Political ‘dark money’ goes pitch black in IRS and treasury rule change

By Andrew Kerr

Politically active tax-exempt nonprofit groups are no longer required to disclose the identity of their donors to U.S. tax authorities, the Department of the Treasury and Internal Revenue Service announced Monday.

The ruling impacts social welfare 501(c)(4) nonprofits, such as Planned Parenthood Action Fund, Everytown for Gun Safety Action Fund and the National Rifle Association’s Institute for Legislative Action, which are allowed to leverage contributions to engage in political activities as long as they don’t constitute a majority of their yearly expenditures.

Social welfare nonprofits are commonly referred to as “dark money” groups because the identity of their donors are shielded from the public. Now, they are no longer required to identify their “dark money” donors to the IRS.

So-called “dark money” groups have become increasingly prominent in electoral politics on both sides of the political aisle in the past decade. Conservative and liberal nonprofits spent $141 million and $64 million, respectively, in the 2016 elections alone, according to the Center for Responsive Politics.

Labor unions, trade associations and veterans groups will also be affected by the relaxed disclosure requirements, Reuters reported.

Treasury Secretary Steven Mnuchin said in a statement Monday that the change will not limit transparency, noting that “dark money” donors were already shielded from the public prior to the policy change.

“Americans shouldn’t be required to send the IRS information that it doesn’t need to effectively enforce our tax laws, and the IRS simply does not need tax returns with donor names and addresses to do its job in this area,” Mnuchin said.

“It is important to emphasize that this change will in no way limit transparency,” he continued. “The same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected. The IRS’s new policy for certain tax-exempt organizations will make our tax system simpler and less susceptible to abuse.”

The move was hailed by conservative groups as a victory for free speech. Conservatives have argued that donor information supplied to the IRS is susceptible to leaks.

“We applaud the Treasury Department and Secretary Mnuchin for its common-sense move to protect the privacy of Americans who give to nonprofits,” Institute for Free Speech President David Keating said in a statement Tuesday. “It has become increasingly clear that the mass collection of this highly personal information is not necessary to enforce tax laws or conduct investigations. Moreover, it can be easily abused to suppress First Amendment rights.”

Their fears aren’t unwarranted — the IRS has leaked confidential nonprofit documents to the public in the past. The identity of major donors to the conservative National Organization for Marriage was leaked to the Human Rights Campaign, a pro-same sex marriage group, from someone within the IRS in 2012. The IRS admitted it wrongfully released the group’s donor information in 2014.

While “dark money” groups are no longer required to disclose the names and addresses of their contributors to the IRS, they will still need to keep records and make donor information available to tax authorities upon request in the event of an audit.

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