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July 06, 2015

IRS Standing Down for 2016 as Nonprofits Boost Campaign Role

The Internal Revenue Service appears certain to delay any attempt to tighten regulations on nonprofit politicking until after the 2016 election, according to The New York Times.

While IRS officials signal the agency will stand aside through the campaign, 501(c)(4) "social welfare" groups are flexing more political muscle, with nonprofits set up to back eight Republican contenders so far and supporters of Democratic frontrunner Hillary Clinton considering a similar move.

Political spending by tax-exempt organizations, which are not required to disclose their donors, skyrocketed from $5.8 million in the 2004 election to more than $300 million in 2012. IRS officials acknowledge the current rules on such groups' political activity are vague and hard to enforce, but the Treasury Department has quashed speculation that new rules are coming soon. Candidate-aligned groups are already mounting campaign efforts, such as a $1 million advertising blitz by a nonprofit backing Republican Sen. Marco Rubio.

Bipartisan opposition torpedoed an IRS effort to reform the rules last year, and the agency was tainted by allegations that it singled out Tea Party groups for stricter oversight. "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. As a result, she added, "it's going to be pretty much open season" for politically active nonprofits.