Treasury defends move to halt nonprofit disclosures amid Wyden threat

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Money is pictured. | Getty

Lawmakers more recently ended the potential need for the information through gift tax changes adopted in 2015, one of them said. | Getty

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Senior Treasury Department officials on Tuesday defended the decision to scrap donor-disclosure requirements for most nonprofits, saying it won’t limit what the public can glean from legally available sources.

The IRS will no longer collect names or addresses of those who contribute $5,000 or more to all tax-exempt Section 501(c) groups, some of which donate to political campaigns, other than charitable organizations registered under a different section of the tax code, according to new guidelines released late Monday.

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The decision immediately sparked a backlash, with Sen. Ron Wyden (D-Ore.) saying Tuesday that he’ll oppose the nomination of a new IRS commissioner over the move.

Wyden, the Finance Committee’s top-ranking Democrat, charged that President Donald Trump and Treasury Secretary Steven Mnuchin have made it easier for anonymous foreign donors to funnel dark money into nonprofits.

“It’s the latest attempt by Secretary Mnuchin and Donald Trump to eliminate transparency and keep officials and lawmakers from following the money,” Wyden said in a statement. “That’s why I’ll be opposing Charles Rettig, nominee to be IRS commissioner, unless Mr. Rettig commits to restoring this critical disclosure requirement.”

Rettig is scheduled for a vote by the Finance Committee on Thursday.

Congress in the 1960s required donor-disclosure data to match deductions for charitable giving, and the IRS extended the requirement to all other 501(c) organizations during the Nixon administration, the Treasury officials told reporters on a call. Lawmakers more recently ended the potential need for the information through gift tax changes adopted in 2015, one of the officials said.

“Currently, we have at the IRS no need for the routine collection of donor names and addresses,” the official said, speaking on condition of anonymity.

The information was filed on Schedule B to Form 990 on 501(c)s' annual return.

But he said publicly available information on 501(c) groups will remain accessible, still showing, for example, whether an organization has received an outsize donation from one or more contributors relative to other donors.

The news was well-received among conservative groups and congressional Republicans, who have said Schedule B has been illegally leveraged for political gain by infringing on First Amendment rights. Rep. Peter Roskam (R-Ill.) said the IRS simply doesn’t need such taxpayer information.

“This move by the Treasury Department protects the free speech of private citizens and eliminates the use of an unnecessary form that does nothing to increase transparency,” Roskam said in a statement.

Critics disagreed, arguing that the information helps the political and tax administration processes.

Since many of the nonprofits now exempted from the filing engage in political activity, wealthy corporate, individual, foreign and government donors can potentially influence the U.S. political system covertly, said Phil Hackney, a law professor at Louisiana State University. From a tax perspective, the IRS has willingly forgone important data points on where money is flowing in a tax-exempt manner from wealthy individuals, he said.

“Tax oversight will be harmed,” Hackney said in an email to POLITICO.

The Treasury officials dismissed that, saying that 501(c) groups will continue to have to record their donor information in case the IRS needs to audit them. Because such donor data would prove useful only for select examinations, the IRS doesn’t need to systematically collect it any longer, they said.

“The requirement to report such information increases compliance costs for some private parties, consumes IRS resources in connection with the redaction of such information, and poses a risk of inadvertent disclosure of information that is not open to public inspection,” the new IRS guidance says.

Wyden’s spokeswoman Rachel McCleery declined to comment beyond the lawmaker's statement when asked to clarify whether he would place a hold on the nomination or simply vote against Rettig when the committee formally considers him this week.

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