House Democrats urge IRS to reverse Trump-era rule reducing donor disclosure

A group of House Democrats on Wednesday sent a letter to the Treasury Department and IRS urging them to reverse a Trump-era rule that limits donor disclosure requirements for politically active nonprofits.

The letter from the House Democrats comes after Senate Democrats sent a version of the letter to Treasury and the IRS last month.

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

More than 30 House Democrats signed the letter, including Reps. Ted Deutch (Fla.), Peter Welch (Vt.), David Cicilline (R.I.), and Jason Crow (Colo.).

Treasury and the IRS last year finalized regulations under which certain tax-exempt groups no longer have to disclose to the IRS on annual forms the names and addresses of major donors. The guidance applies to social-welfare organizations, business leagues and labor unions. Charities and certain political organizations still have to report the names and addresses of donors.

Treasury and the IRS said when they finalized the rule that the donor information isn’t needed for tax administration purposes and that it was removing the reporting requirements because of the burdens and risks related to the requirement. The agencies also said that Congress hasn’t directed the IRS to enforce campaign finance laws.

But the House Democrats expressed concerns that removing the donor reporting requirements would make it harder for the federal government to enforce the ban on foreign spending in U.S. elections and to police “dark money.”

Reinstating the reporting requirements “is a critical step in preventing special interests and foreign actors from exploiting loopholes at the expense of the American people,” the lawmakers wrote.  

Republicans are strongly supportive of the Trump-era regulations, arguing that the guidance helps to prevent donor information from improperly becoming public and helps to prevent the IRS from targeting tax-exempt groups and their donors for their political beliefs. While the donor information was supposed to be kept private, there have been past instances where information was made public.

Senate Republicans, led by Minority Leader Mitch McConnell (R-Ky.) and Sen. Mike Braun (R-Ind.), introduced legislation last week aimed at codifying the rules the remove the reporting requirements.

“Americans would remain free from a federal dragnet collecting private information that it neither needs nor uses for legitimate law enforcement purposes,” McConnell said in a Senate floor speech. “Information that can be mishandled — or worse, used to target and harass Americans based on their views.”