House passes bill to ban IRS from collecting donor information

The House passed legislation Tuesday that would generally prohibit the Internal Revenue Service (IRS) from requiring tax-exempt groups to report the identities of donors on annual returns — the latest measure the chamber has approved to place limits on the agency.

The bill passed on a largely party-line vote, 240-182. 

{mosads}The vote comes as GOP frustration with the IRS reaches a boiling point. Republicans have been furious with the agency since revelations in 2013 that the agency had subjected conservative groups’ applications for tax-exempt status to extra scrutiny.

The House Oversight Committee is set to vote Wednesday on a resolution to censure IRS Commissioner John Koskinen. And the House Judiciary Committee is set to hold its second hearing on whether to impeach Koskinen next week.

The bill the House passed would largely do away with a requirement that organizations with tax-exempt status under section 501(c) of the code report information about donations of $5,000 or more. Under the bill, only donations of that size from groups’ officers and directors and the five highest-paid employees would have to be disclosed.

Republicans argued that the bill is important to safeguard taxpayers’ privacy and increase IRS accountability in the wake of the political-targeting scandal. While the donor information is supposed to be kept private for tax-exempt 501(c)(4) “social welfare” organizations, it has been improperly released in the past, most notably in the case of the National Organization for Marriage in 2012.

The bill “makes much needed steps to protect taxpayer identities and ease the compliance burden on tax-exempt organizations,” House Ways and Means Chairman Kevin Brady (R-Texas) said. “And most importantly, this bill helps to ensure that Americans can never again be singled out by the IRS for their political beliefs.”

Republicans have highlighted that the disclosure is not needed for tax administration and point to the fact that the IRS has considered eliminating the requirement.

“If they don’t need it, let’s not give it to them,” said Rep. Peter Roskam (R-Ill.), who authored the bill.

The bill has the backing of the Wall Street Journal editorial board, Koch Industries and conservative groups such as Grover Norquist’s Americans for Tax Reform. It was approved by the House Ways and Means Committee on a party-line vote in April.

Democrats strongly oppose the measure. They argue it would solidify the secrecy surrounding donations to 501(c)(4) groups that use the contributions for political purposes.

“The bill before us today would make it easier for groups to operate in the shadows,” said Rep. Bill Pascrell (D-N.J.).

Democrats also said the bill could facilitate the use of foreign money in U.S. elections. While it is illegal for foreign money to be spent in American elections, the requirement for tax-exempt groups to disclose their donors is the only real protection against politically active 501(c)(4) groups using foreign money, they said.

“Republicans are here today to continue their attack on the IRS as they drive really to further undermine our campaign finance system,” Rep. Sandy Levin (D-Mich.), the top Democrat on the Ways and Means Committee, said.

The New York Times editorial board and “good government” groups such as Public Citizen and the Sunlight Foundation are also against the bill.

The Obama administration said it opposes the bill but did not explicitly threaten to veto it.

“By permanently preventing the IRS from requiring reporting of donor information by 501(c) organizations, H.R. 5053 would constrain the IRS in enforcing tax laws and reduce the transparency of private foundations,” the Office of Management and Budget said in a statement of administration policy.

The House approved several other IRS oversight bills in April. These bills would bar the IRS from rehiring employees who had been fired for misconduct, prevent the IRS from paying employees bonuses until it implements a comprehensive customer service strategy, prevent the IRS from spending its user fees without approval from Congress and prevent the IRS from hiring new employees until the Treasury Department certifies that no employees have serious tax problems or issues a report explaining why it cannot do so.

The Senate has yet to vote on any of the measures.