Greg Colvin, the Chair of the Bright Lines Project Drafting Committee, has replied to this posting that raised questions about the Project’s proposed revision of the standards for determining tax-exempt political intervention. Colvin concentrates his defense on the retention of a role, which he describes as limited, of the indefinite, poorly understood and variously applied “facts and circumstances” test. Under the Project’s re-definition, he writes, the test is reserved for use on a “limited basis” in a “small number of cases” and is necessary to address “unforeseen situations,” outside the bright lines, that trigger First Amendment concerns. He provides a crisp summary of the Project proposal and argues that, all in all and with a place for “facts and circumstances,” it “would correct the serious absence of neutral, objective criteria…that led to instances of ideological bias in the IRS review of tax-exempt applications.”

Colvin is right that no proposed reform will attain perfection and that as an exercise in rational rule-making, the Project alternative would be superior to the existing legal framework (such as it is). Where the Project enterprise falters, however, is in its optimism that the IRS can manage to any degree of public acceptance or internal consistency the test that it proposes. For any agency, this work would be a challenge; for the IRS, the challenge may be insurmountable. And it is no more reassuring that the Project hopes that Congress may “incorporate the best ideas” for reform and validate, by way of attempting to improve, the IRS’s role in monitoring political activity.

The problem does not lie entirely at the doorstep of the authority to examine “facts and circumstances” that the IRS would retain under the proposal. The “general speech rule” commits the IRS to make judgments that it is far from clear that the IRS is equipped to make—or that it should be asked to make. The “safe harbor” for speech intended to influence official action rests on the IRS’s capacity for distinguishing campaign from issue advocacy. It would have to analyze “facts and arguments” to ascertain whether they “pertain to the specific action that the organization is attempting to influence.” The Bright Lines Project: Clarifying IRS Rules on Political Intervention (Interim Draft, May 23, 2013) at 15. It would be required to pass on the “logical and visible connection” between a communication’s portrayal of the public official and its authors’ professed goal of simply attempting to influence the course of public policy. Id. It is hard to see that the IRS can administer these tests while persuading critics that it is staying out of politics. In fact, some might argue that in the implementation of these standards, it cannot stay out of politics.

The confidence that Greg Colvin expresses about the limited role of “facts and circumstances” is open to question. He argues that the proposal will reduce the IRS’s review of “facts and circumstances” to perhaps 10% of its cases. Of course, within that 10% may be found the cases that are the most controversial or the most “political”; it seems a fair possibility, if it is in the defense of adverse IRS determinations, at the initiative of the tax-exempt, that “facts and circumstances” will work their way back into the review process. One might also worry that as the campaign finance law continues to churn, the 10% estimate might be an overly modest assessment of the pressures building on the tax laws as more entities turn to 501(c) organizational alternatives.

Colvin suggests constructively that these concerns might be met by limiting “facts and circumstances” reviews to audit and ruling functions, keeping them out of the review of applications for exemption. It is unclear that this procedural adjustment disposes successfully of the larger problem.

That larger problem is a reform, whether left to Congress or to the IRS, or achieved through some collaboration of the two, that requires the tax authorities to examine the programs and activities of tax-exempts for evidence of political intent.

Category: Outside Groups

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