Criticism of the "Preventing IRS Abuse and Protecting Free Speech Act"

Internal Revenue Service|Not-for-Profit|Tax

By Elena Faurie

H.R. 5053, the “Preventing IRS Abuse and Protecting Free Speech Act” passed the Ways and Means Committee on June 14.  H.R. 5053 would amend the Internal Revenue Code to prohibit the IRS from requiring a tax-exempt organization to include in its annual returns the name, address, or other related information regarding contributors.  Currently, this information is required to be disclosed on Schedule B of a Form 990 – Return of Organization Exempt from Income Tax.

Opponents of the bill have expressed concerns regarding this legislation.  The biggest concern of the opposition is the potential effect the bill might have on political campaign finances.  Under the proposed legislation, the names of the contributors would not be required to be disclosed on an organization`s Form 990. Rep. Sander Levin (D-MI9) has commented that, “What this bill does, to put it simply, is to solidify the secrecy around the role of big money in campaigns.”  Another concern is that foreign entities and individuals will be able to influence elections in the United States if the donor disclosures are omitted from Form 990.  Rep. Levin has commented, “The bill also potentially opens the door for unlimited, secret money from foreign governments or individuals to be funneled into our elections.  Currently, foreign money cannot be legally given or spent in our elections.  And the only real protection we have against the use of foreign money by politically active social welfare organizations is that they must disclose their donors to the IRS.  This requirement means that tax-exempt, 501(c)(4) groups know they can be held accountable if they illegally spend foreign money in federal elections.” 

Critics warn that this bill is intended to reduce or avoid the transparency of large donors.  The bill still has to pass the Senate and be approved by President. 

Schneider Downs will post updates as they become available regarding the status of the bill. Contact us if you have questions on how this may impact your organization and visit the Our Thoughts On blog for more articles pertaining to the not-for-profit industry.    

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