Congress Seeks “Common Ground” in Attacking Nonprofits. Let’s Hope They Don’t Find It.

December 19, 2023 | Alex Baiocco

“Today, there’s almost three times the number of charities in the United States compared to 30 years ago,” House Ways and Means Committee Chairman Jason Smith remarked in his opening statement during a recent Oversight Subcommittee hearing. Surprisingly, Chairman Smith did not cite this statistic as a positive sign of a thriving nonprofit sector, but rather as cause for concern.

During the hearing on the “Growth of the Tax-Exempt Sector and the Impact on the American Political Landscape,” Smith and his fellow Republicans continued their efforts to bring more scrutiny to the nonprofit community. Unsurprisingly, the hearing gave Democrats on the Subcommittee the opportunity to promote their own priorities aimed at exposing the names and addresses of nonprofits’ members and supporters. While Republicans repeatedly suggested that the federal government needs more information about nonprofit donors, they also emphasized “the importance of privacy protections for Americans who donate to tax-exempt groups,” as Chairman Smith put it.

Smith stressed that “we cannot sacrifice or risk donor privacy for Americans” while pursuing broader concerns about alleged improper activity by nonprofits. Oversight Subcommittee Chairman David Schweikert rightly pointed out that “Americans have a First Amendment right to contribute to these organizations with their privacy intact.”

At the same time, Republicans consistently engaged in the same sort of fearmongering that opponents of donor privacy have employed for years. Vague concerns about so-called “dark money” and far-fetched allegations of billionaires controlling election results by donating to nonprofits were featured heavily in Republicans’ remarks.

Seizing on Republicans’ “dark money” rhetoric, Democrats offered their ready-made plans to address Republicans’ concerns. In doing so, they demonstrated the importance of enacting the free speech and donor privacy protections included in the ACE Act, which was introduced in the 118th Congress as H.R. 4563.

Subcommittee Ranking Member Bill Pascrell responded to Schweikert by stating that “an appropriations rider pushed by Republicans has blocked the IRS from issuing regulations governing the very spending that you talked about in your opening statement.” Pascrell was referring to a budget rider that was first adopted in the aftermath of the IRS targeting scandal that came to light in 2013. Instead of pursuing the obvious solution of removing itself from the fraught role of regulating political speech, the IRS proposed new rules that would have codified many of the improper targeting practices in official regulations governing the permissible activities of advocacy nonprofits. The new regulations would have severely chilled nonprofits’ ability to voice their opinions on government officials and public policy and forced many organizations to re-register as political committees, compelling the exposure of their supporters’ names and home addresses.

The agency’s proposal was opposed by a diverse array of groups across the ideological spectrum and with different tax statuses. In response, Congress adopted a budget rider that prevents the IRS from writing new regulations to limit political speech by nonprofit groups. This bipartisan policy has been included in eight consecutive annual omnibus appropriations bills spanning four Congresses led by both parties. The ACE Act would codify this longstanding budget rider into law, ensuring that the IRS is prohibited from carrying out politically motivated targeting or pursuing speech chilling proposals that would silence nonprofit groups and invade their supporters’ privacy.

Pascrell also suggested undoing recent privacy reforms at the IRS. That rule change, initiated during the Obama administration and finalized in the Trump administration, prevents the IRS from collecting the names and home addresses of donors to certain nonprofit organizations via Form 990, Schedule B. Before the rule was even finalized, there were efforts by privacy opponents in Congress to block it. The “Don’t Weaponize the IRS Act” provision in the ACE Act would codify this important rule into law to nullify such efforts. As the IRS has noted, the agency does not need the personally sensitive donor information on Schedule B to enforce the tax laws and has not made systematic use of this information in the past. Organizations are still required to retain this information in case it is needed for enforcement purposes.

The free speech and citizen privacy provisions in the ACE Act will protect millions of Americans across the country with diverse views, all of whom cherish and rely on the right to privately support causes they believe in. In addition to the nonprofit community, Republicans in Congress have been supportive of these provisions, and Ways and Means Committee members deserve praise for voicing their commitment to privacy rights. But the recent focus from Republican Committee members on nonprofit activity and reporting requirements is out of step with this commitment and threatens to undermine efforts to protect these rights through proactive legislation.

In a charge that could be applied with equal force to the many hearings Democrats have held pushing legislation aimed at the nonprofit sector, Rep. Pascrell wasn’t far from the truth when he argued that Republicans “are making today about targeting tax-exempt organizations that don’t align with their politics.” However, Pascrell also noted his belief that “there is a common ground to be found on tax-exempt oversight.” He later expressed his agreement with much of what the Republican-invited witnesses were saying, stating that he thinks Republicans and Democrats “can come to some general agreement here.”

Clearly, Pascrell and his colleagues view Republicans’ political interest in attacking nonprofits as an opportunity. The greatest risk for the nonprofit sector and the Americans who support such causes is that short-term interests will result in the sort of “common ground” that Pascrell envisions: an IRS with more power to restrict Americans’ speech and invade citizen privacy. Hopefully, Republicans in Congress will avoid lending support to that agenda and instead demonstrate their commitment to the First Amendment by passing the crucial speech and privacy protections in the ACE Act.