In the recent press release announcing his retirement, Senator Carl Levin announced that he will use his last two years running the Permanent Subcommittee on Investigations (“PSI”) to “encourage” the IRS to provide aggressive oversight of tax-exempt groups that are primarily engaged in politics. The prospect of hearings could potentially expose the inner workings of 501(c)(4) organizations that presently enjoy significant protection under IRS rules and force the IRS to provide a less nebulous standard as to the limits on political activity by such organizations.
In his March 7 statement, Senator Levin said:
“Our tax laws are supposed to prevent secret contributions to tax exempt organizations for political purposes. My Permanent Subcommittee on Investigations needs to look into the failure of the IRS to enforce our tax laws and stem the flood of hundreds of millions of secret dollars flowing into our elections, eroding public confidence in our democracy.”
Many of the organizations he has in mind are tax exempt under section 501(c)(4) of the tax code. These organizations do not have to disclose the names of their donors. On the flip side, their primary purpose must be promoting the public welfare, which, under IRS regulations, does not include supporting or opposing candidates. This is not to say they cannot engage in electoral advocacy, just that there are (poorly defined) limits on their political activity.
Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington, applauded Levin’s efforts and called on him to go further: “He could issue subpoenas and find out who’s supporting these groups. I think he should subpoena all the (c)(4) groups that were active in the last election cycle.”
Sloan’s request for subpoenas is troubling, because it could expose the identity of donors who reasonably expected anonymity and subject the organizations to scrutiny for following the tax laws as they have long been applied.
Yet, as Chairman of PSI, Levin has broad authority to issue subpoenas as he sees fit (with only de minimus restrictions). In fact, the PSI rules enable Levin to unilaterally issue subpoenas as long as he provides notice to the Ranking Minority Member of PSI and the Chairman and Ranking Member of the full Homeland Security and Governmental Affairs Committee.
Being called on the carpet by Senator Levin is never a pleasant experience for his witnesses. Here’s one good example:
PSI routinely holds full-day, four panel hearings and issues staff reports that are hundreds of pages long and include damaging emails and documents. Such information is often utilized by Federal prosecutors and plaintiff’s counsel. In short, the stakes have been raised for organizations that became a significant force in the 2012 elections.
Ray Shepherd, chair of Venable’s congressional investigations practice, previously served as staff director and chief counsel for PSI.