welfare organizations, etc. in the first place? This tax subsidy has serious first amendment implications under, e.g., the establishment clause. It subsidizes certain forms of speech, and thus privileges them over others. And it gives the government a power of control over speech that it would not have if it did not give the subsidy in the first place.

  15. Shouldn’t the libertarian position be more on the side of just abolishing the tax excemptions altogether? I’m an atheist… I do not want religious organizations getting a government approved tax benefit. I’m sure the same applies for many other people who do not want to fund organizations they disagree with. End the tax excemptions and the free speech issue will be a non-issue. They’ll be able to say anything they want, and organizations will rise and fall based on their ability to produce the results they’re trying to achieve.

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