I.R.S. delays rules on taxation for activists

Nicholas Confessore

The Internal Revenue Service said Thursday that it has delayed and is revamping new rules intended to curb political activity by tax-exempt groups and that were proposed after the agency was accused last year of targeting Tea Party groups.

The I.R.S. said it made the decision after receiving 150,000 comments — both positive and negative — about the proposal, the biggest public response to any proposed rule in its history. The decision postpones public hearings originally expected for this summer.

The proposal is intended to clarify how the I.R.S. defines political activity and how much nonprofit groups are allowed to spend on it. Nonprofit groups ranging from Americans for Prosperity, a free-market grass-roots organization co-founded by the billionaires Charles and , to the League of Conservation Voters, an environmental organization that chiefly supports Democrats, are expected to spend hundreds of millions of dollars in the battle for control of Congress in November. The delay announced Thursday means the new rules will not be in place before Election Day.

"Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation," said Bruce Friedland, an I.R.S. spokesman.

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I.R.S. officials have declined to specify when they expect to issue a final rule. In April, the commissioner, John Koskinen, said at a news conference that it was unlikely that the agency would complete the process by the end of 2014.

The original proposal took aim not just at the multimillion-dollar television advertising campaigns mounted by nonprofit groups in recent election years, but also nonpartisan activity like voter registration drives.

Republicans, who have been the chief beneficiaries of nonprofit groups' spending, have attacked the proposal as an Obama administration effort to squelch the Tea Party and other conservative allies.

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But the scope of the draft rules also alarmed some liberals and watchdog groups favoring a broader crackdown on nonprofit groups' political spending. They sought revisions that would focus on what they considered abuses of tax exemptions by openly partisan organizations seeking to hide the source of their funding. Some liberals also argued that the I.R.S. should broaden the proposal to include more types of tax-exempt groups, like trade associations, that spend heavily on elections but are not required to disclose their donors.

"We're pleased that the I.R.S. is committed to clarifying the rules for candidate-related political activity by social welfare organizations," said Miles Rapoport, the president of Common Cause, which backs tighter restrictions on political spending.

Republicans have opposed the agency's new rules from the beginning, and some of the party's senior lawmakers praised the agency for backing down.

"Today's decision is a long overdue step in the right direction," Senator Orrin Hatch, Republican of Utah, said in a statement. He said the proposed rules, as they now stood, "threatened free speech and the rights of all American citizens to participate in the democratic process."

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Government watchdog groups have filed a series of complaints that nonprofit groups affiliated with the two major parties have exploited current rules to carry out thinly veiled political advertising campaigns. Some lawmakers, chiefly Democrats, have echoed those complaints, and said on Thursday they worried that Republican opposition and the outcry from some conservative and liberal groups would derail the entire effort.

"This delay is deeply disappointing and a real setback for democracy and faith in government," said Senator Charles E. Schumer, Democrat of New York.

— By Nicholas Confessore, The New York Times