[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE ADMINISTRATION'S PROPOSED RESTRICTIONS ON POLITICAL SPEECH:
DOUBLING DOWN ON IRS TARGETING
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ECONOMIC GROWTH,
JOB CREATION AND REGULATORY AFFAIRS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 27, 2014
__________
Serial No. 113-93
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Economic Growth, Job Creation and Regulatory Affairs
JIM JORDAN, Ohio, Chairman
JOHN J. DUNCAN Jr., Tennessee MATTHEW A. CARTWRIGHT,
PATRICK T. McHENRY, North Carolina Pennsylvania, Ranking Minority
PAUL GOSAR, Arizona Member
PATRICK MEEHAN, Pennsylvania TAMMY DUCKWORTH, Illinois
SCOTT DesJARLAIS, Tennessee GERALD E. CONNOLLY, Virginia
DOC HASTINGS, Washington MARK POCAN, Wisconsin
CYNTHIA LUMMIS, Wyoming DANNY K. DAVIS, Illinois
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina
KERRY BENTIVOLIO, Michigan
RON DeSANTIS, Florida
C O N T E N T S
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Page
Hearing held on February 27, 2014................................ 1
WITNESSES
Ms. Jenny Beth Martin, President and Co-Founder, Tea Party
Patriots
Oral Statement............................................... 7
Written Statement............................................ 10
Ms. Diana Aviv, President and CEO, Independent Sector
Oral Statement............................................... 15
Written Statement............................................ 17
Ms. Gabriel Rottman, Legislative Counsel/Policy Advisor, American
Civil Liberties Union
Oral Statement............................................... 24
Written Statement............................................ 26
The Hon. Wayne Allard, Vice President, Government Relations,
American Motorcyclist Association
Oral Statement............................................... 53
Written Statement............................................ 55
Mr. James R. Mason, III., Senior Counsel, Home School Legal
Defense Association
Oral Statement............................................... 57
Written Statement............................................ 59
Mr. Allen Dickerson, Legal Director, Center for Competitive
Politics
Oral Statement............................................... 64
Written Statement............................................ 66
APPENDIX
The Hon. Jim Jordan, a member of Congress from the State of Ohio,
Opening Statement.............................................. 130
The Hon. Darrell Issa, a member of Congress from the State of
California, Opening Statement.................................. 132
Letter from Alastar M. Fitzpayne to Chairman Dave Camp, submitted
by Chairman Jordan............................................. 133
Article in the Washington Post: ``Treasury and IRS rules on
Nonprofits' Political Activity Miss the Mark'', by Gary D. Bass
and Diana Aviv, submitted by Mr. Cartwright.................... 138
Email for the record by Richard W. Painter, submitted by Mr.
Cartwright..................................................... 140
THE ADMINISTRATION'S PROPOSED RESTRICTIONS ON POLITICAL SPEECH:
DOUBLING DOWN ON IRS TARGETING
----------
Thursday, February 27, 2014,
House of Representatives,
Subcommittee on Economic Growth, Job Creation &
Regulatory Affairs,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 9:35 a.m., in
Room 2154, Rayburn House Office Building, Hon. Jim Jordan
[chairman of the subcommittee] presiding.
Present: Representatives Jordan, DeSantis, DesJarlais,
Collins, Meadows, Bentivolio, Cartwright, and Connolly.
Also Present: Representative Issa.
Staff Present: Lawrence J. Brady, Majority Staff Director;
David Brewer, Majority Senior Counsel; Sharon Casey, Majority
Senior Assistant Clerk; Drew Colliatie, Majority Professional
Staff Member; Adam P. Fromm, Majority Director of Member
Services and Committee Operations; Christopher Hixon, Majority
Chief Counsel for Oversight; Katy Rother, Majority Counsel;
Laura L. Rush, Majority Deputy Chief Clerk; Rebecca Watkins,
Majority Communications Director; Meghan Berroya, Minority
Counsel; Aryele Bradford, Minority Press Secretary; Susanne
Sachsman Grooms, Minority Staff Director/Chief Counsel; Adam
Koshkin, Minority Research Assistant; Brian Quinn, Minority
Counsel; and Donald Sherman, Minority Counsel.
Mr. Jordan. The committee will come to order.
We want to thank our distinguished panel of witnesses for
being here today. Members will be trickling in and out. You
know how these things are; maybe you have testified before.
Members' schedules are busy. But we want to get started and
respect everyone's time. We will do opening statements, then we
will get right to each of you and introduce you and swear you
in here in just a second.
Today's hearing continues the committee's ongoing oversight
of the IRS's inappropriate treatment of conservative groups
applying for tax-exempt status. The IRS has doubled-down on its
targeting and is now seeking to codify their actions.
On November 29th, 2013, the IRS issued a proposed
regulation under the guise of clarifying the tax-exempt
determinations process. As we will hear today, this rule, if
implemented, will stifle speech of social welfare organizations
and will systematize the targeting of nonprofit organizations.
The Administration is using the controversy surrounding the
targeting of tax-exempt groups as a pretense for the need for
this regulation. In reality, this is Lois Lerner's final act in
the Administration's effort to curb political speech. We note
that this effort was in the works well before the release of
the inspector general's audit. Through the committee's
investigation, we have uncovered evidence that Ms. Lerner
sought to crack down on political speech by certain nonprofit
groups as early as 2010, well before the rule was made public.
Emails show the IRS was surreptitiously working on this
effort off-plan. In fact, the committee's investigation has
revealed that the Administration secretly considered additional
regulation of 501(c)(4) organizations for years. In transcribed
interviews, Treasury officials have confirmed that work on
changing the rules for social welfare groups started long
before the inspector general's report. For example, Ruth
Madrigal, a senior official in the Treasury Department's Office
of Tax Policy, confirmed that she suggested that Treasury
conduct its work offline in June of 2012. She testified that we
had had requests to do guidance on this topic.
Former IRS acting commissioner provided further context for
the request that the IRS and the Treasury received. He
testified that as of the fall of 2012, ``So I am not sure there
was a problem, right? I mean, we had Senator Levin complaining
bitterly about our regulation that was older than me. We were
being asked to take a look at that, and so we were thinking
about what things could be done.''
Think about that. The IRS and the Treasury, under the guise
of responding to the targeting scandal, had proposed a
crackdown on political speech that has secretly been in the
works for years and is the result of political pressure from
Democrats in Congress and left wing special interest groups.
A chilling effect can already be seen. Groups who have
engaged in political speech for years are now in limbo about
how to proceed for fear that the IRS will retroactively look
back at their activities through the lens of the new regulation
and determine they are in violation of their tax status.
The rule is hugely unpopular, receiving over 94,000
comments. Record number of comments; highest number the IRS has
ever received on any proposed rule. My understanding is the
second highest in the history of any Government agency. Ninety-
four thousand comments. And rest assured the vast majority of
those are negative.
The rule has been criticized by groups across the political
spectrum, as well as by groups who have nothing to do with
politics and simply advocate for causes their members believe
in, such as some of our witnesses here today. Make no mistake,
the proposed regulation will seriously hinder the freedom of
speech guaranteed by our Constitution. I think this is
important. You think about the First Amendment and the rights
we enjoy as Americans: freedom of religion, freedom of press,
freedom to assemble, freedom of speech. And the most
fundamental component of that freedom of speech right is your
right to speak out against your Government; your right to
exercise speech that is political in nature. And this
Government, this IRS is targeting that very thing, and that is
why this hearing is so important and why I am glad that our
witnesses are with us today.
I want to thank all of you for being here. We appreciate
your courage in speaking out against this effort to crack down
on your ability to engage in political speech, and we will do
everything in our power to ensure that you continue to be able
to exercise this fundamental constitutional right.
With that, I would yield to the ranking member for his
opening statement.
Mr. Cartwright. Thank you, Mr. Chairman.
Good morning to all the witnesses. Thank you for being
here. Look forward to hearing your testimony.
Today's hearing is intended to discuss the merits of the
IRS and Treasury Department's proposed rule of clarifying the
definition of political campaign activity for 501(c)(4)
organizations. This rule is a positive first step towards
providing much-needed clarity and guidance for tax-exempt
social welfare organizations. Unfortunately, the title of
today's hearing--you know, here in Washington it is not like
jury trials; we start off our hearings with titles. You know,
if you showed up at a criminal defense trial and it said the
title of our trial is why the defendant is a criminal and must
go to jail. We are not quite so open-minded here in Washington.
The title of today's hearing is a not-so-subtle clue that some
members will use these proceedings as another opportunity to
lob bombs at the White House and the Obama Administration.
As I explained yesterday, after multiple hearings,
extensive witness interviews, and the review of thousands of
documents, this committee has uncovered no evidence that the
White House was involved in the treatment of tax-exempt
organizations or their applications. Likewise, the Treasury
Inspector General for Tax Administration, TIGTA, has repeatedly
testified that he found no evidence of outside influence, White
House or otherwise, in how the IRS personnel processed
applications.
What the IG's report on exempt organizations did find is
that the applications experienced delays not because of
political bias, but in part because the IRS employees struggled
without specific guidance on how to determine whether social
welfare was ``the primary activity'' of these organizations. As
Mr. George explained, Treasury regulations state that IRC
Section 501(c)(4) organizations should have social welfare as
their primary activity.
However, the regulations do not define how to measure
whether social welfare is an organization's primary activity.
As a result of this longstanding ambiguity, the IG recommended
that the IRS create better guidance on how to process 501(c)(4)
applications and work with Treasury to develop guidance on how
to measure what is primary activity. In direct response to the
IG's recommendations, the IRS and Treasury developed a proposed
rule to clarify the definition of political campaign activity
and requested public input to ensure the standards are clear
and can be applied consistently.
Despite these facts, on February 4th, Chairman Jordan and
Issa demanded that the IRS Commissioner Koskinen withdraw the
proposed rule, claiming it was an attempt to, as we heard this
morning, ``stifle political speech'' by conservative 501(c)(4)
organizations. There is no evidence to support my colleagues'
partisan accusation, but it seems the House Republicans will
stop at nothing to keep the American public in the dark about
dark money and always in a high state of political outrage.
Furthermore, there is nothing in the proposed rule that
restricts any form of political speech. Political groups can
still be tax-exempt organizations under the IRC Section 527.
They simply would be required to disclose their donors. And
that is the big point today, is that they don't want their
donors disclosed. We are not here about stifling free speech,
ladies and gentlemen. To any Americans listening to this
subcommittee hearing, what is being stifled, what is being
attempted to be stifled is stifling your freedom to find out
where the money behind political campaigns is coming from. This
is an attempt to crack down on transparency in American
elections. Make no mistake, that is what this is about, to hide
where the dark money is coming from.
It is counterproductive to demand that the proposed rule be
withdrawn, especially in light of the very real and clear need
for more guidance on the issue. Regardless of our specific
views on the proposed rule, I hope we can at least agree that
IRS employees and organizations seeking 501(c)(4) tax-exempt
status need to have clear, easy to follow guidance about what
is permissible and impermissible. Many, including me, have also
called for a return to the language of the 501(c)(4) statute
itself, requiring that these organizations be ``operated
exclusively for the promotion of social welfare,'' instead of
using the current primary activity test.
To this end, I have introduced the Open Act, which would
require both corporations and unions to disclose their
political spending to shareholders and members. It would also
cap political spending by 501(c)(4) organizations at 10 percent
of annual expenditures. And this is a legislation that will
help shine a light on that dark money funding political
activities in the United States of America.
I look forward to hearing from the witnesses today on this
important issue and I yield back to the chairman.
Mr. Jordan. I thank the ranking member's comments. I
certainly appreciate the ranking member, but his revisionist
history is astounding. The idea that conservative groups were
not targeted when there was a specific list, called the Bolo
List, which had these terms on it: 9/12, Tea Party, and
patriot, and somehow that was not targeting just dismisses the
facts that I think the vast majority of Americans understand
and certainly many of those 94,000 comments understand.
With that, I would yield to the chairman of the full
committee for his opening statement.
Mr. Issa. Thank you. Thank you so much, Mr. Chairman.
I listened with interest at your ranking member and, Mr.
Cartwright, you are certainly entitled to your opinions. They
couldn't be more wrong, but you are entitled to them. Dark
money. 501(c)(4). Organize for Action. The President's own
agenda, perhaps $1 billion in 501(c)(4) money unreported.
Beautiful picture of the President standing in front of a
windmill on the last page of this 501(c)(4). Of course, it
says, Donate as the first item you see. And then it says
Organizing for Action is the grassroots movement fighting for
the agenda Americans voted for in 2012.
We are millions of people empowering individuals to make
their voices heard. Climate change comes next. Gun violence
prevention. Healthcare. Helping millions of Americans learn how
Obamacare works. Okay, there is something you can have a lot of
trouble getting them to believe. Fixing our broken immigration
citizen. A pathway to citizenship. Advocating for a pathway to
citizenship.
The list is the President's political agenda; it is
millions and millions and millions and millions of dollars that
are not reported as to their source. And I am okay with that. I
am okay with the small donor being able to give without
retribution, without the IRS going after the donors, putting
their list online, having them intimidated for who they
support. I am okay with that. And you should be too. Americans'
right to donate without tax deduction at all.
And make one thing perfectly clear: this is not tax
deductible, this is not charity contribution; this is a pooling
of Americans' post-tax money to do what they want to do. It is
no different, Mr. Cartwright, than if you sat in a room and you
got 10 guys and you said, you know, let's all put in 50 bucks
apiece and buy an ad to say what we believe; and you each take
your $50 and you buy a $500 ad. Would you expect to have to go
through endless filing and have all your donors disclosed?
But make no doubt about it, the President did this and did
it very well. His 501(c)(4) didn't bother to go through the
abuse because his lawyers knew that they didn't need to; they
simply self-declared and went on.
Organize for Action is as political as any organization in
the world, and to say that it is somehow organizing the way
Wikipedia does for social welfare is as much hogwash as any
other organization could dream of. It is advocating the
President's political policies and promoting the election of
the candidates who work with him.
Your only objection is you can't go on the House floor and
yell about the Koch brothers the way Senator Reid did. You
can't talk about specific monies because you are not getting to
know who gave how much.
This is an amazing debate that has absolutely nothing to do
with what happened to law-abiding citizens who saw the tax
code, made an application, and from application one they were
sent to, among others, Lois Lerner and they were stopped. This
wasn't about ambiguity. A man who has put more than four
decades into being at the IRS fully recommended that these be
approved, and his approval was simply not discussed.
The facts do not support any of the allegation the ranking
member made in his opening statement. Our investigation shows
consistently effective targeting by denial of an answer to
organizations. You know, the American people deserve answers.
If anyone thinks for a moment that it takes years to answer the
question of whether or not you get a 501(c)(4) on even one
application, if they really believe that, please call or write
my office, because the fact is even the people who want to be
on the other side of this know you deserve an answer in days or
weeks, not waiting years. The months tick by for these
organizations and the only thing they got were abusive
questions, questions that in many cases were outside the legal
or even the reasonable right to request.
So I would certainly hope, Mr. Chairman, that your ranking
member and the rest of us on the committee will go back to the
basics, which has nothing to do with whether a 501(c)(4)
discloses its contributors; whether or not we change the rules
one way or the other based on longstanding court decisions;
whether or not the President's Organize for Action has in fact
done far more than any Tea Party group ever dreamed of doing
when it came for advocating political positions. We simply look
at the facts of the IRS getting involved in an ideological
political bent.
The ACLU is here today, and other groups, who have stood on
both sides, to stop conservatives from taking advantage of
liberals, liberals taking advantage of conservatives, the many
taking advantage of the few. And I hope today what we hear is
the danger of allowing a Federal agency to pick winners and
losers, regardless of the ideology.
Mr. Chairman, there can be no more important hearing; that
is why I came here personally to it. This may be a subcommittee
hearing, but this is one of the most important hearings we will
do this year, and I thank you and yield back.
Mr. Jordan. I thank the chairman
Does the gentleman from North Carolina wish to be
recognized? The gentleman is recognized.
Mr. Meadows. Thank you, Mr. Chairman.
I would just like to point out, if we could, my esteemed
colleague from the great State of Pennsylvania was pointing out
that indeed this rule change is a result of the IG's report.
And I find that troubling because, quite frankly, we already
have knowledge that there was a rule change in effect long
before the IG's report came out, Mr. Chairman. If you would put
up a slide, if they could put up a slide on the screen here,
there is an email that we have from June the 14th, 2012,
basically saying that what we were going to do is, Don't know
who in your organization is keeping tabs on (c)(4)s, but since
we mentioned potentially addressing them off plan in 2013, I've
got it on my radar up and this seems interesting.
Now, the problem is that if the genesis of this was the
IG's report, we have a time problem, Mr. Chairman, because the
IG's report did not get filed and completed until 2013, and yet
here we have an email from June 14th of 2012. So I think it is
important that we have a time line and just wanted to correct
that for the record.
I yield back.
Mr. Jordan. Appreciate the gentleman.
Anyone else wish to make an opening statement? Go ahead.
Mr. Collins. Thank you, Mr. Chairman.
I think what is really interesting here is, as has also
been said, and I think we just continue to jump off and you
take what is given, is the use of this hearing, as spoken about
by the ranking member, to lob bombs at this Administration. I
think all you have to do is go find 93,000 comments that have
done that for us. I don't think this is a time when we can look
at what has actually happened and say why is this happening,
why are we doing this now, and what are we distracting from? We
are distracting from the real issues and the real problems of
this country that are a broken health care system, a broken
system that is driving our businesses and our employees to a
brink of not understanding why their Federal Government is
against them, and yet we are still dealing with this and saying
we don't want you to have a voice.
Mr. Chairman, this is a good hearing. This is something we
need to take a part in and realizing that this is an area that
people care about because they care about our Country and the
direction that it is in right now. This is why we need to be
here and, like I said, we don't need this hearing to lob bombs;
93,000 folks or more have already said this is a bad idea and
we need to stop it.
Mr. Chairman, I yield back.
Mr. Jordan. I thank the gentleman.
We are pleased to have with us today Ms. Jenny Beth Martin,
who is the President and Co-Founder of Tea Party Patriots; Mr.
Gabriel Rottman is a Legislative Counsel and Policy Advisor at
the American Civil Liberties Union; The Honorable Wayne
Allard--Senator, good to have you with us--is Vice President of
Government Relations for the American Motorcyclist Association;
Ms. Diana Aviv is the President and CEO of the Independent
Sector; Mr. James R. Mason, III is Senior Counsel at Home
School Legal Defense Association.
I might point out an association that my wife and I used to
contribute money to; I think Mr. Meadows did the same. We home-
schooled--well, I use the term ``we'' lightly; my wife did all
the work--for several years, so we appreciate your
organization. Glad to have you with us.
And Mr. Allen Dickerson is the Legal Director at the Center
for Competitive Politics.
We want to thank our distinguished guests. It is the
practice of this committee to have you stand, raise your right
hand, and swear you in, so if you would please all stand up.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth, so help you, God?
[Witnesses respond in the affirmative.]
Mr. Jordan. Let the record show that each witness answered
in the affirmative.
And we will start with the lady. Jenny Beth Martin, you are
recognized.
WITNESS STATEMENTS
STATEMENT OF JENNY BETH MARTIN
Ms. Martin. Chairman Jordan and members of the
subcommittee, thank you for conducting this hearing today and
for inviting me to share my story. It is absolutely imperative
that members of Congress understand what is going on with the
IRS, what has been going and what is still going on.
I am holding in my hand an email I received yesterday from
Tea Party Patriots attorney, an email that was received less
than 24 hours before our five-year anniversary event today
across Capitol Hill. This email was received less than 24 hours
before the deadline for commenting on the proposed IRS
regulations and this email was received less than 24 hours
before my testimony here today.
What does it says? It says that yesterday the IRS finally
decided, after more than three years and tens of thousands of
dollars in legal fees and accounting fees, and countless hours
of volunteer and staff time answering questions and questions
and questions and more questions from the IRS, that finally the
IRS has decided to grant us our 501(c)(4) status. We don't have
a letter yet from the IRS, but they told my attorney in a phone
call.
Now, I am happy to receive this information. It is about
time.
Mr. Chairman, the question I have is what took them so
long? Tea Party Patriots is not engaged in any political
activities. None. We made a conscious decision from the
beginning not to engage in political activities, and that did
not keep the IRS from withholding our exempt status for more
than three years and investigating our organization that entire
time.
I am happy and relieved to receive the information, but I
still wonder what took them so long. We have not engaged in
political activities. The IRS should have been able to
determine that within a few months of receiving our application
in December of 2010. After all, these allegations, which talk
about the primary purpose for social welfare organizations,
have been in place since 1959, over a decade before I was born
and before man landed on the moon.
Perhaps a reason for the delay of these regulations is that
the IRS is what we are here today to talk about, the proposed
regulations from the IRS that they issued just before
Thanksgiving. If those regulations are enacted, yesterday's
approval will be moot. The new definition of political activity
could not be more targeted at Tea Party Patriots if the IRS had
spent the last three years, two months, and 10 days drafting
rules specifically to silence us.
I have attached to my written testimony a the copy of the
comments we are submitting to the IRS. We outline a great many
of the constitutional and practical problems with these
regulations. Let me highlight just a few.
One of the most egregious is the requirement that we track,
calculate, report the activity of thousands of volunteers. The
army of citizens who volunteer for their Country is the
backbone of every group in America, Tea Party, moderate, or
progressive. Volunteerism is one of the greatest character
traits of our Country. These proposed regulations would treat
volunteers as a problem, annihilating relationships that are
the heart of an informed electorate.
Furthermore, Tea Party Patriots provides grants to local
groups, always requiring the grants are not used for political
activity. Under the new regulations, a grantee group's decision
to use its own funds for an event as innocuous as a nonpartisan
voter registration drive would become our political activity.
That standard would gut our ability to assist local groups.
The new regulations would sensor the Internet. Tea Party
Patriots would not be able to mention any incumbent on our Web
site within 30 days of a primary or 60 days before a general
election. We have to scrub our Web site of any mention anywhere
in it of information just as basic of how elected
representatives voted on the Affordable Care Act, Federal
spending, or just historic voting information.
The proposed rules would attribute to us a value of the
remarks by our leaders and our volunteers. If, in September of
this year, The New York Times quoted a volunteer or me about a
congressman's voting record, we would have to place monetary
value if The New York Times reported that.
The proposed rules create cracks in the trust of the
foundation of our Nation. A Government of the people, by the
people, and for the people is supposed to trust the people and
the people should be able to trust our Government. When the
people are afraid of an agency and they see that agency as a
bunch of bullies who abuse power, the trust is shattered. Free
people shouldn't fear a politicized bureaucracy that delves
into social media and communications to determine what they
have said, whom they have heard speak, and what they think
about their Government.
We can't fill these cracks in the foundation by adding more
rules to the 67,000 pages of oppressive tax code. We personally
favor replacing with a flat fair rate, and until then, Mr.
Chairman, the Government must fulfill its duty and stop the IRS
from infringing on the rights of the American people to freely
associate, speak their minds, talk to the press, and petition
their Government.
[Prepared statement of Ms. Martin follows:]
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Mr. Jordan. Thank you.
I failed to mention five minutes, more or less. We try to
keep it less, but Ms. Martin did fine; she was just a few
seconds over. So hopefully we will maintain that. We are going
to go to Ms. Aviv, and then we will go right down the line.
Ms. Aviv, you are recognized.
STATEMENT OF DIANA AVIV
Ms. Aviv. Good morning, Chairman Jordan, Representative
Cartwright, and members of the subcommittee.
Independent Sector is a leadership forum for charities,
foundations, and corporate giving programs whose member
networks collectively represent tens of thousands of
organizations nationally, locally, and globally. Our membership
also includes a number of 501(c)(4) social welfare
organizations. Thank you very much for the opportunity to share
with you the perspectives of our community today.
Charitable organizations understand that continued support
from Americans who give their time and money depends upon the
public trust in our sector, and that any erosion of their trust
will ultimately limit our effectiveness and harm those that we
serve. We are therefore deeply committed to ensuring that all
charitable nonprofit organizations are governed effectively and
transparently, maintain maximum accountability, and demonstrate
highest levels of ethical conduct and fully comply with the
law.
As part of our commitment to supporting responsible
practice, Independent Sector, for some time, has been deeply
concerned about the rules governing political activity by
501(c)(4) social welfare organizations and have advocated three
changes.
First, it is imperative that a clear definition of
political activity across all 501(c) organizations be created
so that exempt organizations and regulators are no longer
forced to rely on the ambiguous facts and circumstances
approach to determine whether, and to what extent, political
activity has actually taken place.
Secondly, a clear limit should be established for how much
political activity is permitted by 501(c)(4) organizations.
Doing so will provide certainty for exempt organizations and
remove the subjective judgment of case officers at the IRS.
Thirdly, the rules must ensure that all 501(c) entities
lawfully permitted to engage in partisan political activity are
transparent regarding the source of donations used for those
activities. When clearly defined and within appropriate limits,
political activity can be an important part of advancing the
missions of these organizations, but it must be conducted in a
way that organizes the electorate's right to know who is
working to influence the outcome of elections.
We sought and welcome the IRS's recognition of the need to
improve the current rules, but the recently proposed
regulations fail to address some of the most serious problems I
have just outlined. At the same time, in the areas it does
address, we believe that the IRS has overreached in a deeply
problematic way. The proposed guidance includes an overly broad
definition of candidates related political activities that
conflates partisan with longstanding, widely accepted
nonpartisan activities.
For the first time, activities such as nonpartisan voter
registration efforts, get out the vote campaigns, voter guides,
and nonpartisan candidates forums that encourage civic
participation and educate the general public would be
considered political. Defining nonpartisan voter engagement
activities as political for 501(c)(4) social welfare
organizations will have a deleterious cascading effect on
501(c)(3) public charities. Given the expressed prohibition for
(c)(3) organizations to engage in candidate-related political
activity risks sensitive public charities and their funders may
curtail the activities in order to avoid association with
activities that the IRS would then deem as political.
Furthermore, the proposed guidance would define as
candidate-related political activity any public communication
that clearly identifies an candidate or any forum where a
candidate appears within 30 days of a primary or 60 days within
a general election. This would include any effort to influence
legislation during the blackout period that refers to an
elected official who is running for reelection. Such a rule
would have limited the ability of 501(c)(4) organizations to
engage with or publicly mention lawmakers during consideration
of the 700 million top bank bailout bill passed just before the
2008 election.
A uniform set of rules that applies across all tax-exempt
categories will provide predictability and clarity for what
constitutes political activity, will protect free speech, and
will encourage civic engagement. Thank you.
[Prepared statement of Ms. Aviv follows:]
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Mr. Jordan. Thank you, Ms. Aviv.
Mr. Rottman?
STATEMENT OF GABRIEL ROTTMAN
Mr. Rottman. Thank you, Mr. Chairman.
Chairman Jordan, Ranking Member Cartwright, members of the
subcommittee, I very much appreciate the opportunity to testify
today on the troubling rule proposed by the Internal Revenue
Service. We believe that, if implemented, the sweeping new
definition of candidate-related political activity in the rule
will chill a vast amount of debate on matters in the public
interest.
By way of illustration, had these rules been in place
during the presidential race in 2012, the ACLU would have been
limited in its ability to even mention President Obama or
Governor Romney during a period covering almost 300 days of
that year. Were we to do so, even in a completely nonpartisan
way, it would have counted against our allowance of candidate-
related political activity, too much of which would jeopardize
our 501(c)(4) status.
During 30 days before any primary and 60 days before the
general election, we would have had to purge all such
communications from our Web site, including thousands of
individual Web pages, or account for them in our tax filings.
In fact, this testimony, Mr. Chairman, would have to come down
just because I mentioned your name.
The proposed rule would not be an improvement on the
existing standard. Earlier this month, the ACLU submitted
comments critical of the current facts and circumstances test,
the inherent vagueness of which likely led to the use of
inappropriate criteria in the selection of conservative and
some progressive groups for undue scrutiny. We further noted
that the IRS's proposed alternative would make matters worse by
chilling a legitimate issue advocacy while doing very little to
address the perceived problem of anonymously funded campaign
ads. For these and other reasons we have concerns with several
provisions in the rule.
We oppose the proposed application of the rule to
communications merely mentioning a candidate within the 30 days
before a primary and 60 days before a general election. The
IRS's proposal is so broad that it would cover such
communications if they were posted to a Web site before the
blackout period and kept up during that time. Indeed, in the 60
days before a general election, remarkably, we would be limited
in our ability to even mention any political party represented
in the election. Totally nonpartisan communications like urge
Democrats and Republicans to unite in support of NSA
surveillance reform would be covered.
We also oppose the extension of the definition of
candidate-related political activity to advocacy communications
that are the functional equivalent of expressed advocacy.
Historically, Government regulators have been unable to draw
appropriate lines between communications urging voters to
support or oppose a candidate and those that urge action on an
issue in the public interest. The ACLU itself has repeatedly
run afoul of this functional equivalence problem. In the 1970s,
for instance, The New York Times refused to run a sharply
worded advertisement criticizing then President Richard Nixon
for opposing court-ordered desegregation. The New York Times
believed that to be a campaign ad. Communications by groups
like the NAACP or the National Organization for Women on issues
like voter identification laws or reproductive rights could
also quality depending on where and how they run.
Finally, we have strong concerns with the inclusion in the
proposed rule of totally nonpartisan voter registration,
mobilization, and education efforts, and candidate forums
within the 30/60 day blackout period.
While the IRS does deserve credit for taking action here,
the rule unfortunately attempts to cast as broad a net as
possible, rather than narrowly targeting actual electioneering
using explicit terms of support or opposition. In America, the
First Amendment disfavors regulations that suppress protected
speech to get an unprotected speech. The regulations do exactly
that; they give the tie to the sensor, not the speaker.
Regardless of the politics involved, that should be of concern
to any advocate for the public interest.
Thank you again for inviting me to testify today.
[Prepared statement of Mr. Rottman follows:]
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Mr. Jordan. Thank you, Mr. Rottman. We appreciate that.
Senator Allard.
STATEMENT OF THE HONORABLE WAYNE ALLARD
Mr. Allard. Chairman Jordan and Ranking Member Cartwright
and distinguished members of the subcommittee, thank you for
inviting the American Motorcyclists Association to speak today
and discuss the rule proposed by the Federal Internal Revenue
Service designed to provide guidance to tax-exempt
organizations.
The AMA believes this rule will limit our ability to
communicate with our members and will create a defacto blackout
period during which our Government will be less accountable to
the people it serves.
Currently, the IRS provides a tax exemption for civic leads
or organizations not organized for profit, but operated
exclusively for the promotion of social welfare. The AMA is
exactly that type of organization that lawmakers anticipated
granting tax-exempt status to when they drafted Section
501(c)(4).
The AMA provides enormous social benefit to the
motorcycling community. As an organization, we sanction about
3,000 competition recreational events a year, and, sanctioning
with the AMAm event promoters and track owners agree to use the
AMA rule book and operate their events in a safe manner with
set minimum insurance levels. As a result, participants in
these events know they will be treated fairly and in a safe
manner.
On the highway we provide numerous benefits to our members,
including sanctioning charity rides, which include providing
insurance and best practices to make the roadways safer for
riders and drivers, providing roadside assistance to our
members, and educating and informing our members regarding
congressional and regulatory actions.
The AMA represents the interests of our Nation's estimated
27 million motorcyclists and all terrain vehicle riders. Any
fact-intensive analysis takes into account all of the facts and
circumstances of the AMA and its functions would conclude that
the AMA promotes the social welfare of motor-cross racers,
recreational off-highway vehicle riders, on-highway
motorcyclists and drivers. We do not participate in elections.
Since 1984, the AMA has been classified as a 501(c)(4)
organization based upon this analysis. However, the IRS new
guidance would force the AMA either to muzzle its advocacy
efforts or lose its status as a tax-exempt organization.
The definition of candidate-related political activity the
IRS proposes to use is arbitrary and limits free speech. For
example, any communication mentioning an elected official's
name is considered political activity during the 60-day period
before a general election or 30-day period before a primary
election. This creates an odd situation. The timing of the
speech is what makes political not the content.
According to the proposed rule, it even includes material
without regard to whether the public communication is intended
to influence the election or some other non-electoral actions,
such as a vote on pending legislation. As a result, the new
definition of candidate-related political activity assumes that
all congressional, regulatory, and executive actions cease
before an election. We know this is not the case. Legislative
and regulatory business is conducted right up to an election.
This creates a defacto blackout period during which citizens
will find it much harder to gain information about the actions
of their representatives and Government.
The U.S. House of Representatives is scheduled to be in
session for 12 days during the proposed rules blackout.
Additionally, the reauthorization of MAP-21, our Nation's
transportation bill, an important vehicle to road safety
programs, may be debated and voted on during this time. We must
be allowed to communicate information about such issues to our
members in a timely manner.
According to George Mason University's United States
Election Project, less than 54 percent of eligible voters cast
a ballot in 2012. This is a decline of more than 3 percent than
the 2008 presidential election. At a time when the proportion
of eligible voters casting a ballot is declining, the AMA
opposes any effort to restrict access to voter registration
drives, voter guides, and information related to their
representatives' voting records. In fact, this is a time when
more voter educational material is needed, specifically
pertaining to issues Americans care about.
The proposed rule the IRS seeks to implement will stifle
nonpartisan speech in a manner that leads to a less informed
electorate. We believe that the changes proposed will prevent
the AMA from educating voters and advocating for the social
welfare of the motorcycling community. Even the IRS agrees,
stating in the rule itself, more definitive rules might fail to
capture activities that would or would not be captured under
the IRS traditional facts and circumstances approach.
It is our understanding that the IRS hoped to curtail
electoral activity, but this rule is limiting our ability to
educate our members about congressional and regulatory activity
in keeping with our objective to promote social welfare of the
motorcycling community.
Thank you very much for your time and consideration of the
American Motorcyclist Association's views.
[Prepared statement of Mr. Allard follows:]
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Mr. Jordan. Thank you, Senator.
Mr. Mason.
STATEMENT OF JAMES R. MASON, III
Mr. Mason. Mr. Chairman, ranking member, and honorable
members, thank you for the honor of being invited to testify
before this committee.
Home School Legal Defense Association is a social welfare
organization that is tax-exempt under Section 501(c)(4) of the
Internal Revenue Code. I oversee HSLDA's compliance with
numerous State and Federal tax laws, campaign finance laws,
lobbying laws, and other areas of Government affairs. In a
previous job I worked on several important campaign finance
cases in which Federal courts, including the Supreme Court of
the United States, struck down regulations of political speech
as being unconstitutional under the First Amendment. The
constitutional issues and those in many other campaign finance
cases are closely related to the constitutional issues raised
by the IRS's proposed rules.
HSLDA is a national organization that has as its primary
purpose advancing and protecting the right of parents to
educate their children at home. We have over 80,000 member
families in all 50 States and the District, and we communicate
with many thousands more by various channels, including email,
Web site, news media, and personal appearances at conferences.
Many social welfare organizations, like ours, from across
the political spectrum are dedicated to giving a voice to the
people so that together they can affect social change. These
social welfare organizations, like ours, are made up of
millions of people who wish to speak with one voice on issues
of importance to them.
One of HSLDA's main activities is monitoring State,
Federal, local legislation. When a bill, ordinance, regulation,
or policy change is proposed that will affect the ability of
parents to home school, we frequently alert our members and
friends about the proposal. Sometimes we urge them to contact
their elected officials, by name, to express their support or
opposition to the proposed legislation. We communicate with
home schoolers about legislative issues to advance our policy
goals in ways that we believe are in the public interest.
Under current law, we need not worry about whether a
particular elected official is also a candidate or whether an
election is near when legislation is introduced. But under the
proposed rules, 30-and 60-day pre-election windows, what would
be an issue advocacy communication on Monday would be a
candidate-related political activity on Tuesday without
changing a single word. Even worse, if the issue advocacy
communication is posted on our Web site on Monday, by some
strange IRS alchemy it would be magically transformed into a
candidate-related political activity on Tuesday.
The IRS justifies its expansive definition of candidate-
related political activity by the need for bright-line rules.
We agree that a bright-line rule is preferable to placing IRS
agents in charge of deciding whose speech is protected and
whose is not. But according to the notice of proposed
rulemaking, ``The IRS acknowledges that the approach taken in
these proposed regulations, while clearer, may be more
restrictive and more permissive than the current approach.''
In some cases a bright-line rule may be a good thing, but
not all bright-line rules are created equal. In this case, the
aspects of the bright-line rule that are ``more restrictive''
actually abridge protected free speech. In the interest of
clarity, the IRS approach has captured too much speech. Issue
advocacy does not become expressed advocacy based on arbitrary
dates on the calendar, and the need to speak out on issues of
public importance does not decrease as election day approaches.
Indeed, issue speech becomes all the more valuable because the
public and officials are paying closer attention.
The IRS's bright-line rule is designed to prevent
impermissible use of tax-exempt status, but, because it
captures too much speech, the proposed rule is contrary to
decades of Supreme Court precedence that hold that the better
approach is to err on the side of regulating less speech, even
if it means missing some that might properly be subject to
regulation to avoid improperly abridging any protected speech.
As the Court has said, such a prophylaxis upon prophylaxis
approach to regulating expression is not consistent with strict
scrutiny. The desire for a bright-line rule hardly constitutes
the compelling State interest necessary to justify any
infringement on First Amendment freedom.
The IRS proposed rules would damage HSLDA, other social
welfare organizations, and the public's ability to keep abreast
of issues that are important to a healthy civil Government. The
proposed rules are also contrary to the free speech clause of
the First Amendment. We strongly oppose the proposed rules.
Thank you.
[Prepared statement of Mr. Mason follows:]
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Mr. Jordan. Thank you, Mr. Mason.
Mr. Dickerson.
STATEMENT OF ALLEN DICKERSON
Mr. Dickerson. Thank you, Chairman Jordan, Ranking Member
Cartwright, members of the committee. I am going to try not to
repeat everything you have already heard from the panel, but I
do want to make a few points.
One is because this involves a regulation of the Internal
Revenue Service, one might be forgiven for thinking this
involves, in some ways, the collection of the Nation's revenue.
It does not. There is no reason to believe one way or the other
that revenue will rise if this is adopted or that it will fall
if this is adopted, and the reason for that was already made
clear by the chairman of the full committee earlier; the
organizations we are talking about do not receive tax
deductible money.
So if this doesn't involve the internal revenue, why
exactly is the IRS involved in the first place? And isn't it
odd that something called candidate-related political activity
would be regulated by the IRS at all, given that we already
have a commission, called the Federal Election Commission,
which would seem to be somewhat more competent in this area?
I would suggest that the reason for this is simple and
structural. When this Congress gave the Federal Election
Commission ``exclusive jurisdiction'' over the civil remedies
and enforcement of the Nation's election laws, it made a
structural choice. There are six members of the Commission,
unlike the usual five, and they are evenly divided between the
two parties. The reason for this is simple: no one party may,
using the Federal Election Commission, take a partisan
advantage.
The IRS does not have that safeguard. I will leave it to
the committee to draw its own conclusions.
One of the things the FEC has that the IRS doesn't is the
institutional confidence that comes from 40 years of regulation
in this area. And going back to this idea of clarity, and
whether these rules in fact provide clarity, I practice
generally in the Federal election area, mostly in campaign
finance cases, and there you have real clarity. You have
financial cutoffs. Something is a type of communication if you
spend $10,000 on it, not if people volunteered and we somehow
have to value their time in this very amorphous and
unpredictable manner.
We know that something is directed at an electorate if it
can be found under FCC regulation to reach 50,000 voters of the
person being identified; unlike here, where it says that
something is candidate-related if it is intended--and for the
lawyers in the room, we all know the wiggle room in there--that
is intended to reach 500 persons. The difference between a
broadcast ad that is taken out in a member's home State
intended to reach that person's electorate and something put on
You Tube is enormous and is a trap for the unwary and for small
organizations.
So in that sense I would suggest that even if the facts and
circumstances test lacks clarity, and it most certainly does,
there are other areas here where the clarity is perhaps worse.
In this attempt to create a patina of predictability and a
patina of sensible regulation, you actually have buried in the
NPRM a number of things that are very troubling. For instance,
how do we know when someone is a candidate? Well, under the FEC
rules, we know someone is a candidate when they spend money as
a candidate through an authorized candidate committee. How do
we know someone is a candidate under this? Well, when someone
proposes them as a candidate for office, full stop.
Theoretically, if I were to suggest Mr. Cartwright as the
next vice presidential nominee of the Democratic party, I would
have converted him into a candidate for that office. Now,
presumably this could be dealt with later on in the process,
but the fact that the IRS saw fit to use that as its standard
suggests if not a political intention, at least a lack of
institutional competence in this area, which perhaps give us a
certain amount of pause about the IRS regulating this in the
first place.
And I think it is important to deal with the elephant in
the room, which is disclosure. The fact, as I said earlier, is
that there is no revenue purpose to this rule. It is about the
disclosure of people's donors. And I want to tackle that head
on. The reason 501(c)(4)s do not disclose their donors is
because Congress said so. When the Internal Revenue Code was
passed, it created criminal penalties for the unauthorized
disclosure of the donors to these organizations. And the reason
for that is that it has always been understood that 501(c)(4)s
are the beating heart of civil society. These are the
organizations, like the NRA and the Sierra Club, which go out
there and take unpopular positions and move the national debate
and make this a vibrant and functioning democracy.
Requiring unpopular organizations to give up their donor
list to public scrutiny is not only contrary to Congress's
intention in the Internal Revenue Code, it is also contrary to
constitutional law. In a number of very hard-fought victories
during the civil rights era, the Supreme Court said unanimously
that organizations could not be required to give up their
donors unless there was a strict and important overriding
governmental interest. And the reason for that was that the
Court noted the ability to speak is undeniably held by the
ability to associate, and chilling the ability to associate
inevitably makes it less likely that speech will be effective
and that 501(c)(4)s will continue to be able to do their job as
civil society.
Thank you.
[Prepared statement of Mr. Dickerson follows:]
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Mr. Jordan. Well said, Mr. Dickerson. That is why freedom
of assembly and freedom of speech are in the same darn
amendment; they are very, very important.
Before turning to the vice chair of the committee, I would
just recognize--I don't know who is for this rule. We have the
Center for Competitive Politics and the independent sector
opposed to it; we have home schoolers and Harley riders opposed
to it; we have the Tea Party and the ACLU. I mean, who is for
this? We could stop right now. This thing is done. Get rid of
this crazy thing. But we probably can't do that because members
of Congress like to talk, too, and they want to ask some
questions. So we are going to go first to the vice chairman,
Mr. DeSantis, the gentleman from Florida.
Mr. DeSantis. Well, maybe after this presentation the
Administration will agree to just pull the rule. I was very
impressed with what I saw. Look, I think this rule is going to
have a chilling effect on speech. I think it is going to
facilitate the type of targeting that we have seen,
unfortunately.
And really of concern to me particularly is I don't think
Government should be in the speech police business generally,
but certainly you shouldn't have the IRS doing this; and this
committee has uncovered emails back in 2012, one email from a
Treasury Department official to, among others, Lois Lerner at
the IRS that said don't know who in your organization is
keeping tabs on (c)(4)s, but since we mentioned potentially
addressing them off plan in 2013, I've got my radar up and this
seemed interesting. And, of course, Steven Miller has testified
about trying to ``level the playing field'' between 501(c)(4)
groups and 527 organizations based on pressure from Senator
Levin and others in Congress. So, to me, I think that the IRS
needs to get out of this entirely.
But you talk about a 30/60 day window. That is precisely
the time where people need to be able to engage on public
issues. I mean, it is just absolutely ridiculous, but I think
what it does is it stems Government's desire of Government
muzzling of speech in this context. It is really rooted in the
desire of incumbents to control discourse, because if you can
control who can speak, the people who are here now are going to
be more likely to be returned to office; and if more people can
speak and get involved, then it becomes more competitive. It is
more difficult to continue to get returned if you are held
accountable.
I appreciate Mr. Dickerson talking about the anonymity and
the donors disclosure. I just wanted to ask you, Mr. Rottman,
because I read in your testimony you do talk about that. Is it
your group's position that there is value in having these
social welfare groups for them to be able to keep their donors
anonymous?
Mr. Rottman. Congressman, yes. The short answer is yes. The
right to anonymous political speech, as Mr. Dickerson said, was
hardened during the civil rights era, but it goes back to the
founding of our Country.
Mr. DeSantis. And why was it? I assume you agree with NAACP
vs. Alabama, where basically Alabama had a law that required
donor disclosure if you wanted to operate in Alabama. So the
NAACP would have to have disclosed their donors. So just for
people who may not be familiar with that case, why would that
have a chilling effect on First Amendment speech at that time?
Mr. Rottman. Well, it was quite literally an attempt to
intimidate the NAACP into leaving the States. By disclosing the
membership list, it would have left the members of the NAACP
open to reprisal, which, at the time, would be completely
expected. So the Court found that in that case, if there is a
chance of harassment or reprisal, then the right to an honest
political speech is constitutionally guaranteed.
Mr. DeSantis. Yes. And I would just remind folks who may be
watching the Federalist papers were anonymous. I mean, this was
the one most potent mechanism that the Founding Fathers used to
get the Constitution ratified in New York, which was the
critical thing at the time, because if they had lost in New
York, they probably would have lost and wouldn't have gotten
ratification. So Hamilton didn't sign the SAs, Madison didn't
sign the SAs, and John J. didn't sign the SAs under their name,
they signed it as Pubulous.
Of course, during the American Revolution you had all kind
of pamphleteers. This was one of the main ways where people
were able to be educated about these things. Many of those were
written anonymously or written under pseudonyms. So I think
that there is just such a desire in this town to control
everything that goes on that we end up seeing proposed rules
like this, but I will just say I really appreciate the chairman
having the hearing.
Thanks to all the witnesses. I think you all made very good
and logical statements, and I think we can stop this rule from
taking effect in Congress and just make sure that we want a
robust debate. We want people getting involved in political
education and issue education, and that is part of what being
an American is all about.
So I yield back the balance of my time.
Mr. Jordan. I thank the gentleman, would recognize the
gentleman from Pennsylvania, the ranking member.
Mr. Cartwright. Thank you, Mr. Chairman.
And I thank you for the comments from all of the witnesses.
I listened, I learned, and I appreciate your attendance today.
I was born in 1961, and I say that because it was two years
before I was even born that this Country, the United States of
America, placed restrictions on political activity by
501(c)(4)s. So anyone listening to this hearing who thinks that
this new rule being proposed is introducing a novel concept is
sadly mistaken; this has been part of the American fabric since
two years before I was born, and I am getting pretty long in
the tooth myself.
What we are up to right now is trying to craft a rule that
answers what everybody has been screaming about on Capitol
Hill, you know, is the IRS unfairly targeting right wing
groups? We know that there were BOLOs on right wing groups. We
also know that there were BOLOs on left wing groups. We haven't
sorted through the statistics to see what percentage of the
right wing groups were targeted, what percentage of the left
wing groups were targeted. Maybe some day we will engage in
that exercise. But what we are up to right now is try to make
clearer rules, because even though the FEC does know a lot
about political campaign finance rules, since 1959 it has been
the charge of the IRS to handle some of that as well.
Now, Ms. Aviv, I particularly appreciated your testimony,
because rather than scrap everything, what you have done is you
have come up with some clear and cogent suggestions on
tightening this rule up. They appear on page 6 of your written
testimony, and rather than go through them, I just want to
thank you for those intelligent suggestions.
We also had Senator Allard. I appreciate your testimony
here and I want to say it is an honor to have a former United
States senator testifying before our subcommittee. I also
appreciated your points about the time restrictions. I think
that is worth looking into. I think you make some sensible
comments. Having served here on Capitol Hill, you know about
the business that goes on here, the workaday work that we do
here in dealing with interest groups and their concerns, and I
appreciate your comments and I hope that your thoughts will be
taken into consideration.
Remember, everyone, this is a proposed rule; it is
malleable, it is subject to change. We are not wasting our time
and our breath here because there are people paying attention
to your comments, and, Senator Allard, I appreciate yours as
well.
Now, Ms. Aviv, I wanted to follow up with you a little bit.
As I mentioned at the outset, really what my concern is about
is the elephant in the room that Mr. Dickerson mentioned, and
that is the dark money, the dark money. I mean, on the one hand
we have concerns about First Amendment, freedom of speech and
political expression; on the other hand we worry, we worry in
this Country about undisclosed donors, who they are, where they
are from, are they even from this Country, the people pumping
money into who gets elected in this Country. And I wanted to
follow up with you, Ms. Aviv. Why do you think there is public
concern about the increase in partisan activity funded by dark
money?
Ms. Aviv. Mr. Cartwright, I am going to come at this
question from the perspective of the charitable sector. I
started off my testimony by saying that we depend on the public
trust. We know that the public likes charitable organizations,
501(c)(3) and 501(c)(4) organizations, to be involved in
educating about the issues, communicating with law makers, with
elected and appointed officials, and all of that. They are also
very clear that they don't want us involved in partisan
political activity, in determining who is sitting there. But
once people are sitting there, for us to engage.
Our concern with 501(c)(4) social welfare organizations is
that they have the right to do both of those activities.
Mr. Cartwright. Right. And you said that. In fact, you
wrote in The Washington Post that this proposed rule could be
an important first step in pushing dark money into the sunlight
and providing IRS examiners with objective tools for reviewing
applicants for tax exemption. Did you say that?
Ms. Aviv. Yes, but we hoped that is what it would do. Our
concern is that these rules, as currently crafted, don't do
that. We have an equal concern that we simply throw out these
rules and nothing happens. We think that the current law is not
workable and we think that these rules, as crafted, are the
wrong way to go.
Mr. Cartwright. Well, thank you for that.
Mr. Chairman, I would like to enter her op ed in The
Washington Post for the record.
Mr. Jordan. Without objection.
Mr. Cartwright. Mr. Chairman, I also got an email from
Richard Painter, Professor Painter from yesterday's hearing. He
said, so far, I have not heard facts suggesting involvement in
this scandal of anyone at the White House. I hope the rhetoric
in the course of this investigation will not get ahead of the
facts.
And I would ask permission to enter this email into the
record.
Mr. Jordan. Without objection.
Mr. Cartwright. I yield back.
Mr. Jordan. The gentleman from Florida is recognized for a
response.
Mr. DeSantis. Mr. Chairman, could we maybe put into the
record the number of times that officials from the IRS visited
the White House, if we are going to put that in? I know the
committee has previously uncovered that. Maybe we can just note
that for the record, if that is okay.
Mr. Jordan. That is fine. That is fine. Without objection.
Mr. Jordan. The gentleman from Tennessee is recognized.
Mr. DesJarlais. Thank you, Mr. Chairman.
Though I have lived in Tennessee for over 20 years, Senator
Allard, I grew up in a town you may have heard of, a little
north of your home State, Sturgis, South Dakota. I guess you
probably advocate for a few of the AMA folks there.
Mr. Allard. Yes, sir.
Mr. DesJarlais. And I wouldn't be surprised if maybe you
have been there.
Mr. Allard. I have not, but we have a lot of members who go
there.
Mr. DesJarlais. Okay.
The American Motorcyclist Association is not a political
party, correct?
Mr. Allard. It is not a political party, that is correct.
Mr. DesJarlais. Okay. And it is an organization dedicated
to advocacy for the motorcycle community, right?
Mr. Allard. It is a social welfare organization and we
promote responsible and safety behavior on our roads and when
they are out on our public lands.
Mr. DesJarlais. So what do you think, then, the big concern
about the AMA advocating for issues and talking to elected
officials would be?
Mr. Allard. There shouldn't be any concern because we are a
social welfare organization. We are prohibited from being
partisan in our activity. And I might give you an example. We
do list all the candidates for office on our Web site and we
also send out a questionnaire and we put that questionnaire on
the Web site verbatim; we don't edit it or anything else. We
are just there to educate our members, then they can understand
what the members are doing in the Congress and they can
understand our issues. The highway transportation bill, for
example, comes up during that dark period and we have a lot of
issues in there, and we can't mention a bill carried by so-and-
so. That would preempt us from doing that.
Mr. DesJarlais. And so this would end that?
Mr. Allard. Yes.
Mr. DesJarlais. Ms. Martin, the ranking member now, for two
days in a row, has indicated that we really don't know if this
targeting was a bipartisan process, that conservative groups
were targeted and liberal groups were targeted. I saw you
making some notes after that statement. Do you have any
information that would help the ranking member with who was
targeted and who wasn't?
Ms. Martin. The inspector general's report said that 100
percent of conservative groups were targeted.
Mr. DesJarlais. And the number of liberal groups that were
targeted, I believe all of them received their status?
Ms. Martin. They all received their status, including one
for a 501(c)(3) named after the President's father, Barack
Obama Foundation was a (c)(3), and it was approved by Lois
Lerner.
Mr. DesJarlais. How long does it typically take an
organization to receive tax-exempt status?
Ms. Martin. Prior to late 2009, it took somewhere between
two to four months, maybe six months at the most. After the
beginning of 2010 or very late 2009, it seems 2010, it took
years, at least for organizations like mine with Tea Party and
Patriots in their name, or conservative organizations.
Mr. DesJarlais. Why do you think that you were targeted
specifically? What do you think the underlying purpose was.
Just open and honestly, why do you think you were targeted?
Ms. Martin. I think we were targeted because people in the
IRS and other parts of this Government did not want to hear
from the people. They wanted us to be quiet.
Mr. DesJarlais. Do you really believe it was the IRS, the
IRS doesn't want you to speak, or do you think maybe it was
somebody higher up the chain?
Ms. Martin. You know, I want to see what the evidence says.
I try my best not to jump to conclusions with this. It
certainly seems that there were quite a few people who did not
want us speaking, and they have done everything they can to
silence us.
Mr. DesJarlais. Do you think it was a lot of conservative
people that didn't want to see you speaking?
Ms. Martin. I would hope not. I have a feeling there may
even be some Republicans who, from time to time, don't want to
hear us speaking, because we are nonpartisan and we hold both
parties accountable.
Mr. DesJarlais. Okay. After going through what you have
been through the last several years, your organization, other
conservative groups, how does it make you feel after finally
getting tax-exempt status, after being put off for years, how
does it make you feel now that they want to invoke this rule?
Ms. Martin. So just before coming here to testify, I
receive a call or our attorneys receive a call saying we have
finally been approved. If these regulations go into effect,
that approval is absolutely meaningless. The organization, Tea
Party Patriots, has lived under these rules for the past three
years. We may be one of the only national organizations who
truly knows the effect of what it is like to keep the mountains
of paperwork, to watch every single word you say, whether you
even say Obamacare or the health care law, because using the
word Obama in Obamacare may count against you. It is oppressive
and it is very, very frustrating. I didn't want to have to go
through that. I don't want any organization to go through it,
even one who disagrees with me on all of the issues. No
organization in America should have to go through this.
Mr. DesJarlais. And I think we have a table full of them
represented here today, so thank you.
I yield back.
Mr. Jordan. I thank the gentleman.
Just real quickly before going to the gentleman from
Michigan. So the ranking member mentioned 1959, but it seems to
me the history for 50 years, from 1959 to 2009, we didn't
really have a problem, and then suddenly we have a huge problem
and we have a new rule that is proposed offline. So for 50
years this thing worked fine, but something changed in 2009,
right?
Ms. Martin. In 2009, five years ago, to today, this
movement, the modern day Tea Party movement started.
Mr. Jordan. But something changed at the IRS which happened
to correspond with the modern day Tea Party movement. All
right, thank you.
The gentleman from Michigan is recognized.
Mr. Bentivolio. Thank you very much, Chairman Jordan,
Ranking Member Cartwright and distinguished members of the
subcommittee. I want to thank all of the witnesses who have
taken time from their busy schedules to come and testify today
about this very, very important issue.
Ms. Jenny Beth Martin, you and I go way back, right? In
fact, I got involved in politics because of the Tea Party.
Ms. Martin. Yes.
Mr. Bentivolio. And I remember then jokingly saying if we
really wanted to control speech, we should hook up our
politicians to lie detectors; it would be the quietest campaign
season in history, right? And we have been talking about the
First Amendment here this morning, which is one of our basic
rights, put into the Constitution by our Founding Fathers. It
is a fundamental right and a pretty important one, isn't it?
This amendment gave the people the right to prohibit the
Federal Government from exercising their authority over freedom
of speech. And the Founding Fathers did note that this right
was not absolute and must operate under reasonable
restrictions. But the intent was for the States to establish
these standards, not the Federal Government.
I am guessing all of you here today know what the First
Amendment says, correct? Everybody?
Do you think the employees at the IRS know what the First
Amendment says, Ms. Martin?
Ms. Martin. I would imagine no, they do not, because if
they did, there is no way they would not have done--if they
knew what the First Amendment said, they wouldn't have done
what they have done to my organization and others like ours.
Mr. Bentivolio. Mr. Rottman?
Mr. Rottman. I am not sure that that is actually the
question that needs to be answered. Whether they do or not, the
fact is that the rule, as proposed, could be misused to target
groups on both the right and the left, and that should be a
concern to all of us.
Mr. Bentivolio. I understand. Lawyer, right?
Mr. Rottman. Yes.
Mr. Bentivolio. Okay.
[Laughter.]
Mr. Bentivolio. First Amendment, Senator, do you think the
IRS----
Mr. Allard. I am not a lawyer, by the way, I am a
veterinarian.
Mr. Bentivolio. There you go.
Mr. Allard. But let me point out I think there probably are
some employees there that understand. I think, if they reflect
the total population, a lot of employees that don't. And in
regard to this rule, I think they completely ignored the First
Amendment.
Mr. Bentivolio. Ms. Aviv?
Ms. Aviv. Sir, I think that is the IRS employees are
charged with fulfilling their responsibilities according to the
rules. The rules are so unclear that using facts and
circumstances allows individual agents to make personal
determinations about what is right and wrong. We think that we
need greater clarity so that there is less discretion left up
to them.
Mr. Bentivolio. In the interest of time, I think you would
probably say pretty much what they said.
In the hearing we had back in May of last year, I asked Mr.
Schulman of the IRS, who is a lawyer, by the way, if he knew
the First, Second, and Nineteenth Amendments. He told me he
didn't have the Constitution memorized. Do you think IRS agents
should have a right to training in the Constitution and Bill of
Rights? I think they should know basically, even though they
are attorneys, what the Constitution says. Would you agree, Mr.
Rottman? I mean, you know, case law, constitutional law, that
is for lawyers, but basically?
Mr. Rottman. The fundamental problem is they are given too
much discretion under both the existing rule and the proposed
rule, and that discretion is going to lead to problems,
regardless of who is in office.
Mr. Bentivolio. But it is a basic right. I mean, a
constituent came to me one time and asked, Mr. Bentivolio, I
don't like this type of noise coming from this particular
church, and I said, well, if I did that, I would have to pass a
law that said get rid of church bells, and I am not going to do
that because it is freedom of religion, and I am here to
protect those rights, just like freedom of speech, right?
I don't really have that many questions, but, Ms. Martin,
we go a long way. I think you are responsible for my and much
of America's great political awakening that took place since
2009. I want to thank you for that. Don't let this get you
down; we are fighting the good fight. Our job here in Congress
is to protect those rights, not take them away.
Ms. Martin. Thank you.
Mr. Bentivolio. Thank you very much, Mr. Chairman. I
appreciate it.
Mr. DeSantis. [Presiding] The gentleman yields back.
I am going to recognize the ranking member for three
minutes.
Mr. Cartwright. Thank you, Mr. Chairman.
So I want to address this idea of everything coming up
since 2009 now. What was I doing talking about 1959 if
everything started in 2009? Well, I want to first invite
everyone's attention to 1979. I was born then; I was graduating
high school then. In 1979, an IRS general counsel memorandum
referred to the ``perennially troublesome question'' of whether
the regulations implementing 501(c)(4) should be changed. In
fact, Mr. Chairman, I would like to enter that memo from 1979
in the record.
Mr. DeSantis. The memo will be entered into the record.
Mr. Cartwright. So it was already a perennially troublesome
question in 1979. I will take it forward to 2004, also before
2009. Members of the American Bar Association's--forgive me for
mentioning lawyers; evidently, that is out of fashion. The
American Bar Association's Committee on Exempt Organizations
proposed that the IRS design a ``simplified, clear, and
predictable alternative test for 501(c)(4) qualification.'' So
they were concerned about that at the ABA in 2004. And then in
2006 George Washington University Law School Professor Miriam
Galston observed in 2006, ``Since the late 1970s, there appears
to have been no serious consideration given to changing either
the 'primarily' aspect of the exempt purpose standard in the
regulations or the IRS's application of the standard in its
rulings or other pronouncements.''
So I am here to tell you that for anyone to say that there
was some kind of epiphany that this Nation had in 2009----
Mr. Jordan. Would the gentleman yield for a question?
Mr. Cartwright. I yield.
Mr. Jordan. My point was this. In the 50 years, I don't
ever recall reading stories, hearing any information about it
taking three years to get approved when you applied for
whatever tax-exempt status you were applying for. That was my
point. In 50 years, it never took anyone three years to get
approval, but since 2009 it has taken three years for hundreds
of groups. That was my point.
Mr. Cartwright. Well, I certainly will credit the chairman
with being much more elderly than I am and have a fuller view
of history.
Mr. Jordan. Well, do you have any evidence that people were
denied their tax-exempt status and had to wait three years from
1959 through 2009? If you can produce that, produce it.
Mr. Cartwright. You know, that is a fundamental flaw of
this entire Oversight and Government Reform Committee and all
of its subcommittees, is that we constantly say, well, there is
no evidence that the President isn't a murderer, so therefore
we feel justified in suggesting----
Mr. Jordan. Mr. Chairman, I didn't bring up the year 1959,
the ranking member did. And I am saying that based on this
committee's investigation, we know the delays happened after
2009.
Mr. Cartwright. And do you have evidence that there were no
groups that had to wait two or three years, say, in the 1970s
or 1980s? Do you have evidence of that, Mr. Jordan?
Mr. Jordan. I don't.
Mr. Cartwright. So, therefore, it must have happened or it
must not have happened. Let's stop engaging in this there is no
evidence of as proof of the opposite.
Yield back.
Mr. DeSantis. The gentleman from Ohio, the chairman, is
recognized.
Mr. Jordan. I would just ask also enter into the record a
letter sent yesterday, excuse me, two days ago, from the
Treasury, Alastair Fitzpayne, Assistant Secretary for
Legislative Affairs, sent to the chairman of the Ways and Means
Committee, and would highlight on page 2, beginning in 2010,
2010, beginning in 2010, it doesn't say 1959 anywhere in this
letter. Beginning in 2010, this is from the Treasury, Treasury
and the IRS received requests from members of Congress and
others to consider engaging in rulemaking to clarify the rules
regarding social welfare organizations. Beginning in 2000, the
very first sentence in that portion of the letter, Mr.
Chairman. So I would ask that this be entered into the record.
Mr. DeSantis. Without objection.
Mr. Jordan. Thank you, Mr. Chairman.
Let me start with Mr. Rottman. Mr. Rottman, just, again, to
highlight how ridiculous this rule, as proposed, is, let's say
this October the ACLU wanted to sponsor a debate between Mr.
Cartwright and Mr. DeSantis on the Second Amendment, host that
event. Could you, in fact, do that?
Mr. Rottman. In October we could, but we would have to
count it against our permissible allotment of candidate-related
political activity. And if that, in the aggregate, was to go
over our permissible allotment, then our 501(c)(4) exempt
status would be jeopardized.
Mr. Jordan. Okay. Could you even, after the fact, let's say
a local college was hosting an event, you weren't. Could you
comment on the event after it took place? Could you send
someone there and comment on what Mr. DeSantis and Mr.
Cartwright had to say about the Second Amendment? Could you do
that?
Mr. Rottman. It would be the same issue.
Mr. Jordan. Counting against you.
Mr. Rottman. It would be counted against us, yes, even if
we didn't mention your name, actually, because the topic itself
could be at issue in the election, and that would qualify under
the rule as clearly identifying a candidate.
Mr. Jordan. Okay, what if you just wanted to host a
candidate, let's say for some reason Mr. Cartwright moved to
Florida and wanted to run against Mr. DeSantis. Could you
sponsor a debate against those two candidates this October,
short time before the election?
Mr. Rottman. Again, it would be counted.
Mr. Jordan. Yes. Okay. And that is the absurdity of it. I
think about, in Ohio, our primary election is in early May, and
on tax day, if a Tea Party organization wants to have me come
speak at their event, they would be in the same boat. Same kind
of thing. Again, just how ridiculous this rule is.
Let me go to Ms. Martin. This is something that bothers me,
too, the timing of things we now get from our Government, this
Administration. Are you familiar with Katherine Engelbrecht,
Ms. Martin?
Ms. Martin. Yes, sir.
Mr. Jordan. And Ms. Engelbrecht testified in front of this
committee a couple weeks ago, did an outstanding job. And what
we discovered in that hearing was that Ms. Engelbrecht, for 20
years her and her husband had ran a successful business. She
had never had any interaction with OSHA in that 20 years. She
had never had any interaction with the FBI in that 20 years.
She had never had any interaction with ATF in that 20 years.
And her only interaction with the IRS in that 20 years was
filing her annual return.
And then she starts to do the same thing you do, she
applies for tax-exempt status for her organization called True
the Vote, and suddenly her world changes. After she applies,
the FBI visited her six times. Not in the course of the
criminal investigation of the Justice Department, before that
started, but between when she applied and when the current
investigation started, the FBI visited her six times, two in
person, four on the phone. ATF showed up at her business; OSHA
showed up at her business; and the IRS audited both her
personal and business records.
And if you remember that hearing, the Democratic side said
that was just one big coincidence. Shazam, it just happened.
Now, you come to us today and you tell us comment for the
rule ends today. You are testifying today. You applied for tax-
exempt status three years ago, and suddenly, yesterday, you get
an email from the IRS saying, by golly, we finally got around
to you, right? We finally figured it out, you are now approved.
Ms. Martin. Exactly.
Mr. Jordan. One big coincidence again.
Ms. Martin. It is apparently pure coincidence and no
political motivation and no smidgeon of corruption.
Mr. Jordan. You know why I think it took so long for them
to approve you, and do you know why I think they went after Ms.
Engelbrecht, the full weight of the Federal Government came at
Ms. Engelbrecht? Why do you think it took them three years for
you?
Ms. Martin. I think that--I cannot answer what was going
through their mind. All I can do is say that looking----
Mr. Jordan. Hazard a guess why.
Ms. Martin. I think that they wanted me to be able to come
in here and, if I were asked did you receive your status
approval, I would have to testify yes.
Mr. Jordan. But I am asking about--I think you get
harassed. I think you received the treatment you did, I think
Ms. Engelbrecht received the treatment she did because you are
effective. Right? You are actually making a difference in the
political process, just like Katherine Engelbrecht was. And
they couldn't have that. No, we are going to have the full
weight of the Federal Government come down on you. We are going
to make you wait three years, which from 1959 to 2009 took
weeks or months.
Ms. Martin. That is correct. The time involved to do this,
no organization should have to go through this. When we should
have been able to talk about issues or Supreme Court hearings,
instead, I would be working all day long and literally go back
to a hotel room and spend another few hours dealing with
accountants and attorneys to make sure I complied. And the
questions they were asking me, regardless of the targeting,
which happened, regardless of the questions they were asking me
are the questions they will be asking every single person on
this panel, and the time and the money involved is enormous.
Mr. Jordan. I am a little over time, but if I could, Mr.
Chairman.
Mr. Mason, I just thought of this, because I remember when
this happened, I think it was the early 1990s, there was a
proposed change in law that would have essentially put home
schoolers out of business. Parents wouldn't have been able to
exercise that option. Because I remember hearing about it on
the radio and I remember my wife calling me up and saying, I am
on the phone and she is calling friends who also home schooled,
and they mobilized in a way that I think this place had
probably never seen before.
If this rule was in place, could you have had the same
impact that you were able to? And you won that debate; that law
was stopped, proposed law was stopped. If this rule is in
place, could you have that same kind of impact that you had
back in the 1990s?
Mr. Mason. It would be very doubtful because everything
that we did was contacting elected officials, and if--that was
H.R. 6, by the way----
Mr. Jordan. It was. What year was that? Refresh my memory,
Mr. Mason, what year was that?
Mr. Mason. Ninety-four. Yes, 1994. My organization at that
time wasn't real savvy in email and Internet, as probably most
of us were not, so a lot of it was done by real grassroots
effort, phone trees and just people contacting each other; you
get the word out and it gets spread. And a lot of it was
contact your member of Congress and oppose this. I believe we
shut down the congressional switchboard.
Mr. Jordan. Sure did.
Mr. Mason. If that had occurred, especially during
somebody's primary election, it would have counted against us
as candidate-related political activity.
And on that score I would like to address one point. Every
minute would have to be tracked by every employee of a social
welfare organization because you would have to be able to
determine what amount of time and overhead expenses were being
used for these candidate-related political activities. It is an
enormous amount of effort and paperwork, and when you add on to
that 50 States, all regulating political speech, all regulating
lobbying, all regulating charitable solicitations, the amount
of paperwork that an organization like ours has to do and the
amount of care we have to take to avoid getting in trouble is
enormous.
Mr. Jordan. Thank you, Mr. Mason.
Mr. Chairman, I yield back.
Mr. DeSantis. The chair recognizes the chairman of the full
committee, Mr. Issa.
Mr. Issa. Thank you, and thank you, Mr. Jordan. That was a
good line of questioning to help, I think, explain the
burdensome nature of this.
Mr. Rottman, you are not normally seen as a right wing
neanderthal Republican. Would that be a correct assessment?
Mr. Rottman. I think that is fair.
Mr. Issa. And the history of the ACLU is one of being as
independent and as willing to object to Congress's or the
Administration's actions, regardless of popularity, isn't that
true?
Mr. Rottman. Absolutely.
Mr. Issa. I am very proud of the ACLU. At some times my
current pride is not as great as my historic pride. I might
think back to the internment of American citizens in World War
II, and the ACLU bravely said it may be popular, but it is not
right.
The ACLU has always stood for a number of constitutional
amendments and support, and we always hear about the First
Amendment, but for a moment give me your answer on freedom of
association. And I will give you an environment. If I am a
homeowners association, I have 200 homes and everybody is
paying in to a homeowners association with after-tax money, and
that association is doing the usual good social work of
deciding whether or not we should have gates in our community,
or whatever the other items are, whether we are going to re-
slurry the road; and then there is a proposed power line coming
through our community and we say, well, we need to use a little
of our money, from which we got no tax deduction, and we need
to be able to meet and we need to be able to push against this
absurdity that will diminish our values of our home.
Is there really any difference between that freedom of
association and the basic freedom of association of Ms.
Martin's group that gets together and holds up copies of the
Constitution and says, God, we have to save our Country, we
have to explain to people that this is what our Founding
Fathers left to us as inalienable rights?
Mr. Rottman. Mr. Chairman, I think that brings up exactly
the concern with this proposed rule, and that is that it
doesn't deal with partisan political activity, it extends the
definition of partisan political activity to fundamentally
nonpartisan issue advocacy. And you are absolutely right, the
rights to freedom of speech and the corollary right to freedom
of association are essential when we are talking and debating
about the issues of the day, regardless of which side of the
political spectrum we land on. And that fundamentally, it would
be one thing if we were talking about partisan politicking.
This rule is not about partisan politicking, it is about
regulating fully protected issue advocacy by social welfare
groups.
Mr. Issa. Senator, you and I have a long history of looking
at these issues in minute detail. You have looked, undoubtedly,
at the question of what 527s can do and how they do it.
Essentially, isn't the biggest difference that if you are a
501(c)(4), like Ms. Martin--congratulations, by the way. After
only three years you are an overnight success. But when we look
at these things, aren't we really having a discussion about
what entity can advocate for or against an elected official and
what entity can do other things, but not advocate for or
against an elected official? Isn't that really what defines the
difference between a 527, of which there are many, and super
PACs and the like, and 501(c)(4)? In your opinion, after years
of looking at it.
Mr. Allard. Well, 501(c)(4)s are prohibited from
participating in partisan activity.
Mr. Issa. And, therefore, the intent of the Federal
Election Commission, something where Lois Lerner worked for a
period of time, is 527s, they get to look at; other groups that
advocate for or against, try to bring down somebody like you or
me or promote, by bringing us down, the person running against
us, that is an activity in which the FEC and Congress has
determined that there needs to be transparency as to donors,
right?
Mr. Allard. That is correct.
Mr. Issa. And when you get to issue advocacy, including
Organize for Action, President Obama's well connected
organization, it isn't just his picture on the cover, it is him
raising the money for it, they are prohibited from trying to
defeat me directly; they can simply turn out people who
disagree with my views, right?
Mr. Allard. That is correct.
Mr. Issa. So the President is well within his rights
because it is issues. Does anyone think that the attempt by the
IRS to organize the 501(c)(4) isn't essentially to bring it
within the FEC? All of you at the table, I would love to have
each of your responses, because, to me, that is what I see, is
I see these rules designed to say to, and I am going to call it
my homeowners association for a moment, although Ms. Martin's
new organization could follow in that too, they just basically
want to bring us under the Federal Election Commission as
though our organizations exist for purposes of electing or
defeating federal officers.
Right down the row.
Ms. Martin. Chairman Issa, after the 2012 election, and
because of the questions we were being asked by the IRS, we
actually did form a 527 super PAC, just so that, when we got
close to an election, we can mention a candidate's name. We
truly, truly have been living under these regulations for three
years, and now, today, we don't have to, and we may have to
again very soon.
Mr. Issa. Mr. Rottman?
Mr. Rottman. I am not sure. I think that the regulations,
they go even further than that, right?
Mr. Issa. You mean they are worse than I----
Mr. Rottman. What they do is they conflate fundamentally
nonpolitical issue advocacy with partisan politicking, and they
make that the definition of candidate-related political
activity. So I am not sure that it is an administrative
question; I think it is fundamentally erring on the side of
suppressing speech in order to get at absolutely anything that
could be problematic, as opposed to erring on the side of
caution and erring on the side of free speech.
Mr. Issa. So similar to putting in Federal agents in
broadcast studios to see whether the new reporting rose to
political activity, maybe.
Mr. Rottman. Actually, we came the opposite way on that,
but----
Mr. Issa. You thought it was okay to go in there and see if
they were being fair and balanced at MSNBC?
Mr. Rottman. We didn't feel that it was coercive, what the
SEC was doing, and, therefore, if it is not coercive, then
there is no First Amendment issue.
Mr. Issa. Yes. No, a Federal agent sitting in my office
never intimidated me.
Senator?
Mr. Allard. We are basically a social organization----
Mr. Issa. That advocates for helmet laws.
Mr. Allard. And safe driving and responsible behavior,
whether it is on public lands or----
Mr. Issa. But that leads to legislation, rulemaking, and so
on.
Mr. Allard. That is correct.
Mr. Issa. So you would fall right in the trap of they want
to call you political because you would like to make sure that
dirt bikers have access to dirt.
Mr. Allard. We are prohibited by Federal law from being
active in partisan politics.
Mr. Issa. But this rule would sweep you into calling
partisan politics just trying to make sure that dirt bikers
have dirt.
Mr. Allard. That is correct.
Mr. Issa. Ms. Aviv?
Ms. Aviv. Mr. Chairman, we are focused on (c)(3) and (c)(4)
organizations, and we see 501(c)(4) social welfare
organizations as different than 527s, since their primary
purpose is supposed to be a social benefit purpose, but can
engage in some partisan political activity. Our concern with
this rule is what has been expressed by I think everybody on
this panel, which is that it goes too far and it doesn't
address the problems that have been talked about in the media
and by this committee and others in the last number of months,
which is to define what political activity is, to limit the
scope of what IRS agents have by way of personal opinions or
judgment calls because there are clear criteria of what
political activity includes, and not to include longstanding
activities that are part and parcel of the American fabric that
(c)(3) organizations can do and (c)(4) organizations have long
been doing.
Mr. Issa. Thank you.
Mr. Mason?
Mr. Mason. Thank you, Congressman. I think that it may be a
little different than what you think, and it is probably worse.
In the Federal Election Campaign Act, all of these kinds of
regulations have a long history, it is well litigated, there is
a very precise distinction between issue advocacy and expressed
advocacy. That has been frustrating to those who think that
more speech should be regulated because, under the FEC case
law, less speech is regulated. So now it is not that it is
bringing speech into the FEC, it is taking that speech and
putting it into the regulatory authority of the IRS. So instead
of having a complaint made with the FEC, you get an IRS agent
in to decide whether you are engaging in issue advocacy or
expressed advocacy, and I think that is just enormously wrong-
headed.
Mr. Issa. Thank you.
Mr. Dickerson?
Mr. Dickerson. Well, chairman, I appreciate the suggestion.
My organization, a very few days after the comment period was
opened, filed a comment suggesting that if what we are really
concerned about here is specificity and clarity, what we should
do is just say political activity is that which the FEC
considers political activity. You have to file a report if you
do an independent expenditure. That has been fully legally
vetted up to the Supreme Court of the United States; there is a
dollar number on it. That is your candidate-related political
activity. If you import those regulations in, you don't have
any of these constitutional problems, you have a clear dollar
value that can be applied against your overall budget. We think
it is a very elegant solution and I would suggest those draft
regulations.
Mr. Issa. Thank you.
Mr. Chairman, I appreciate the indulgence in time and I
think the point was well made that what Ms. Lerner and others
at the FEC have tried to expand the FEC, but even if you expand
the FEC, much of exactly what this rule would capture would be
outside their jurisdiction, outside the speech that they have
any influence in; and I think that is the reason that, from the
President on down, those who objected to Citizens United and
wagged his finger at the U.S. Supreme Court in the well of the
House are trying to get a back door of something that even
Congress never legislated in the post-Nixon era with the
Federal Election Commission. So I certainly think this has been
a fruitful discovery. I am just sorry for the ranking member
that he has been so wrong in this hearing. I yield back.
Mr. DeSantis. The chairman yields back and we will
recognize the ranking member for five minutes.
Mr. Cartwright. If the chairman hadn't said that, I would
have had to check and make sure I was in the right hearing
room.
Mr. Issa. You are in the right hearing room.
Mr. Cartwright. Ladies and gentlemen, I am a freshman here
in Congress, I am not afflicted with the decades inside the
Beltway that many of my brothers and sisters are afflicted
with, and what I have come here to Washington to do is to try
to seek consensus, try to look for the ways that we can come
together on issues in Washington, D.C. that affect the entire
Nation. Believe it or not, although it doesn't sell newspapers,
we do agree on a great many things here in the Congress, and I
am looking to expand those areas.
And I think that this hearing is so important because what
we are struggling with here is how to solve this problem. You
know, when you leave things undefined, when you leave things
vague and ambiguous, that is when these fistfights break out;
that is when, if you have left undefined what political
activity is prohibited by this 501(c)(4) and then the IRS, they
are at their wit's end trying to make the definition, well,
then, if they decide to go one way or the other, one end of the
political spectrum ends up being creased and raising the alarm
and screaming bloody murder, and that is what we have been
hearing for the last year and a half.
But it is not a new problem, it is something that Americans
have understood. That ambiguity, that uncertainty, that
vagueness has existed since 1959. Commentators have mentioned
it through the 1970s and through the 1990s and through the
2000s, and it behooves us to come together and talk about these
things. And we have talked about this. There is this tension
where, on the one hand, we have the First Amendment rights to
engage in political activity and free speech, and on the other
hand we have this concern that there is going to be dark money,
there is going to be undisclosed money financing elections, and
we don't know who is behind the money that got this or that
candidate elected.
I know all of you see that tension and you understand it,
and, Ms. Martin, I want to congratulate you not only on getting
your 501(c)(4), but also on getting your 527. As we know, here
in the United States 527 organizations can engage in political
activity, and they do disclose their donors. And that is a
very, very important point not to be missed, that disclosing
your donors is required in 527 organizations.
I am here to say protecting dark money has to stop.
Chairman Issa was here saying, well, the Democrats do that too,
and that is well and good, and I think it has to stop on both
sides. This is not just about finger-pointing between Democrats
and Republicans, it is about making our Nation better, making
our democracy better. We are the shining light, we are the
beacon for the world on how democracy is supposed to work.
Let's make it work better.
And what I want to do is I want to run down the panel
quickly, because I want to get a good sense from you. And we
have heard great comments from all of you, including Senator
Allard, Ms. Aviv, Mr. Dickerson, all of you. But I want to get
a sense. Raise your hand if you think--I am going to ask it two
ways. Do you think we should absolutely not have more specific
rules on how 501(c)(4)s are allowed to engage in political
activity? Should we just not have more specificity and clearing
up the ambiguities or should we just eliminate all control?
How many of you, raise your hand if you think we ought to
have better, more specific rules. Okay, seeing three hands out
of six.
And raise your hand if you think we ought to just have no
control over what the 501(c)(4)s can do in terms of political
activity. Okay, I am seeing no hands.
So I think we are in agreement that there has to be control
over the dark money, and I thank you for appearing here today
and making that clear.
Mr. DeSantis. Would the gentleman yield for a question?
Mr. Cartwright. I yield for a question.
Mr. DeSantis. With dark money, so would you have dissented
in the NAACP vs. Alabama case, where the Supreme Court struck
down Alabama's forced disclosure of donors to groups like the
NAACP, who were unquestionably engaged in public issues, not
simply that we would define, but of the utmost seriousness and
importance, and that ability to conduct anonymous speech was
critical not only in terms of martialing resources in the
African-American community. Imagine if you were a white
individual who had sympathy. To be able to stay anonymous
allowed you to probably help more than maybe you just didn't
have the courage to come out and do it on your own. So would
you have wanted to uphold that Alabama statute in order to
force the disclosure in that situation?
Mr. Cartwright. No, I think not, and I think that is a
great question, Ron. I am glad you asked it. It is something
that has to go into the mix. We have to strike the right
balance, because on the one hand we have to protect the people
in Alabama who, at that time, were doing whatever they could
think of to rebel against the oppressive conditions and the
violent atmosphere and climate there, but, on the other hand,--
--
Mr. Jordan. Would the gentleman yield?
Mr. Cartwright.--you don't want to give a blank check to
dark money, and I think we all agree on that, as the panel
does.
I yield back.
Mr. DeSantis. Thanks for answering the question.
The chair now is going to recognize Mr. Meadows from North
Carolina for five minutes.
Mr. Meadows. Thank you, Mr. Chairman. I will be very brief.
I want to apologize to each of you; I had a markup. We have
been following this, our staff has been following it, so I had
a markup to go. But I would encourage the gentleman from
Pennsylvania to quit using dark money. Since when is free
speech dark money? And I am tired of us. It is like nails on a
chalkboard when I hear that, because when we really look at it,
it is not dark money, it is moms and dads giving money that,
quite frankly, they don't have, because they believe in this
Country. And we need to make sure that we do that.
So that I am not redundant in the questions that may have
already been asked, I am going to yield the balance of my time
to the gentleman from Ohio, Mr. Jordan.
Mr. Jordan. Thank you, and I appreciate the gentleman
yielding, and a great point. Was it dark money that funded the
Federalist papers? I mean, this is ridiculous. And what the
gentleman suggests is it is okay for some people not to
disclose, but other groups need to disclose, and we are going
to let the IRS decide which ones those are. That is the
gentleman's premise. That is the scariest thing in the world.
Mr. Cartwright. Would the gentleman yield for a question?
Mr. Jordan. Yes. You have had more time than any other
member on the committee, but yes, go ahead.
Mr. Cartwright. Well, we are not talking about letting the
IRS decide anything. In fact, it is very much the opposite.
Mr. Jordan. That is what this rule is about. Why do you
think we have six witnesses, including the Democrat-requested
witness, Ms. Aviv, who said this rule is wrong?
Mr. Cartwright. Just let me finish the sentence. What we
are talking about is crafting a rule that takes away unfettered
discretion from the IRS so that they have bright lines to
follow, and then we don't get into these fistfights. That is
all my point is.
Mr. Jordan. And I am sure we are all confident that will
actually take place if they move in that direction.
Mr. DeSantis. Would you yield just for one second?
Mr. Jordan. I would be happy to. It is amazing, I am
actually the chairman of this committee and I have to yield?
[Laughter.]
Mr. DeSantis. Well, bright-line rules are great, but I like
Amendment 1, U.S. Constitution bright-line, Congress shall make
no law----
Mr. Jordan. Well said. Thank you, Mr. Chairman.
I would ask to enter into the record a piece that Mr.
Dickerson probably think is well written as well. Bradley
Smith, a guy that Mr. Dickerson and I both know, has an
outstanding piece in today's Wall Street Journal, and I am
actually going to read from this, which I normally don't do
when it is my time to ask questions and during my five minutes.
But this is important because this gets at why it started now,
why it wasn't 1959, why it was now. And Mr. Smith's point is
the smoking gun in the targeting of conservative groups has
been hiding in plain sight, it has been members of Congress who
have asked the IRS, who have pushed the IRS to do exactly what
they did, harass people like Jenny Beth Martin and her
organization for three years.
And I am just going to read the bullet points that Mr.
Smith so nicely put in his piece.
January 27th, 2010, not 1959, January 27, 2010, President
Obama criticizes Citizen United in the State of the Union
address and asked Congress to correct the decision.
February 11th, 2010, Senator Chuck Schumer says he will
introduce legislation known as the Disclose Act to place new
restrictions on some political activity by corporations and
force more public disclosure of contributions to 501(c)(4)
organizations. Mr. Schumer says the bill is intended to
``embarrass companies.'' Not a Republican saying that, Senator
Chuck Schumer saying that, embarrass companies out of
exercising their rights in recognizing Citizens United.
Soon after, March 2010, Mr. Obama publicly criticizes
conservative 501(c)(4) organizations engaging in politics. In
his August 21 radio address, he warns Americans about shadowy
groups with harmless sounding names.
Mr. Mason, are you a shadowy group?
Mr. Mason. I don't believe so, but I might have to check
with my colleague.
Mr. Jordan. Senator Allard, is the Motorcyclists
Association a shadowy group?
Mr. Allard. Certainly not.
Mr. Jordan. I mean, this is amazing.
September 28, 2010, Mr. Obama publicly accuses conservative
organizations posing as not-for-profit social welfare and trade
groups.
Mr. Mason, are you just a poser? Are you just posing or are
you a real social welfare group?
Mr. Mason. We have been a real social welfare group for
decades, doing the same business for many, many years.
Mr. Jordan. Helping lots of families, thousands and
thousands of families across the Country.
October 11, 2010, Senator Dick Durbin asks the IRS to
investigate. Dick Durbin, Democrat from Illinois, I should have
added that, asks the IRS to investigate Crossroads GPS and
other organizations.
April 2011, White House officials confirm that Mr. Obama is
considering an executive order that would require all
Government contributors to disclose their donations to
politically active organizations.
February 16th, 2012, seven Democratic Senators, Michael
Bennett, Al Franken, Jeff Merkley, Mr. Schumer, Senator
Shaheen, Senator Udall, Senator Whitehouse, write to the IRS
asking for them to investigate conservative 501(c)(4)
organizations. That is why they couldn't approve you. Democrat
Senators said no, don't keep investigating. That is why you had
to wait three years. That is why you get approved the day
before the comment period is up.
March 12th, 2012, the same seven Democrats write another
letter asking for more investigation of other conservative
groups.
July 27th, 2012, Senator Carl Levin writes one of several
letters to then-IRS Commissioner Doug Schulman seeking a probe
of nine conservative groups.
August 31st, 2012, in another letter Senator Levin calls it
is fair to investigate and prosecute targeted organizations
unacceptable. What? Senator Levin says the IRS was failing to
target and investigate organizations. You waited three years.
What Senator Levin didn't know was the very thing he had been
asking for was going on.
December 14th, 2012, ProPublica receives Crossroads GPS's
2010 application for tax-exempt status.
April 9th, 2013, Senator Whitehouse convenes the Judiciary
Committee on crime and terror to examine nonprofits. He alleges
that nonprofits are violating Federal law by making false
statements about the activities of donors using shell companies
to PACs to hide donor identities.
May 10th, 2013, Senator Levin announces the permanent
Subcommittee on Investigation will hold hearings on ``the IRS's
failure to enforce the law.''
November 29th, February--I mean, it just continues. I will
stop because I had two more bullet points, which shows how
extensive this was. All, again, happening not in 1959, but
starting January 27th, 2010.
Mr. Chairman, again I ask for unanimous consent to enter
this fine piece by Mr. Smith into the record.
Mr. DeSantis. Without objection, it shall be entered into
the record.
Mr. Jordan. And I yield back all that remaining time.
Mr. DeSantis. Oh, yes. Thank you.
At this point, the chair will recognize the gentleman from
Virginia.
Mr. Connolly. I thank the chair.
By the way, Ms. Martin, does your organization have its
tax-exempt status?
Ms. Martin. As I said in my opening statement, just
yesterday, after three years, two months, and 10 days, and the
day before this hearing, we got a call from the IRS saying we
would be granted it. We still don't have the letter.
Mr. Connolly. Okay. So whatever that attempt to silence you
was seems to have failed, is that right?
Ms. Martin. I am sorry, what?
Mr. Connolly. You were indicating in your testimony that I
was at earlier that there was some conspiracy to silence your
voice.
Ms. Martin. I didn't say there was a conspiracy to silence
my voice, I said there was a silencing effect with the way that
we were treated.
Mr. Connolly. Ah. Okay.
Ms. Martin. And there will be a silencing effect of any
organization who has to do this, especially when they have to
find out how volunteers spend their time, what they say, and
what they do. At which point do you determine whether a
volunteer is still affiliated with your organization or acting
as an independent and free American?
Mr. Connolly. Thank you.
As somebody who was very involved, before your time, in
anti-war protests and expressing dissent during the Vietnam War
era, I am very sensitive to the idea that the Government would
ever attempt to silence voices, even dissenting voices. So even
though we probably have very little in common politically, one
thing we do have in common is the absolute commitment to making
sure all voices are protected in the United States of America.
I am not persuaded that there is any active attempt to squelch
your voice, but should there be I assure you Democrats,
certainly this Democrat, will be on your side.
Mr. Rottman, I heard your testimony too, and, forgive me, I
had to leave; I had a markup that just ended in the House
Foreign Affairs Committee, otherwise I would have been here for
all of your testimony. But isn't the issue here about in terms
of who has what tax-exempt status and what the rules are,
doesn't it really boil down to whether or not we want to
disclose who our donors are?
For example, you were complaining about whose name could be
invoked and who you might use. But isn't that really about
whether you wish to disclose your donors or not? I mean, don't
we have an awful lot of tax-exempt organizations that have
filed who consciously want to make sure that they can protect
the anonymity of who funds them?
Mr. Rottman. I would say two things. I would say, first of
all, that this debate may flow from the concern over the lack
of disclosure of donors to groups that are engaged in partisan
political activity. But the proposed rule at the IRS goes far
beyond that and it covers a vast amount of legitimate issue
advocacy that has nothing to do with partisan politicking. That
is the concern.
Mr. Connolly. So it overreaches, you are saying.
Mr. Rottman. It overreaches and it also would do very
little to tamp down on the phenomena that caused it to be
proposed.
Mr. Connolly. Well, let me ask you another question. As I
said to Ms. Martin, I am a child of the 1960s and 1970s and was
very involved in dissent; a different kind of dissent, but
dissent. And I did see the Government try to squelch that
dissent. I saw the Government infiltrate organizations that
were simply trying to express their point of view about a
terrible war. So it does happen and we have to be always on our
guard to make sure it doesn't happen ever again.
But I am also an English Lit major, and I always wondered
whether that would come in handy here in Congress. And to an
English Lit major words mean something. So let me try out on
you, Mr. Rottman. I am reading Section 501(c)(4) of the
Internal Revenue Code, and it says, civil leagues organizations
not organized for profit, but operated exclusively for the
promotion of social welfare.
What does the adverb exclusively mean to you? I mean, here
is a simple Wikipedia definition: to the exclusion of others;
only or solely. Not 60 percent. When I say to my wife, ours is
an exclusive relationship, it doesn't mean 60 percent; the
other 40 percent I am free to sort of roam. It is exclusively a
relationship.
Primarily means for the most part or mainly. And what I
find in this debate is we have sort of lost track of what the
English language means. Exclusively does not mean mostly.
Mr. Rottman. Congressman, can I just jump in?
Mr. Connolly. Yes, of course. Please.
Mr. Rottman. Well, you are absolutely right that the
statute says exclusively and the regulations say primary
purpose. The definition of political intervention, for 60
years, has been limited as closely as possible to partisan
politicking. This rule has very little to do with partisan
politicking. It would allow the same type of activity that is
ongoing right now, but at the same time it would cover a vast
amount of nonpartisan issue advocacy, and that is the concern
that you are hearing from both the right and the left.
Mr. Connolly. I wish I had a little more time. I would just
say this is something we have to clear up either in the law or
with regulations, but exclusively doesn't mean for the most
part. That is not what the word, the adverb means. You can look
it up in any dictionary. Primarily does mean that.
Mr. Rottman. We don't disagree. In fact, we have supported
an expressed bright-line that would make it very clear, and
easy to apply by the IRS, between partisan political activity
and legitimate issue advocacy, and that bright line would end
the need for hearings like this and the current controversy.
Mr. Connolly. And just a final point I would say, Mr.
Rottman, because I think you make a good point, but remember it
is not just partisanship that is the issue, it is political. It
is political involvement. And when you say I am exclusively a
social welfare organization, but what you really mean is I am
actually, for the most part, a political organization, that is
a different matter. And I think we have to get these
definitions right, and I think some legislative relief, I
think, is frankly going to be in order.
Mr. Rottman. I agree completely, but I would say, though,
that partisan politicking aside, if you are engaged in
political activity like anti-war protests, you have a right to
do that anonymously, and that right should be protected
strenuously.
Mr. DeSantis. The gentleman's time has expired.
Mr. Connolly. I thank the chair.
Mr. Jordan. Mr. Chair?
Mr. DeSantis. The chairman is recognized.
Mr. Jordan. Just real quickly.
Mr. Mason, does Home School Legal Defense engage in
exclusive activity to better home schooling for the families
you represent?
Mr. Mason. We have other things that we do as well.
Mr. Jordan. But it is all about home schooling.
Mr. Mason. Yes.
Mr. Jordan. And, Mr. Allard, does the Motorcyclists
Association, are you exclusively focused on better roads,
better helmet laws because you care about exclusively doing
things for the motorcyclists who are part of your organization?
Mr. Allard. That is correct. We are a motorcyclist
organization.
Mr. Jordan. And, Ms. Martin, I bet your organization is
exclusively about defending the United States constitution and
the principles that you think make America great, is that
correct?
Ms. Martin. Yes, sir.
Mr. Jordan. Yes. So we are fine, exclusive is the right
word. We are all fine. But this new rule would say, uh-uh, now
you have big problems, now you have big problems, because it
tries to define what political--that is, again, why this thing
is so absurd and why everyone across the political--as I said
before, from the Tea Party to the ACLU, from the home schoolers
to the Harley riders, everyone knows this rule is bad. Everyone
knows it except this Administration. Everyone except this
Administration. And this is why this hearing was important and
why we had such a great panel.
I yield back, Mr. Chairman.
Mr. DeSantis. Well, thanks for that. And I really
appreciate the witnesses coming. I think you all did a
wonderful job, and I think clearly this rule cannot stand; it
is way over-broad, it will chill core First Amendment speech.
And I know we are going to be moving legislation through
Congress; hopefully the Senate will agree.
But at the end of the day we need to be able to speak,
people need to be able to pool their resources. And the thing
that amazes me is you chill these 501(c)(4)s from getting
involved in different issues. Guess what? That actually gives
more power to people who are very wealthy, who can just stroke
an individual check on their own. So you are not making it more
democratic, you are making it more difficult to speak.
This committee stands adjourned.
[Whereupon, at 11:37 a.m., the subcommittee was
adjourned.]
APPENDIX
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