It seems the IRS controversy has spilled into the states. Late last week Governor Rick Perry vetoed legislation
 that would have required the disclosure of high-level donors by many politically active organizations, including those exempt under Section 501(c)(4) of the Internal
TexasRevenue Code. After a Republican legislature passed the bill, there was a fevered
internet grassroots campaign urging him to veto it. Ultimately, Governor Perry rejected the bill, citing the recent IRS controversy as one of his reasons.

In reality, the two seem to have very little to do with one another – state disclosure obligations and federal income tax status involve different bureaucracies, different tests, and different legal interests. But, perhaps the fear of bureaucratic meddling into core First Amendment activities and the disclosure and harassment of donors could be a sign of a more hands-off approach to politics.

The veto bucks the recent the trend of state legislatures imposing new disclosure requirements on tax-exempt organizations that engage in political activities. The bill would have required persons or organizations (excluding labor organizations) that make political expenditures (e.g.,
independent expenditures) exceeding $25,000 during the calendar to disclose donors who contribute over $1,000 and file regular reports. Current law requires these organizations to disclose only their political expenditures over $100. 

It remains to be seen whether other states will feel similar legislative effects of the IRS controversy, or whether donor-disclosure laws will continue to be the new norm.

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Photo of Ronald M. Jacobs Ronald M. Jacobs

Ron Jacobs focuses his practice on political law, nonprofit organizations, and crisis management, including congressional investigations, class actions, and regulatory investigations. Ron founded and co-chairs the firm’s nationally recognized Political Law practice. He advises clients on all aspects of state and federal political…

Ron Jacobs focuses his practice on political law, nonprofit organizations, and crisis management, including congressional investigations, class actions, and regulatory investigations. Ron founded and co-chairs the firm’s nationally recognized Political Law practice. He advises clients on all aspects of state and federal political law, including campaign finance, lobbying disclosure, gift and ethics rules, pay-to-play laws, and tax implications of political activities.

Photo of Lawrence H. Norton Lawrence H. Norton

Larry Norton, a former general counsel of the Federal Election Commission (FEC), advises clients on federal and state campaign finance laws, lobbying disclosure, gift and ethics rules, pay-to-play laws, and the tax implications of political activities. His clients include corporations and their PACs…

Larry Norton, a former general counsel of the Federal Election Commission (FEC), advises clients on federal and state campaign finance laws, lobbying disclosure, gift and ethics rules, pay-to-play laws, and the tax implications of political activities. His clients include corporations and their PACs, advocacy groups and trade associations, candidates, super PACs, lobbying shops and law firms, and high-net-worth individuals. Larry recognizes the unique issues facing organizations seeking to influence public policy and elections. He provides pragmatic and creative solutions to complex problems, troubleshoots new projects and programs, and helps clients manage their legal and reputational risks.