Democrats press IRS to reverse Trump-era rule limiting donor disclosure

A group of Senate Democrats on Tuesday urged the Biden administration to reverse a Trump-era IRS rule that reduced donor disclosure requirements for certain politically active tax-exempt organizations.

“As it stands, this policy weakens federal tax laws, campaign finance laws, and longstanding efforts to prevent foreign interference in U.S. elections,” the senators wrote in the letter to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig.

More than three dozen Senate Democrats signed the letter, including Sens. Amy Klobuchar (Minn.), Jon Tester (Mont.) and Ron Wyden (Ore.). Klobuchar is chairwoman of the Senate Rules Committee, and Wyden is chairman of the Senate Finance Committee.

Under regulations the Trump administration finalized last year, certain types of tax-exempt groups no longer have to provide the names and addresses of major donors on annual IRS forms. The disclosure requirement was removed for groups that include “social welfare” organizations such as the National Rifle Association and the American Civil Liberties Union as well as business leagues and labor unions. 

The groups still have to provide the IRS with the amounts of donations from major donors and keep the donor information in their records.

Republicans argued that the donor information isn’t needed for tax enforcement and that removing the disclosure requirement helps to protect taxpayers’ First Amendment rights. While the donor names and addresses that tax-exempt groups had previously provided to the IRS were supposed to be kept private, Republicans were concerned that the information could inadvertently be made public.

But Democrats have strongly opposed the removal of the donor reporting requirements. The Senate Democrats argued in their letter Tuesday that the removal of the requirements makes it harder for the federal government to police “dark money” and to enforce prohibitions against foreign contributions to U.S. elections.

“As secret campaign contributions continue to pour into federal elections, this IRS rule is a major step backwards for transparency and will allow dark money to continue to corrode our political system,” the senators wrote. “The IRS needs every tool at its disposal to ensure that these organizations are complying with the law.”

Reconsidering the regulations is “a critical step in preventing special interests and foreign actors from exploiting loopholes at the expense of the American people,” they added.

The Washington Post first reported on the letter. The Post noted that President Biden on the campaign trail proposed requiring entities that spend more than $10,000 on federal elections to publicly disclose donors. The Post also noted that Biden and Democrats were boosted in the 2020 election cycle by spending from dark money groups.