Some tax-exempt organizations, such as the National Rifle Association, will no longer have to disclose their major donors’ identities to federal tax officials under a policy the Trump administration is set to finalize this week.
The change long has been sought by politically active conservative groups and powerful Republicans such as Senate Majority Leader Mitch McConnell of Kentucky, who have said disclosing the information – even just to the IRS – could subject contributors to harassment.
But election watchdogs have cried foul, saying the change strips federal tax regulators of the ability to easily scrutinize donations and could leave US elections vulnerable to infiltration by foreign interests. The move comes as the nation grapples with the coronavirus pandemic and a little more than five months before November’s general election.
“It’s another nail in the coffin of disclosure,” said Lisa Gilbert, an official with the left-leaning Public Citizen, one of the groups that opposed the change.
In a statement, NRA officials said the new rule “helps safeguard the legitimacy of the political process and helps ensure donors on both sides of the aisle will not be attacked for their beliefs.”
The change affects a wide swath of highly visible tax-exempt organizations across partisan lines, ranging from trade groups, such as the US Chamber of Commerce, to politically active nonprofits like the NRA, Planned Parenthood Action Fund and parts of the network aligned with Kansas billionaire Charles Koch.
Koch officials have pushed to shield contributors’ identities, and one Koch group, Americans for Prosperity, has battled in court with California authorities over donor disclosure.
Brent Gardner, a top official with Americans for Prosperity, on Thursday praised the new rule as making it “easier for Americans to support causes and join groups without being monitored and intimidated by those in power.”
“When people are free to stand alongside others who share their deeply held beliefs, they’re able to amplify their individual voices—contributing to a diverse public square and continued social progress,” he said in a statement.
Key groups at the center of November’s presidential election also operate as tax-exempt organizations and would no longer have to disclose their major donors to the IRS. Those include America First Policies, which supports President Donald Trump, and Priorities USA, which backs Democratic presumptive nominee Joe Biden.
The new policy will become official Thursday when the Treasury Department publishes its final rule in the Federal Register. The administration first announced the change to disclosure requirements in July 2018, but a federal lawsuit brought by Democratic Montana Gov. Steve Bullock delayed its implementation by requiring the government to seek public input on the change.
The names of donors to these politically active organizations have never been available to the public, but the groups disclosed them to the IRS on their annual tax returns. The agency then redacted the names and addresses of the donors when it released the tax returns publicly.
The groups affected by the change do not operate as charities, and their donors do not receive tax deductions in return for their contributions. As a result, both Treasury Secretary Steve Mnuchin and McConnell have said the IRS doesn’t need the donor information to enforce tax laws.
McConnell, in a speech on the Senate floor when the rule was first announced, said allowing the IRS to “stockpile” donor information would lead to “Americans being bullied for exercising their First Amendment rights.”
McConnell and others who support the new policy have highlighted past examples of the IRS bungling its treatment of tax-exempt organizations. The agency became engulfed in scandal in 2013 after its inspector general concluded that tax officials had subjected conservative groups to additional scrutiny.
Opponents of the change say it removes one of the few tools in the federal arsenal to detect potential efforts by foreign entities to influence elections.
Under the new rule, nonprofits affected by the change still have to retain records on their donors that the IRS can request on a case-by-case basis.
Gilbert says that’s not good enough.
“They are basically saying: ‘We trust you to do this yourselves’ with basically no evidence that bad actors will abide.”
In the regulations the agency is slated to publish this week, the Treasury Department notes that its job is to police tax laws: “Congress has not authorized the IRS to enforce campaign finance laws,” the new guidance reads.
Meredith McGehee, who runs the watchdog group Issue One, said the responsibility now falls to Congress to act and “strengthen our transparency rules to ensure foreigners aren’t using opaque tax-exempt organizations to meddle in our elections.”
This story has been updated.