Donors to nonprofits have long feared, and with good reason, that the list of donors who've given $5,000 or more that nonprofits must include on their tax forms will be abused. The fear is justified: in the past, the agency has not protected this information, and conservative donors who've never had IRS problems have been suspiciously audited. Furthermore, it is widely agreed that the agency can do its job without these lists on tax forms. The House has passed a bill that would prevent the IRS from collecting this information on tax forms.
If enacted Preventing IRS Abuse and Protecting Free Speech Act would eliminate the requirement that 501(c) organizations report information about donations of $5,000 or more. Only donations from the group's officers and directors such as presidents and CFOS and the five highest paid employees would have to be disclosed.
Currently, nonprofit groups are required to list on its tax forms donors who give at least $5,000. What the IRS does with that information as part of audits is questionable. The Wall Street Journal explains:
The bill, sponsored by Rep. Peter Roskam (R., Ill.), passed by a 240-182 vote. Republicans argued the IRS couldn't be trusted with the information and questioned how useful donor lists are in audits.
"This bill helps ensure that Americans can never again be singled out by the IRS for their political beliefs," said Rep. Kevin Brady (R., Texas), chairman of the House Ways and Means Committee.
Grover Norquist of Americans for Tax Reform made an impassioned plea for the bill:
“Richard Nixon had the decency to write down his own enemies list. Obama and Hillary Clinton want the IRS to compile the list of individuals who give to political causes they disapprove of. We know how they will abuse that list. It has happened already through leaks,” said Grover Norquist, president of Americans for Tax Reform. “And we’ve seen the Democrat Attorneys General across the country attack people for holding views supporting institutions that disagree with them on a carbon tax.”
The Wall Street Journal editorial board wrote in favor of the bill and other supporters included a host of conservative groups who realized that the requirement might make donors afraid to give to them for fear of an audit or having the information leaked. They are not without evidence:
Republicans and allied groups such as Freedom Partners, which has ties to Koch Industries Inc., said the IRS has used lists of donors to target conservatives. They pointed in particular to the release of information about contributors the National Organization for Marriage, a group opposed to gay marriage.
The IRS paid the National Organization for Marriage $50,000 to settle a lawsuit over the disclosure. The government said it had inadvertently released the information and Federal Judge James Cacheris agreed with that characterization.
The judge denied the group's request for nearly $700,000 in attorney fees, writing that NOM had made "unfounded claims of willful and grossly negligent conduct." An appeals court upheld that ruling last year.
The Preventing IRS Abuse and Protecting Free Speech Act passed the House along party lines with Democrats joining the White House in strong opposition. They have defended the IRS and President Obama's claim that there wasn't even "a smidgen" of wrong-doing by IRS agents against conservative groups. Their contention with this bill is that it will take policing power away from the IRS.
Democrats also argue that this is a means for foreign governments and individuals to influence American politics. However, Republican Congressman Peter Roskam from Illinois, who introduced the bill, explained that that their fear is overblown because campaign-finance and bank laws allowed the government to police foreign involvement in elections.
The President stopped short of threatening to veto the bill if it makes it through the Senate.