In 2018, the Treasury Department changed its regulations to exempt tax-exempt organizations described by section 501(c), other than section 501(c)(3) organizations, from the requirement that they report the names and addresses of their contributors on the Schedule B of their Forms 990 or 990-EZ. See Treasury Eliminates Donor Information Disclosures by 501(c)(4) and 501(c)(6) Organizations. On July 11, 2019, U.S. Senators Bob Casey (D-PA) and Ron Wyden (D-OR), both members of the Senate Finance Committee, wrote a letter Thursday to IRS Commissioner Charles Rettig questioning the change and the resulting weakening of the ability of IRS investigators to uncover illegal and criminal activity.
The change in this disclosure requirement seems to limit the tools available to investigators attempting to uncover illegal activity which can span from tax fraud, to illegal political contributions from foreign entities, to terrorist financing.
The letter also noted that the IRS Criminal Investigation division (“CI”), whose mission is to serve the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes, was not consulted prior to the revocation of the donor disclosure requirement. The problem, as stated in the letter:
A core function of the IRS is to investigate potential criminal violations of the Tax Code and related financial crimes. In fact, the IRS is the only entity that can do so. Accordingly, and in accordance with IRS practice, it would follow that IRS CI would have been consulted and apprised of this consequential change in disclosure requirements prior to its imposition. However, such a consultation did not take place.
The Letter’s 5 Questions for the IRS Commissioner:
- If IRS identifies illegal political contributions from foreign entities to a tax-exempt entity, how will CI investigate and determine whether this is a singular incident or widespread? That is, will CI have to ask for every 501(c)(4) entity in the country to disclose their donor list to conduct a thorough investigation?
- How will IRS CI be able to maintain confidentiality in an investigation if it must now request a list of donors from dark money 501(c)(4) organization? For example, if CI is tipped off to illegal activity by a whistleblower, how will they maintain that whistleblower’s confidentiality under this new regime, when they must request documentation from an entity under investigation?
- As your staff indicated to our staffs, IRS CI was not consulted prior to the decision to rescind the donor list filing requirement for 501(c)(4)s and other organizations. From where did this disclosure policy change originate?
- Was this change in disclosure policy directed or requested by Treasury?
- Was this change in disclosure policy discussed or requested by any non-governmental entity?
Follow the Criticism
Very generally, the widespread criticism of the change in regulations is that it was promulgated with political motivation to allow more dark money to influence our elections and our laws, which keeps power with the plutocrats and weakens our democracy.