The Trump administration will no longer require certain nonprofits, including politically affiliated ones such as the National Rifle Association, to disclose their donor information to the Internal Revenue Service. The overturning of this longstanding rule will allow political groups to hide their sources of funding from government scrutiny.
The overturning of this rule has long been fought for by Republicans in Congress, often arguing that the rule violates First Amendment rights. The change will affect labor unions, social clubs and political groups such as the NRA, as well as ones that collect “dark money,” such as the Koch network’s Americans for Prosperity. Dark money refers to political spending that will attempt to influence the decision of a voter but the donor is not disclosed.
The groups will still be required to collect donor information, but they will no longer be required to turn over that information to the government unless audited. However, nonprofits whose sole purpose is to sway political campaigns, which are classified as 501(c)(3) and 527 organizations, as well as charities that take tax-deductible contributions, will still be required to report the names of large donors. The new policy will hide more information from the government but not impact public disclosure of the donor’s information.
Treasury officials said the new policy will “protect privacy reduce compliance costs for nonprofits.” They also said the IRS could still have access to the donor information if it is needed for tax scrutiny. So basically, the donor information will only be revealed if the nonprofit is being audited, which is rare. The Treasury secretary Steven Mnuchin released a statement on Monday:
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.
Treasury officials also argued that the rule was partially created due to the IRS scandal that began back in 2013 when the inspector general found the department guilty of targeting conservative and progressive groups.
However, multiple critics have condemned the new policy because it could lead to illegal donations. Steven Rosenthal of Washington’s nonpartisan Tax Policy Center said, “There’s a lot to this administrative rule under the semblance of reducing paperwork. It adds another layer of opaqueness to the tax-exempt funding.”
Republicans have celebrated the new policy. Senate Majority Leader Mitch McConnell called the decision:
... particularly welcome news to those of us who intently are focused on defending the First Amendment, for those of us who over the years have raised concerns during the last administration about activist regulators punishing free speech and free association. It’s a straightforward, common sense policy decision.
However, Democrats have slammed the new policy. Sen. Ron Wyden, a ranking member on the Finance Committee, said the decision would allow “anonymous foreign donors to funnel dark money into nonprofits.” Sen. Jon Tester referred to it as “the swampiest, darkest, dirtiest decision.”