White House proposes limits on political activity by nonprofits

The Obama administration on Tuesday launched a bid to rein in the use of tax-exempt groups for political campaigning.

The effort is an attempt to reduce the role of loosely regulated big-money political outfits like GOP political guru Karl Rove's Crossroads GPS and the pro-Obama Priorities USA.

The Internal Revenue Service and the Treasury Department said they want to prohibit such groups from using "candidate-related political activity" like running ads, registering voters or distributing campaign literature as activities that qualify them to be tax-exempt "social welfare" organizations.

The agencies say there will be a lengthy comment period before any regulations will be finalized. That means groups like Crossroads and Priorities USA will be able to collect millions of dollars from anonymous donors ahead of next year's campaign.

"This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations," said Mark Mazur, assistant Treasury secretary for tax policy. "We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax exemption are clear and can be applied consistently."

Organized under section 501(c)(4) of the tax code, such groups are able to raise millions of dollars to influence elections. But the category also includes small-scale tea party groups, many of which say they were harassed by the IRS after seeking tax-exempt status.

House Ways and Means Committee Chairman Dave Camp, R-Mich., was skeptical of the administration's move.

"There continues to be an ongoing investigation, with many documents yet to be uncovered, into how the IRS systematically targeted and abused conservative-leaning groups," he said. "This smacks of the administration trying to shut down potential critics."

Some of the biggest spenders in the last election also expressed outrage at the proposal.

Americans for Tax Reform, a nonprofit that spent about $14 million in efforts to oppose Democrats in the 2012 elections, according to the Center for Responsive Politics, said the Obama administration was aiming to hurt conservatives at the polls.

"We expect the constitutionality of such a rule would be immediately challenged on solid grounds," said John Kartch, spokesman for the group, which is led by antitax activist Grover Norquist.

The 2010 Citizens United Supreme Court decision lifted the limits on donations by labor unions and companies to 501(c)(4) groups, allowing Crossroads, the largest of them, to raise significant sums outside the limits that apply to candidates' campaigns and traditional party committees.

"Enormous abuses have taken place under the current rules, which have allowed groups largely devoted to campaign activities to operate as nonprofit groups in order to keep secret the donors funding their campaign activities," said Fred Wertheimer, president of Democracy 21, which advocates limits on money in politics.

Under current rules, social welfare organizations may conduct some political work as long as it's not their main activity. The proposed new rules would block such things as running ads that "expressly advocate for a clearly identified political candidate or candidates of a political party." And ads that simply mention a politician to, for instance, urge him or her to vote a certain way couldn't be run 60 days before a general election of 30 days before a primary.

The rules would also limit voter drives, voter registration efforts and distribution of literature.

Wire services