A healthy democracy needs its citizens capable and willing to express their political preferences even, or especially, when they conflict with the views of those in power. Tellingly, robust protections for speech were listed first among the Bill of Rights and have long been a cornerstone of our republic. Supporting like-minded organizations working to inform and shape the public debate has proven to be a valuable means by which millions of Americans express their political preferences. Unfortunately, invasive donor reporting requirements instituted by the Internal Revenue Service threaten to chill this critical democratic tool.
Schedule B requires 501(c) organizations to include certain contributors’ names and addresses with their annual Form 990 reports. Yet the IRS has acknowledged that this information has no enforcement value. Instead, its collection creates opportunities for abuse and chills speech and civic participation.
Like the secret ballot, respecting donor privacy and thus anonymous speech and association is essential to prevent majoritarian abuse and intimidation that subverts democracy. This was a lesson learned in the civil rights era after the shameful attacks on the NAACP and its supporters.
Although officials pledge to keep the collected information confidential, there’s good reason to question the ability of the government to protect sensitive taxpayer information given the history of inadvertent disclosures and information leaks at the IRS. For example, an IRS official wrongly included the Schedule B donor information provided by the National Organization for Marriage in response to an individual’s request for its Form 990. The information was subsequently shared with an adversarial organization that then made it public.
The NOM leak became a national story and potentially influenced an election when an entity associated with then-presidential candidate Mitt Romney was found to be among those donating to the group. In a twisted sort of irony, the same law that the official violated, intending to protect taxpayers, was used by the agency to shield the perpetrator from scrutiny and deny victims any opportunity to learn more about the incident.
Similarly, as part of the investigation into the targeting of conservative organizations by the IRS, Lois Lerner was found to have illegally shared confidential Form 990 taxpayer information with the Federal Election Commission. The classified information disclosed by Edward Snowden further demonstrated that data collected by one government agency is vulnerable to illegal access and exploitation by any other.
For minority viewpoints, public exposure can lead to intimidation or other private consequences. We saw this when Brendan Eich was forced out as Mozilla CEO after it was revealed he donated in support of California Prop 8.
Not long after that, an effort by then-California Attorney General Kamala Harris to collect donor information was found to be unconstitutional as applied to the Americans for Prosperity Foundation and the Thomas More Law Center, though a similar challenge by the Center for Competitive Politics failed. In ruling on the Thomas More Law Center challenge, the district court found that “in the context of a proven and substantial history of inadvertent disclosures,” the state’s government could not assure donor confidentiality.
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The federal government performs no better on that score. In 2015, the IRS admitted that “organized crime syndicates” used an exploit to gain access to the past tax returns of more than 100,000 taxpayers. Unsurprisingly, the Government Accountability Office for years has found the IRS deficient in its protection of sensitive financial and taxpayer data. The most recent audit found that “continuing and newly identified control deficiencies limited the effectiveness of security controls for protecting the confidentiality, integrity, and availability of IRS’s key financial and tax processing systems.”
Several years ago, the IRS was said to be considering dropping the unnecessary Schedule B reporting requirement, which it was never required by statute to collect in the first place. Unfortunately, the agency did not follow through under President Barack Obama, but IRS acting Commissioner David Kautter recently told a Senate panel that he was in discussions with the Treasury secretary about scrapping the requirement. The Trump administration should do what the Obama administration would not and ensure the right of Americans to participate in the political process without fear that they will be made vulnerable to targeting based on their political views.
Brian Garst is vice president of the Center for Freedom and Prosperity, whose mission is the promotion of tax competition, financial privacy and fiscal sovereignty.
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