[House Report 113-353]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 113-353
======================================================================
STOP TARGETING OF POLITICAL BELIEFS BY THE IRS ACT OF 2014
_______
February 18, 2014.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means, submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 3865]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 3865) to prohibit the Internal Revenue Service from
modifying the standard for determining whether an organization
is operated exclusively for the promotion of social welfare for
purposes of section 501(c)(4) of the Internal Revenue Code of
1986, having considered the same, report favorably thereon with
an amendment and recommend that the bill as amended do pass.
CONTENTS
Page
I. Summary and Background...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 3
II. Explanation of the Bill..........................................4
A. Applicable Standard for Determining Whether an
Organization is Operated Exclusively for the
Promotion of Social Welfare........................ 4
III. Votes of the Committee...........................................7
IV. Budget Effects of the Bill.......................................8
A. Committee Estimate of Budgetary Effects............. 8
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 8
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 8
D. Macroeconomic Impact Analysis....................... 9
V. Other Matters to be Discussed Under the Rules of the House.......9
A. Committee Oversight Findings and Recommendations.... 9
B. Statement of General Performance Goals and
Objectives......................................... 10
C. Information Relating to Unfunded Mandates........... 10
D. Applicability of House Rule XXI 5(b)................ 10
E. Tax Complexity Analysis............................. 10
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 10
G. Duplication of Federal Programs..................... 11
H. Disclosure of Directed Rule Makings................. 11
VI. Changes in Existing Law Made by the Bill, as Reported...........11
VII. Dissenting Views................................................12
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Stop Targeting of Political Beliefs by
the IRS Act of 2014''.
SEC. 2. APPLICABLE STANDARD FOR DETERMINATIONS OF WHETHER AN
ORGANIZATION IS OPERATED EXCLUSIVELY FOR THE
PROMOTION OF SOCIAL WELFARE.
(a) In General.--The standard and definitions as in effect on January
1, 2010, which are used to determine whether an organization is
operated exclusively for the promotion of social welfare for purposes
of section 501(c)(4) of the Internal Revenue Code of 1986 shall apply
for purposes of determining the status of organizations under section
501(c)(4) of the Internal Revenue Code of 1986 after the date of the
enactment of this Act.
(b) Prohibition on Modification of Standard.--The Secretary of the
Treasury may not (nor may any delegate of such Secretary) issue,
revise, or finalize any regulation (including the proposed regulations
published at 78 Fed. Reg. 71535 (November 29, 2013)), revenue ruling,
or other guidance not limited to a particular taxpayer relating to the
standard and definitions specified in subsection (a).
(c) Application to Organizations.--Except as provided in subsection
(d), this section shall apply with respect to any organization claiming
tax exempt status under section 501(c)(4) of the Internal Revenue Code
of 1986 which was created on, before, or after the date of the
enactment of this Act.
(d) Sunset.--This section shall not apply after the one-year period
beginning on the date of the enactment of this Act.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
H.R. 3865 provides that the criteria as in effect on
January 1, 2010, used to determine whether an organization is
operated exclusively for the promotion of social welfare for
purposes of section 501(c)(4) of the Internal Revenue Code
shall remain in effect. The Department of the Treasury
(Treasury Department) and the Internal Revenue Service (IRS)
would be barred from issuing or finalizing any regulation,
including the proposed regulations issued on November 29, 2013
(see 78 Fed. Reg. 71535), that would change the applicable law.
The proposal would sunset one year after enactment.
B. Background and Need for Legislation
Under regulations in place for over 50 years, an
organization is eligible for a tax exemption under section
501(c)(4) of the Internal Revenue Code if it is primarily
engaged in promoting the common good and general welfare.
Section 501(c)(4) social welfare groups can engage in political
campaign intervention, so long as the organization is primarily
engaged in activities that promote social welfare. Examples of
activities that promote social welfare (and are not, therefore,
considered political campaign intervention) include: get-out-
the-vote (GOTV) drives, voter registration efforts, and
candidate forums. Thus, a section 501(c)(4) social welfare
organization can engage in these activities without
jeopardizing its tax-exempt status.
On November 29, 2013, the Treasury Department proposed
regulations (78 Fed. Reg. 71535) that categorically exclude
from the definition of the promotion of social welfare certain
activities defined as ``candidate-related political activity.''
Candidate-related political activity includes: GOTV drives,
voter registration efforts, and candidate forums. Under the
proposed regulations, section 501(c)(4) organizations could
engage in some candidate-related political activity, but such
activity would no longer be considered the promotion of social
welfare, and could jeopardize their tax-exempt status. Other
tax-exempt organizations, such as 501(c)(3) charitable
organizations, 501(c)(5) unions, and 501(c)(6) chambers of
commerce would be unaffected by the proposed rule.
The Ways and Means Committee's ongoing investigation has
found that the primary activities of many of the right-leaning
501(c)(4) groups that were targeted by the IRS included: GOTV,
voter registration, and candidate forums. The proposed new
rules would adversely affect many of these groups, forcing them
to cease many of these activities to avoid jeopardizing their
exempt status. The investigation also has revealed that the
rationale given by the Treasury Department and the IRS for the
proposed rule change--that confusion about how to apply the law
governing 501(c)(4) organizations was to blame for the
targeting--is baseless. Indeed, it was recently revealed that
the new proposed rules have been secretly under consideration
since at least 2011, well before the IRS's targeting of right-
leaning groups came to light.
The Treasury Inspector General for Tax Administration audit
report, ``Inappropriate Criteria Were Used to Identify Tax-
Exempt Applications for Review,'' issued on May 14, 2013, found
that groups were subjected to extra scrutiny on the basis of
name--for example, ``Tea Party''--and policy position starting
in early 2010. The Committee's investigation has further found
that Tea Party applications were being received, processed and
approved before this time. Thus, H.R. 3865 fixes the standards
for determining exempt status at January 1, 2010, which pre-
dates the targeting. The bill would further provide a one-year
delay on the promulgation of the proposed new rules, as well as
other guidance, so that the Committee can complete its
investigation, including an examination of the process by which
these regulations were drafted.
C. Legislative History
Background
H.R. 3865 was introduced on January 14, 2014, and was
referred to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up H.R. 3865, the
Stop Targeting of Political Beliefs by the IRS Act of 2014, on
February 11, 2014, and ordered the bill, as amended, favorably
reported (with a quorum being present).
Committee hearings
The Committee has held numerous hearings about IRS
targeting. On May 17, 2013, the full Committee received
testimony on the IRS's practice of discriminating against
applicants for tax-exempt status based on the political
leanings of the applicants. Witnesses included Steve Miller,
then-Acting Commissioner of the IRS, and J. Russell George,
Treasury Inspector General for Tax Administration. On June 4,
2013, the full Committee received testimony on organizations
that were targeted as part of the IRS's practice of
discriminating against applicants for tax-exempt status based
on their personal beliefs from victims. On June 27, 2013, the
full Committee received testimony on the IRS's 30-day report on
the practice of discriminating against applicants for tax-
exempt status based on their personal beliefs from Daniel
Werfel, then-Principal Deputy Commissioner and Deputy
Commissioner for Services and Enforcement of the IRS.
The Committee also has held hearings at the subcommittee
level. On September 18, 2013, the Subcommittee on Oversight
received testimony on the current state and practices of the
IRS's Exempt Organizations Division following the May 14, 2013,
TIGTA audit report and then-Principal Deputy Commissioner
Werfel's June 25, 2013, report from Daniel Werfel, then-Acting
Commissioner of the IRS. On February 5, 2014, the Subcommittee
on Oversight received testimony on issues facing the IRS,
including consideration of the proposed new rule, from newly
confirmed IRS Commissioner John Koskinen.
II. EXPLANATION OF THE BILL
A. Applicable Standard for Determining Whether an Organization is
Operated Exclusively for the Promotion of Social Welfare
PRESENT LAW
Section 501(c)(4) organizations, in general
Section 501(c)(4) provides a tax exemption for civic
leagues or organizations not organized for profit, but operated
exclusively for the promotion of social welfare, and no part of
the net earnings of which inures to the benefit of any private
shareholder or individual.\1\ Treasury regulations provide that
an organization is operated exclusively for the promotion of
social welfare if it is engaged primarily in promoting in some
way the common good and general welfare of the people of a
community.\2\ An organization is not operated primarily for the
promotion of social welfare if its primary activity is
operating a social club for the benefit, pleasure, or
recreation of its members, or is carrying on a business with
the general public in a manner similar to organizations that
are operated for profit.\3\
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\1\Sec. 501(c)(4). Unless otherwise stated, all section references
are to the Internal Revenue Code of 1986, as amended.
\2\Treas. Reg. secs. 1.501(c)(4)-1(a)(1) and (2)(i).
\3\Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(i).
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Political campaign activities of section 501(c)(4) organizations
Treasury regulations further provide that the promotion of
social welfare does not include ``direct or indirect
participation or intervention in political campaigns on behalf
of or in opposition to any candidate for public office''
(herein, ``political campaign intervention'').\4\ However,
social welfare organizations are permitted to engage in
political campaign intervention so long as the organization is
primarily engaged in activities that promote social welfare.\5\
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\4\Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(ii).
\5\See Rev. Rul. 81-95, 1981-1 C.B. 332.
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Whether an activity constitutes political campaign
intervention (and thus does not promote social welfare) depends
on all the facts and circumstances of the particular case.\6\
The rules concerning political campaign intervention apply only
to activities involving candidates for elective public office;
the rules do not apply to activities involving officials who
are selected or appointed, such as executive branch officials
and judges.
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\6\See, e.g., Rev. Rul. 2007-41, 2007-25 I.R.B. 1421 (June 18,
2007) (analyzing 21 different factual scenarios involving section
501(c)(3) charitable organizations for political campaign
intervention); Rev. Rul. 81-95, 1981-1 C.B. 332 (referencing section
501(c)(3) standards in determining whether activities of a section
501(c)(4) organization constitute political campaign intervention).
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Similar rules apply for determining whether other types of
section 501(c) organizations have engaged in political campaign
intervention, including charities (section 501(c)(3)), labor
and horticultural organizations (section 501(c)(5)), and
business leagues (section 501(c)(6)). However, while sections
501(c)(4), (5), and (6) organizations may engage in some
political campaign intervention without jeopardizing exempt
status, section 501(c)(3) organizations are prohibited from
engaging in any political campaign intervention.\7\
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\7\Sec. 501(c)(3).
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The lobbying and advocacy activities of a section 501(c)(4)
organization generally are not limited, provided the activities
are in furtherance of the organization's exempt purpose.
Proposed regulations relating to the political campaign activities of
section 501(c)(4) organizations
On November 29, 2013, the Department of the Treasury and
the Internal Revenue Service (``IRS'') published proposed
regulations regarding the political campaign activities of
section 501(c)(4) organizations.\8\ The proposed regulations
seek to replace the present-law facts-and-circumstances test
used in determining whether a section 501(c)(4) organization
has engaged in political campaign intervention with an
enumerated list of activities that constitute political
campaign activities (and which therefore do not promote social
welfare).\9\
---------------------------------------------------------------------------
\8\Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social
Welfare Organizations on Candidate-Related Political Activities REG-
134417-13, 78 Fed. Reg. 71535 (November 29, 2013); incorporating Prop.
Treas. Reg. secs. 1.501(c)(4)-1(a)(2)(ii), (a)(2)(iii), and (c).
\9\Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social
Welfare Organizations on Candidate-Related Political Activities REG-
134417-13, 78 Fed. Reg. 71535 (November 29, 2013), p. 71536.
---------------------------------------------------------------------------
The proposed regulations replace the political campaign
intervention reference in the existing section 501(c)(4)
regulations (i.e., ``direct or indirect participation or
intervention in political campaigns on behalf of or in
opposition to any candidate for public office'') with a new
defined term, ``candidate-related political activity.''\10\
Candidate-related political activity means: (1) communications
that express a view on, whether for or against, the selection,
nomination, election, or appointment of one or more clearly
identified candidates (often referred to as express advocacy
communications); (2) certain public communications (as defined)
within 30 days of a primary election or 60 days of a general
election that refer to one or more clearly identified
candidates, or in the case of a general election, one or more
political parties; (3) communications the expenditures for
which are reported to the Federal Election Commission; (4)
contributions (including gifts, grants, subscriptions, loans,
advances, or deposits) of money or anything of value to or the
solicitation of contributions on behalf of a candidate, a
section 527 political organization, or a section 501(c)
organization that engages in candidate-related political
activity; (5) conduct of a voter registration drive or ``get-
out-the-vote'' drive; (6) distribution of any material prepared
by or on behalf of a candidate or by a section 527 political
organization; (7) preparation or distribution of a voter guide
that refers to one or more clearly identified candidates, or in
the case of a general election to one or more political
parties; and (8) hosting or conducting a forum for candidates
within 30 days of a primary election or 60 days of a general
election.\11\
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\10\Prop. Treas. Reg. secs. 1.501(c)(4)-1(a)(2)(ii) and (iii).
\11\Prop. Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(iii)(A).
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For purposes of defining candidate-related political
activity, the proposed regulations define the term
``candidate'' to mean ``an individual who publicly offers
himself, or is proposed by another, for selection, nomination,
election, or appointment to any federal, state, or local public
office or office in a political organization, or to be a
Presidential or Vice-Presidential elector, whether or not such
individual is ultimately selected, nominated, elected, or
appointed,'' including officeholders who are the subject of a
recall election;\12\ this includes certain judicial and
executive branch appointments.
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\12\Prop. Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(iii)(B)(1).
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The proposed regulations apply only to section 501(c)(4)
organizations.\13\ Other section 501(c) organizations
(including section 501(c)(3) charitable organizations, section
501(c)(5) labor and horticultural organizations, and section
501(c)(6) business leagues) will continue to use present-law
rules concerning political campaign intervention.
---------------------------------------------------------------------------
\13\Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social
Welfare Organizations on Candidate-Related Political Activities REG-
134417-13, 78 Fed. Reg. 71535 (November 29, 2013), p. 71537.
---------------------------------------------------------------------------
The proposed regulations are not immediately effective.
They are proposed to be effective on the date they are
published in the Federal Register as final regulations.\14\
---------------------------------------------------------------------------
\14\Prop. Treas. Reg. sec. 1.501(c)(4)-1(c). In the notice of
proposed rulemaking, the IRS seeks comments on a number of issues,
including: (1) whether the existing regulation that provides that an
organization is operated exclusively for social welfare if it is
engaged primarily in promoting in some way the common good and general
welfare of the people of a community should be modified; and (2)
whether the rules included in the proposed regulations should be
extended to other section 501(c) organizations or to section 527
political organizations. Notice of Proposed Rulemaking, Guidance for
Tax-Exempt Social Welfare Organizations on Candidate-Related Political
Activities REG-134417-13, 78 Fed. Reg. 71535 (November 29, 2013), p.
71537.
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REASONS FOR CHANGE
On May 14, 2013, the Treasury Inspector General for Tax
Administration issued an audit report concluding that the IRS
used inappropriate criteria to identify certain applications
for tax exemption for heightened review. In response to the
Inspector General's report, the Committee on Ways and Means
continues to investigate the procedures and criteria used by
the IRS in reviewing applications for exemption, particularly
applications filed by organizations seeking recognition of
their status as social welfare organizations under section
501(c)(4).
The Committee believes that, in light of the ongoing
investigation and the need for a more deliberative process, it
is appropriate, for a one-year period, to: (1) require that the
IRS use the standards and definitions in effect as of January
1, 2010, for determining whether an organization is operated
exclusively for the promotion of social welfare for purposes of
section 501(c)(4); and (2) prohibit the Secretary of the
Treasury and the IRS from issuing, revising, or finalizing any
regulations (including the proposed regulations issued November
29, 2013) or other guidance modifying such standards and
definitions. This one-year period will afford the Committee the
opportunity to complete its investigation and will allow the
IRS and the Congress to consider more fully the numerous
concerns that have been raised about the proposed regulations,
including whether the proposed regulations will have the effect
of discouraging legitimate tax-exempt activity.
EXPLANATION OF PROVISION
Under the provision, the standards and definitions as in
effect on January 1, 2010, which are used to determine whether
an organization is operated exclusively for the promotion of
social welfare for purposes of section 501(c)(4), shall apply
for determining the tax-exempt status of organizations under
section 501(c)(4).
The provision also provides that neither the Secretary of
the Treasury nor any delegate of the Secretary may issue,
revise, or finalize any regulation (including the November 29,
2013 proposed regulations described above), revenue ruling, or
other guidance that is not limited to a particular taxpayer
relating to the standards or definitions used to determine
whether an organization is operated exclusively for the
promotion of social welfare for purposes of section 501(c)(4).
The provision applies with respect to any organization
claiming tax-exempt status as an organization described in
section 501(c)(4) that was created on, before, or after the
date of enactment.
The provision sunsets such that it does not apply after the
one-year period beginning on the date of enactment.
EFFECTIVE DATE
The provision is effective on the date of enactment.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 3865, the ``Stop Targeting of Political
Beliefs by the IRS Act of 2014.''
The bill, H.R. 3865, was ordered favorably reported to the
House of Representatives as amended by a rollcall vote of 23
yeas to 13 nays (with a quorum being present). The vote was as
follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Ryan....................... X ........ ......... Mr. Lewis........ ........ ........ .........
Mr. Nunes...................... X ........ ......... Mr. Neal......... ........ ........ .........
Mr. Tiberi..................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Roskam..................... X ........ ......... Mr. Larson....... ........ X .........
Mr. Gerlach.................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Price...................... X ........ ......... Mr. Kind......... ........ X .........
Mr. Buchanan................... X ........ ......... Mr. Pascrell..... ........ X .........
Mr. Smith...................... X ........ ......... Mr. Crowley...... ........ X .........
Mr. Schock..................... X ........ ......... Ms. Schwartz..... ........ ........ .........
Ms. Jenkins.................... X ........ ......... Mr. Davis........ ........ X .........
Mr. Paulsen.................... X ........ ......... Ms. Sanchez...... ........ X .........
Mr. Marchant................... X ........ .........
Ms. Black...................... X ........ .........
Mr. Reed....................... X ........ .........
Mr. Young...................... X ........ .........
Mr. Kelly...................... X ........ .........
Mr. Griffin.................... X ........ .........
Mr. Renacci.................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 3865, as
reported.
The bill, as reported, is estimated to result in a
negligible reduction in Federal budget receipts for 2014-2024.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee states further that the bill involves no new or
increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the Congressional Budget Office (``CBO''), the
following statement by CBO is provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 14, 2014.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3865, the Stop
Targeting of Political Beliefs by the IRS Act of 2014.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Douglas W. Elmendorf, Director.
Enclosure.
H.R. 3865--Stop Targeting of Political Beliefs by the IRS Act of 2014
H.R. 3865 would amend federal law relating to certain tax-
exempt nonprofit organizations. Specifically, the bill would
require the Internal Revenue Service (IRS) to continue to use
certain standards and definitions in effect on January 1, 2010,
for determining whether an organization qualifies for tax-
exempt status under section 501(c)(4) of the Internal Revenue
Code. In addition, H.R. 3865 would prohibit the agency from
issuing, revising, or finalizing any regulation related to
those standards and definitions. The legislation's provisions
would sunset one year after enactment.
CBO estimates that implementing the legislation would have
no significant impact on IRS administrative costs, which are
subject to appropriation. The staff of the Joint Committee on
Taxation (JCT) estimates that enacting H.R. 3865 would result
in a negligible loss of revenues over the 2014-2024 period,
therefore, pay-as-you procedures apply.
JCT has determined that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Matthew
Pickford. The estimate was approved by Theresa Gullo, Deputy
Assistant Director for Budget Analysis.
D. Macroeconomic Impact Analysis
In compliance with clause 3(h)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made by the staff of the Joint Committee on Taxation with
respect to the provisions of the bill amending the Internal
Revenue Code of 1986: the effects of the bill on economic
activity are so small as to be incalculable within the context
of a model of the aggregate economy.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was as a result of the
Committee's review of the provisions of H.R. 3865 that the
Committee concluded that it is appropriate to report the bill,
as amended, favorably to the House of Representatives with the
recommendation that the bill do pass.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
involve any Federal income tax rate increases within the
meaning of the rule.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service
Restructuring and Reform Act of 1998 (the ``IRS Reform Act'')
requires the staff of the Joint Committee on Taxation (in
consultation with the Internal Revenue Service and the Treasury
Department) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported by
the Senate Committee on Finance, the House Committee on Ways
and Means, or any committee of conference if the legislation
includes a provision that directly or indirectly amends the
Internal Revenue Code and has widespread applicability to
individuals or small businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Code and that
have ``widespread applicability'' to individuals or small
businesses, within the meaning of the rule.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with Sec. 3(j)(2) of H. Res. 5 (113th
Congress), the Committee states that no provision of the bill
establishes or reauthorizes: (1) a program of the Federal
Government known to be duplicative of another Federal program,
(2) a program included in any report from the Government
Accountability Office to Congress pursuant to section 21 of
Public Law 111-139, or (3) a program related to a program
identified in the most recent Catalog of Federal Domestic
Assistance, published pursuant to the Federal Program
Information Act (Public Law 95-220, as amended by Public Law
98-169).
H. Disclosure of Directed Rule Makings
In compliance with Sec. 3(k) of H. Res. 5 (113th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires one
directed rule making within the meaning of such section.
Specifically, Sec. 2 of the bill provides that, for one year
beginning on the date of enactment, the Secretary of the
Treasury may not (nor may any delegate of such Secretary)
issue, revise, or finalize any regulation (including the
proposed regulations published at 78 Fed. Reg. 71535 (November
29, 2013)), revenue ruling, or other guidance not limited to a
particular taxpayer relating to the standard and definitions as
in effect on January 1, 2010, which are used to determine
whether an organization is operated exclusively for the
promotion of social welfare for purposes of section 501(c)(4)
of the Internal Revenue Code of 1986.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
With respect to clause 3(e) of rule XIII of the Rules of
the House of Representatives, the bill, as reported, includes
no provisions proposing to repeal or amend an existing statute
or part thereof. Therefore, no additional materials otherwise
required to be included in this report or any accompanying
document under that clause are required to be included with
respect to this bill.
VII. DISSENTING VIEWS
This Committee has started the new year where it left off--
showing painfully little interest in legislating--and instead
pursuing its politically based agenda of seeking to unearth
scandal in the IRS where none exists and undermining the
Affordable Care Act.
H.R. 3865 would impose an unnecessary one-year delay on any
guidance, including the newly proposed 501(c)(4) regulations,
on the tax-exempt requirements for social welfare
organizations. The Democrats on the Ways and Means Committee
were unanimous in their opposition to this bill, as it
reiterates the misplaced priorities of the Committee's
majority.
This markup was the latest in a series of hearings, press
releases, and other statements by the Republicans to revive the
failing IRS controversy on the processing of Tea Party
applications. Indeed, the title of H.R. 3865 is ``Stop
Targeting of Political Beliefs by the IRS Act of 2014.''
Republicans are using the proposed IRS regulations to try
and reignite their baseless allegations that the White House,
through the IRS, orchestrated an attack on its political
enemies. Even though after the IRS has provided more than
500,000 pages of documents to Congressional committees, five
dozen interviews of current and former IRS employees have taken
place and lawmakers at fifteen congressional hearings have
questioned IRS officials there has been absolutely no evidence
that the IRS processing of Tea Party applications was
politically motivated ``targeting'' or connected to the White
House.
All six investigations (TIGTA, Federal Bureau of
Investigations (FBI), and four Congressional investigations)
were launched based on a fundamentally flawed report from the
Treasury Inspector General for Tax Administration (TIGTA) who
is now the subject of an ethics complaint to the Council of
Inspectors General.
It has been repeatedly demonstrated that progressive groups
were also negatively affected by the incompetent handling of
501(c)(4) applications. Had the Treasury Inspector General not
left out vital information--producing a fundamentally flawed
audit report--it may have dissuaded Republicans from
immediately accusing the White House of keeping an ``enemies
list'' and trying to turn the audit into a scandal that they
are intent on keeping alive, no matter the facts.
H.R. 3865 is nothing more than an attempt to recast the
proposed 501(c)(4) regulations as a new ``scandal'' to replace
the old ``non-scandal.''.
The Republican's argument would make people think that
Treasury just spontaneously decided to issue proposed
regulations on 501(c)(4) organizations. That is not the case.
The proposed regulations were actually a recommendation of
TIGTA. In the May 14, 2013 audit report on tax-exempt
applications, TIGTA recommended to the IRS Chief Counsel and
the Department of the Treasury that guidance on how to measure
the ``primary activity'' of 501(c)(4) social welfare
organizations be included for consideration in the Department
of the Treasury Priority Guidance Plan. Treasury did include
this on the 2013-2014 Treasury Priority Guidance Plan released
in August 2013. The proposed regulations were then issued in
November 2013.
Furthermore, Republicans called for the implementation of
TIGTA's recommendations. A Republican Committee Member
introduced H.R. 2532, which would require the IRS Commissioner
to implement all of TIGTA's recommendations, including the
recommendation to clarify the 501(c)(4) regulations. In
addition, the joint explanatory statement on the Consolidated
Appropriations Act of 2014 (H.R. 3547) states ``The IRS' new
management is expected to implement the Treasury Inspector
General for Tax Administration recommendations regarding the
inappropriate criteria being used to identify tax-exempt
applications for review.''
Commissioner Koskinen testified that the proposed
regulations are generating massive public interest. To date,
more than 21,000 comments have been submitted--``a record
[number of comments],'' Koskinen said. The comment period ends
on February 27, 2014. Many of our Democratic colleagues and
outside allies have also weighed in on the proposed regulations
to ensure that non-partisan voter registration and get out the
vote efforts are not negatively impacted. But we start from the
premise that the regulation needs to be clarified for
organizations across the political spectrum and the Code should
not be used to shield political activities and donors.
The fundamental Republican problem here does not lie with
these proposed regulations that are nowhere close to becoming
final. The fundamental problem is one of campaign finance and
that the Republicans will stop at nothing to keep their donors
secret.
It is clear that the entire purpose of this one-year delay
is to keep the Republicans' donors secret through the next
election cycle. In the last election cycle, outside groups
reported to the FEC political expenditures of nearly $1
billion. Between 2010 and 2012, applications for 501(c)(4)
status nearly doubled, from 1,735 to 3,357. The designation
allows organizations to keep their donors secret. Spending
during the 2012 election by 501(c)(4)s soared to more than $250
million, from $92 million in 2010 and just $1 million in 2006,
according to the Center for Responsive Politics.
It should be noted that all of these groups are welcome to
be involved in the political election process and still face no
tax by forming as section 527 organizations, commonly called
PACs, and disclosing their donors to the public.
The irony of this bill is that, in seeking to delay these
regulations for a year under the guise of a ``scandal,'' what
really remains hidden are donors to groups pouring millions of
dollars into campaign advertising.
In all, more than 150 IRS employees have worked 70,000
hours--time taken away from taxpayer services--to accommodate
the ongoing requests for information from congressional
investigators. Now, because all of these taxpayer dollars have
been wasted with absolutely no evidence of corruption, the
Republicans have pivoted to the 501(c)(4) regulations as their
new bogeyman. It is a shameful use of this prestigious
Committee that we, the undersigned, strongly oppose.
Sander M. Levin.
Charles B. Rangel.
Jim McDermott.
John Lewis.
Richard E. Neal.
Xavier Becerra.
Lloyd Doggett.
Mike Thompson.
John B. Larson.
Earl Blumenauer.
Ron Kind.
Bill Pascrell, Jr.
Joseph Crowley.
Allyson Y. Schwartz.
Danny K. Davis.
Linda T. Sanchez.