Obama Makes the IRS Free Speech Cop Too

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As if the Internal Revenue Service did not have enough to do with administering Obamacare, President Obama wants to give it another job: regulating the free speech of his political opponents, while leaving the political activities of the president's friends untouched.

The new proposed IRS regulations were placed in the Federal Register the day after the Thanksgiving holiday, and comments on them are due by the end of February. Anyone who wants to participate can upload comments to www.regulations.gov (IRS Reg 134417-13).

The regulations are targeted at tax-exempt organizations that file under 501(c)(4) of the IRS code, the status of some popular right-wing groups such as Americans for Tax Reform, Americans for Prosperity, and Crossroads GPS. Contributions to these groups are not tax-deductible. Under the new rules they would not be allowed to engage in voter education that mentions a candidate within two months of a general election or one month of a primary.

The IRS explains the new rules as follows: "The Treasury Department and the IRS recognize that more definitive rules with respect to political activities related to candidates...would be helpful in applying the rules regarding qualification for tax-exempt status under section 501(c)(4)." The Treasury therefore wants to "identify specific political activities that would be candidate-related activities that do not promote social welfare."

Left untouched are unions, which file under 501(c)(5) of the Internal Revenue Code. Not only are they some of the largest spenders in election cycles, but they also provide funding for worker centers such as OUR Walmart and the Restaurant Opportunities Center, many of which operate under 501(c)(3) of the code.

I am not suggesting that the Internal Revenue Service regulate other tax-exempt organizations, such as 501(c)(3)s and 501(c)(5)s. Rather, the IRS should not be regulating in this area at all. Political activity is regulated by the Federal Election Commission. The First Amendment requires that everyone have free speech, and to the extent that contributions and speech are limited, this should be the purview of the FEC.

Writing in the Wall Street Journal last month, law professor and former FEC chairman Bradley Smith said, "Furthermore, while Section 501(c)(4) states that it applies to organizations operating exclusively for the promotion of "social welfare," the statute does not define ‘social welfare.' Since when, in a democratic society, are nonpartisan get-out-the-vote drives, voter registration, voter education, and meet-the-candidates nights-all of which will be limited by the IRS's proposed rules-not activities in support of social welfare?"

Meanwhile, unions are actively engaged in political activity and get-out-the-vote drives, the vast majority on behalf of Democratic candidates. In the 2012 election cycle, according to the Center for Responsive Politics, unions gave $143 million to federal candidates, parties, and outside groups.

The numbers are even higher when state races are included. The Service Employees International Union spent $58 million on federal and state elections; the AFL-CIO spent $20 million; and the American Federation of Teachers spent $63 million.

In the 2010 election cycle the American Federation of State, County and Municipal Employees was the biggest outside spender of the 2010 elections, spending $88 million. Larry Scanlon, the head of AFSCME's political operations, said, "We're the big dog....But we don't like to brag."

In addition to the contributions, unions also contribute time. Union members are engaged in "get-out-the-vote" drives. Some are given time off from their employment to do so as elections approach.

In a column written on Sunday, November 4, 2012, the weekend before the presidential election, SEIU president Mary Kay Henry wrote "On Saturday, more than twenty-five thousand SEIU members were out in full force, knocking doors and making the case for President Obama and other champions for working people."

She continued, "Collectively, SEIU members have knocked almost 460,000 doors in Ohio, having conversations with close to 7,000 members along the way."

This is undoubtedly public communication, posted on the Internet, made within four days of the election. Yet the IRS is not targeting 501(c)(5) organizations such as the SEIU.

Also left untouched are 501(c)(3) organizations, which benefit from tax-deductible contributions as well as tax-exempt status. Many individuals and foundations give only to 501(c)(3)s. It is not unusual for some of these, such as the Sierra Club or Planned Parenthood, to educate the public about the preferred way to vote.

The Sierra Club, which accepts tax-deductible contributions, brags on its website about its campaign success: "By framing many of the state and federal races with environmental issues," the Club writes, "we not only won many of our battles, we facilitated a shift in power that will help us win the war against dirty energy and its effects on the planet."

It is bad enough if the government imposes too many regulations on everyone. It is even worse when the government imposes regulations on its political enemies but not its political friends. The wisest course for the IRS would be to leave the regulation of political speech to the courts and the Federal Election Commission.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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