Does this sound unacceptable? I'd certainly say so. But the IRS is complicit in a broader breach of trust with the American people — one that is threatening the fabric of our democracy.
Beyond gross misuse of taxpayer money and mishandling the applications of mom-and-pop nonprofits, the IRS is wrongfully allowing secret, big-money interests to conceal millions of dollars in political campaign spending and run roughshod over our elections.
All of the estimated $300 million in secret money spent in the 2012 election cycle can be traced back to a single provision in our tax laws, called Section 501(c)(4). Originating in the Revenue Act of 1913, Section 501(c)(4) provides tax-exempt status to nonprofit groups "operated exclusively for the promotion of social welfare." Like many nonprofits, 501(c)(4) groups are not required to publicly disclose their donors.
The operative word in the law is that these organizations are required to function "exclusively" for the general public's benefit, meaning they are prohibited from engaging in political campaigns. But in a 1959 rulemaking, the IRS turned this simple standard on its head, changing the word "exclusively" to "primarily." This seemingly small change opened up a loophole in our tax law that, until the Supreme Court's infamous "Citizens United" decision, had gone relatively unnoticed. Once "Citizens United" opened the spigot of corporate money in elections, special interests rushed to funnel hundreds of millions of dollars into political campaigns under the secrecy provided by 501(c)(4) status.
This secret money from unknown donors is poisoning our electoral system and our democracy. So long as their primary purpose is to promote social welfare — arguably a mere 51 percent — 501(c)(4) organizations with innocuous-sounding names like Americans for Prosperity can pour the remainder of their funds into political campaigns, all without disclosing their big-money backers. For all we know, foreign nationals could be influencing our elections with undisclosed contributions. Furthermore, taxpayers end up subsidizing the political agendas of special interests.
The IRS attempted to rectify how it considers 501(c)(4) applications this week. Applicants who have been waiting more than 120 days for a decision will be approved if they "self-certify" that no more than 40 percent of spending goes toward elections. Rather than pull an arbitrary standard from thin air, the IRS should update its rule to ensure that 501(c)(4) organizations function "exclusively" to promote social welfare, as Congress intended.
The burden of ridding our elections of secret money doesn't fall entirely on the IRS. A constitutional amendment overruling the "Citizens United" decision is necessary to grant Congress full regulatory authority over campaign contributions and expenditures. Congress should also pass legislation that requires corporations, labor unions and nonprofit groups to disclose all campaign-related spending or donations within 24 hours.
Our government is being bought and sold on the auction block by unlimited money from anonymous buyers. That is not a democracy, and the American people should not stand for it.
Anna G. Eshoo, a Democrat, represents California's 18th Congressional district.