Senate Votes to Overturn IRS Donor Privacy Rule

Yesterday, the Senate voted to overturn new IRS rules which are meant to protect certain tax-exempt organizations that do not have 501(c)(3) status from the requirement to report the names and addresses of their contributors who donate more than $5,000 in a given year.

The new rule, which was proposed in July, was the result of an extra administrative step the IRS was not required to take. Prior to the rule, it was required that donor information be kept confidential; and by law, it had to be redacted from nonprofit tax returns before they were made public. Therefore, the IRS decided to take the simple step to not require the information, since it does not need the information and by law, it did not have to collect or require it from the organizations in the first place.

The IRS gave several additional justifications:

But the agency said collecting it risked “inadvertent disclosure” and not having it at all would prevent that. . . . The IRS said even under the new rules, organizations needed to save their donor information and the tax agency said it could still ask to see it during an audit or investigation.

Senate Republicans stressed that these types of requirements threaten an individual's privacy and violate the First Amendment. Senate Majority Leader Mitch McConnell said:

The Treasury Department has said the IRS simply does not need tax returns with donor names and addresses to do its job in this area. . . . In a climate that is increasingly hostile to certain kinds of political expression and open debate, the last thing Washington needs to do is to chill the exercise of free speech and add to the sense of intimidation.

Senator Orrin Hatch, Utah Republican, is confident that the Democrats' efforts will cease in the House and said this about the inadvertent disclosures of donor information by the IRS:

Mr. Hatch said those kinds of disclosures have happened at least 14 times this decade alone. He called that a “direct threat to First Amendment rights.

Senator Jon Tester, Montana Democrat who introduced the resolution, has touted that the resolution is about transparency and ensuring that foreign governments are not interfering with elections through donations.  Yet the donor information at issue is not publicly disclosed.

This is potentially the first of which will be many attempts by the Democrats to tighten campaign finance rules and restrictions during the upcoming Congress, which is evident by Rep. Nancy Pelosi’s announcement that:

[T]he top priority for her chamber will be a package of measures aimed at restoring the Voting Rights Act, forcing disclosure of the president’s tax returns, public financing of campaigns and more extensive disclosure of donors.

This is yet another attempt by the Democrats to target organizations with conservative ideologies. Citizens have the right to keep private what non-political organizations they support through monetary contributions, but disclosure of that information to the IRS clearly threatens donor privacy despite the laws protecting it.