House Republicans Warn of Future IRS Scandals at ACE Act Hearing

May 22, 2023 | Luke Wachob

Civic-minded Americans are increasingly looking for shelter from partisan combat and cancel culture. Lawmakers in 17 states have taken up the call by passing new protections for personal privacy. On May 11, the U.S. Committee on House Administration considered whether Congress ought to join the trend.

In a hearing titled “American Confidence in Elections: Protecting Political Speech,” the committee cast a spotlight on the insufficient privacy protections afforded to Americans when supporting nonprofit causes. The ability to target a group’s individual supporters for harassment and retribution is one of the leading threats to freedom of speech and association today. People United for Privacy Vice President Matt Nese submitted a statement for the record urging Congress to take action to defend citizens who donate their time and support to nonprofits aiding their communities.

Chairman Bryan Steil (R-WI) opened the hearing by revisiting the shameful history of the IRS targeting scandal a day after its ten-year anniversary.

“On May 10, 2013, the IRS had to apologize to conservative organizations for inappropriately targeting their applications for tax-exempt status. The federal government admitted to targeting a group of people because of their political beliefs. That is un-American and anti-democratic,” Steil said.

The IRS not only subjected conservative groups to baseless investigations and lengthy delays in processing routine applications, but it also proposed harsh new rules that would have forced many nonprofits to re-register as political action committees and expose the identities of their supporters. Americans could be made to suffer attacks on their reputations, their careers, or even their safety simply for giving to groups that represent their beliefs about government and public policy. Thankfully, the IRS’s proposed rules were defeated after concerns about free speech fueled a bipartisan backlash, but the threat of future action remains.

“As we sit here today, all these years later, do you feel like we are still vulnerable to [IRS targeting] happening again?” Rep. Laurel Lee (R-FL) asked the panel.

“We clearly are,” answered Bradley A. Smith, Chairman and Founder of the Institute for Free Speech. “Really what we need to do is get the IRS out of enforcing campaign finance law.”

One remedy for the abuses at the IRS is the American Confidence in Elections (ACE) Act, first introduced last Congress as H.R. 8528. The legislation covers election, free speech, and privacy-related issues, including four provisions supported by People United for Privacy and dozens of nonprofits that specifically protect nonprofit donor privacy. Among them is a provision that would prohibit the IRS from writing new, speech-chilling rules for nonprofits.

Other portions of the ACE Act would prohibit federal agencies from demanding or releasing Americans’ personal information when supporting a nonprofit group, except where required by current law. That provision, the Speech Privacy Act, provides a necessary layer of protection for all Americans to feel comfortable exercising their First Amendment right to support a cause. Government agencies have a history of carelessly seizing sensitive personal records of donors on a whim and then leaking them, as the 2021 Supreme Court case Americans for Prosperity Foundation v. Bonta demonstrated.

“Are Americans who donate to nonprofit organizations receiving the protections they deserve under the law today?” Rep. Barry Loudermilk (R-GA) asked the witnesses.

The general consensus was ‘no.’ Smith noted that Americans today face a “minefield” of risks when supporting groups whose missions intersect with political issues.

“Many people will simply refrain from supporting political or policy groups, rather than risk backlash that may come years later or in response to intervening decisions by the person or organization that were not contemplated at the time of the initial contribution. This is not healthy for our culture of self-government,” he explained.

“The exposure of donor information poses a significant threat nationally to liberty and privacy,” said Harmeet Dhillon, Managing Partner at Dhillon Law Group Inc. “Donors across the board, but mostly conservatives… are concerned that if they express their political speech through contributions to nonprofits that are disfavored by the government in power, or state actors, what have you, they will be punished for their speech through audits, investigations, harassment, etc.”

Some politicians and organizations continue to oppose these privacy protections because they benefit from being able to track Americans’ beliefs and giving. Several Democrats on the Committee and one witness, Stephen Spaulding of Common Cause, have advocated new disclosure laws that would put even more Americans at risk of public exposure of their giving to nonprofits. The ability to surveil a nonprofit’s donors and members is a powerful weapon for groups opposed to an organization’s mission.

For those who wish to further divide Americans, stoke partisan rancor, or carry out character assassination campaigns against their political enemies, disclosure is a key ally. For Americans who believe in living together peacefully and without fear of being targeted for our beliefs, privacy is the answer.

The House Administration Committee hearing was a promising sign that lawmakers are hearing their constituents’ concerns and beginning to recognize the vital link between privacy and free speech.