For Immediate Release
February 27, 2014
Contact:

Julia Lawless, Antonia Ferrier (202) 224-4515

Hatch Calls on Obama Administration to Protect First Amendment Rights; Reject 501(c)4 Rule

In Speech on Senate Floor, Utah Senator Says, “We need to call this what it is: an affront to free speech and the right of all American citizens to participate in the democratic process. It is an attempt by the administration to marginalize its critics and silence them altogether.”

WASHINGTON – In a speech on the Senate floor today, Finance Committee Ranking Member Orrin Hatch (R-Utah) called on the Obama Administration to protect the First Amendment and put an end to the proposed Internal Revenue Service (IRS) rule designed to suppress the free speech of 501(c)4 groups, or social welfare organizations. The public comment period for the proposed regulations ends today.

“We need to call this what it is: an affront to free speech and the right of all American citizens to participate in the democratic process. It is an attempt by the administration to marginalize its critics and silence them altogether,” said Hatch.

While the IRS is currently under investigation by three separate congressional committees for its actions against conservative groups applying to the IRS for tax-exempt status, the agency proposed new regulations last November that would fundamentally alter the nature of the activities that these tax-exempt groups can engage in, limiting their free speech rights, and effectively forcing grassroots organizations across the country to shut down. The final regulations are due to take effect right before the 2014 midterm elections.

“The credibility and the political independence of the IRS are very much in question,” said Hatch. “A reasonable person would think that, rather than further damaging the IRS’s reputation, the administration would instead focus on rebuilding it in the aftermath of the targeting scandal. Sadly, there don’t appear to be too many reasonable people working in the Obama Administration, at least not when it comes to this set of issues.”

This week, the U.S. House of Representatives passed the Stop Targeting of Political Beliefs by the IRS Act to delay the implementation of the Obama Administration rules for one year. Hatch, a sponsor of companion legislation in the Senate, called on his Senate colleagues to bring the bill up for a vote.

Below is the text of Hatch’s full speech delivered on the Senate floor today:

Mr. President, I rise today to speak once again on the proposed IRS regulations targeting grassroots 501(c)(4) organizations. I’ve already come once to the floor to discuss this issue and I expect I’ll be here several more times in the coming months as these proposed rules continue to move through the regulatory pipeline at the IRS.

The public comment period for these proposed regulations ends today. As of this morning, the IRS had received over 100,000 comments on this proposal, the vast majority of them negative.
This is an all-time record, Mr. President. In fact, that number is more than five times greater than the previous record for comments on a proposed IRS regulation.

By contrast, the Keystone XL pipeline – another item of enormous public interest – received just over 7,000 comments.

So, with all this public attention, the obvious question is: Why? Why has this proposal generated so much criticism from the American people.

The answer is quite simple. The American people see this proposal for what it is: an attempt to silence this administration’s critics and keep them on the sidelines of the democratic process.
I’d like to take a few minutes to describe, in detail, just what this regulation does.

Under the Internal Revenue Code, a 501(c)(4) organization is a non-profit organization, the exempt purpose of which is the “promotion of social welfare.” The phrase promotion of social welfare has long been defined as “promoting in some way the common good and general welfare of the people of the community” or “bringing about civic betterments and social improvements.”

Such organizations may engage in political activity for or against candidates for public office so long as their primary activity falls under the category of promoting social welfare. Under current regulations, activities such as voter registration or get-out-the-vote drives are correctly treated as promoting social welfare, just like the distribution of voter guides outlining candidates’ positions on issues that are, in the view of the organization, important to the public.

The proposed regulations would re-categorize these types of candidate neutral activities as not consistent with the exempt purpose of promoting social welfare.

This is important because, over the past few days, in an effort to justify these regulations, the administration has communicated to members of Congress that it isn’t banning these types of activities, they’re just putting them in different categories.

But, lost in their justifications are some important distinctions. It’s easy to get lost in the weeds, which is probably what the administration is hoping for.
So, let’s break this down.
Traditionally speaking, in order to keep their tax-exemption, 501(c)(4) organizations have had to limit their involvement in quote-unquote political activities to around 49 percent or less of their overall activities. In other words, they can be directly involved in the political process so long as the majority of their activities are devoted to social welfare.

What this proposed regulation would do is redefine the parameters of what is considered political activity, moving a number of activities from the social welfare category to the political category.

Like I said, under this regulation, simply stating where candidates for public office stand on issues important to a specific 501(c)(4) organization would be considered political activity. In fact, even mentioning a candidate’s name in a communication within a specified period before an election – even if the communication does not say whether the organization supports or opposes the candidate – would be considered political activity. As I mentioned, the same could be said for voter registration drives or get-out-the-vote initiatives, even if the efforts are obviously and legitimately non-partisan.

Basically, this proposed regulation would instantly categorize so much run-of-the-mill behavior as partisan political activities that many existing 501(c)(4) grassroots organizations would have to stop promoting their causes altogether.

And that, Mr. President, is precisely what the administration wants.

They don’t want 501(c)(4)s educating the public on the issues of the day or telling voters where candidates stand on political issues.

Sure, they’re fine with these groups promoting social welfare, so long as that promotion doesn’t include criticism of this administration or its policies that are harmful to the general welfare of their communities.

And it would be one thing if the IRS was an agency with clean hands when it came to dealing with critics of this administration. But, as we’ve seen, Mr. President, that’s simply not the case.

Indeed, over the last few years, we’ve seen a record of harassment and intimidation of conservative groups applying to the IRS for tax exempt status. The agency is under investigation in three separate congressional committees for its actions in the run up to the 2010 and 2012 elections.

Put simply, the credibility and the political independence of the IRS are very much in question. A reasonable person would think that, rather than further damaging the IRS’s reputation, the administration would instead focus on rebuilding it in the aftermath of the targeting scandal.

Sadly, there don’t appear to be too many reasonable people working in the Obama Administration, at least not when it comes to this set of issues.

We need to call this what it is: an affront to free speech and the right of all American citizens to participate in the democratic process. It is an attempt by the administration to marginalize its critics and silence them altogether.

Republicans have been very vocal in our opposition to this proposed regulation. We have spoken out in a variety of venues.

But, make no mistake, Mr. President, it’s not just Republicans and conservatives that oppose this new rule. A number of left-leaning organizations have spoken out against it as well.

The ACLU, for example, submitted a scathing comment letter to the IRS, arguing that the proposed regulation would “produce the same structural issues at the IRS that led to the use of inappropriate criteria in the selection of various charitable and social welfare groups for unfair scrutiny.”

The ACLU argued further that social welfare groups should be free to participate in the political process because that kind of participation “is at the heart of the our representative democracy. To the extent it influences voters, it does so by promoting an informed citizenry.”

We’ve seen similar comments from groups like the Sierra Club.

Leaders of labor unions have also publicly weighed in about the overly broad nature of the proposed regulation.

Put simply, Mr. President, when you have proposal that is drawing unanimous opposition from Republicans in Congress and is being criticized by the ACLU and Big Labor, there’s a pretty decent chance that it isn’t good policy. And, quite frankly, that characterization is probably too charitable for this particular proposal.

This proposed regulation needs to be stopped in its tracks, Mr. President.

Yesterday, the House of Representatives passed legislation that would do just that. If enacted, the House bill would delay the implementation of this proposal for a year.

I am an original cosponsor of the Senate companion to this legislation, which was introduced by Senators Flake and Roberts.

The Senate should take up this bill and pass it immediately. It’s the least we can do to protect free speech.

Sadly, I think I know where my colleagues on the other side of the aisle stand on this issue. And, I expect that those of us here in the Senate that support the right of all Americans to participate in the political process are likely to be disappointed with regard to this particular legislative effort.
Still, even if this legislation dies here in the Senate, that’s not the end of the line.

Earlier this month, when I came to the floor to talk about this issue, I called on IRS Commissioner Koskinen to use his authority to block these regulations. When questioned about this proposal, he has consistently deferred, usually saying that he was not the Commissioner when it was drafted and published. However, now that he is the Commissioner, he is in a position to stop the proposed regulation from going final and acquiring the force of law.

This proposal cannot take effect unless Commissioner Koskinen personally approves and signs the final regulation clearance package. That being the case, I call on him today to not sign it when it reaches his desk.

In an ideal world, the administration would simply withdraw this proposal and leave this issue alone. However, we’re not living in such a world.

That being the case, if the administration continues its effort to push through this proposed rule, the IRS Commissioner can and should use his authority to stop it from taking effect.

After all, that is one reason why Congress gives the IRS Commissioner a five-year term – the Commissioner is supposed to be free from political pressure when making decisions and implementing our nation’s tax laws.

In light of that fact, I want to implore Commissioner Koskinen to use the power he’s been granted to restore the IRS’s credibility and make it clear to the American people that the agency will no longer be used as simply another political arm of this or any future administration.

I hope he’ll do that, Mr. President, because that is the right thing to do. I yield the floor.

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