IRS Likely to Leave 'Dark Money' Groups Alone Until After 2016

Even as candidates find new ways to benefit from "dark money" funneled through tax-exempt 501(c)(4) organizations, the Internal Revenue Service is expected to delay any action to rein in such groups until after the 2016 election cycle, the New York Times reports.

In a change from previous elections, at least eight Republican presidential candidates have aligned themselves with nonprofit groups set up to raise hundreds of millions of dollars for their campaigns, while supporters of Hillary Rodham Clinton are considering a similar tactic. Unlike regular political campaigns and super PACs, these so-called social welfare organizations, which are set up under an exemption established more than a century ago, do not have to disclose their donors, and with scant enforcement of rules limiting their political activity, some, including groups tied to Republican strategist Karl Rove and industrialists Charles G. and David H. Koch, have become fronts for huge political operations. Overall, such groups spent more than $300 million on political activities in 2012 — up from $5.8 million in 2004.

When Treasury and the IRS issued a proposal for regulating 501(c)(4)s' political activities in late 2013, however, both progressives and conservatives attacked the restrictions as having a chilling effect on political speech, and the proposed rules were shelved. And while Democrats on the Federal Election Commission have sought to regulate 501 (c)(4)s like Rove's Crossroads GPS as "political committees" with an eye to forcing them to disclose their donors, Republicans on the commission have blocked those efforts. "The IRS shouldn't play political referee," said Donald F. McGahn, a former FEC commissioner, "and if they attempt another rule-making, they run the risk of looking partisan, ideological, or worse." 

"Because of the way the IRS has been attacked, they've become extremely hesitant to act," said Miriam Galston, a campaign finance specialist at George Washington University, and, in terms of this election cycle, that means "it's going to be pretty much open season."

Eric Lichtblau. "I.R.S. Expected to Stand Aside as Nonprofits Increase Role in 2016 Race." New York Times 07/05/2015.