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Congressman sues over IRS rules

| Wednesday, Aug. 21, 2013, 8:03 p.m.

WASHINGTON — A Democratic congressman filed suit against the Internal Revenue Service on Wednesday, seeking to overturn a 54-year-old rule that allows social welfare groups to engage in political activity.

Rep. Chris Van Hollen, D-Md., seeks to force the IRS to draft new rules requiring that the tax-exempt 501(c)(4) groups comply with the section of the Internal Revenue Code for which they're named. That section requires such groups to be “operated exclusively for the promotion of social welfare.”

“The law is clear. What do you want us to do, put an exclamation point after exclusively?” Van Hollen said.

But since 1959, the IRS has followed a rule that allowed 501(c)(4) groups to engage in political activity, as long as it wasn't their primary mission. That rule has been widely interpreted as allowing such tax-exempt groups to spend 49 percent of their money on politics — without disclosing where that money came from.

After the Supreme Court's 2010 ruling in the Citizens United case paved the way for unlimited corporate and union spending to elect or defeat political candidates, political spending from 501(c)(4) groups has tripled, from $83 million in 2008 to $256 million in 2012, according to the Center for Responsive Politics.

The lawsuit, filed in federal court in Washington, comes amid a growing debate about how the IRS oversees tax-exempt groups involved in political activity. In May, the agency admitted that it had wrongly held up applications from Tea Party groups beginning in 2010.

Van Hollen isn't happy with how the Obama administration has responded to the Tea Party affair. The lawsuit seeks to overturn a new “safe harbor” provision enacted by acting IRS Commissioner Danny Werfel. That provision allows groups whose activities are less than 40 percent political to have their tax-exempt applications fast-tracked, but Van Hollen argues that provision is arbitrary.

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