H. Rept. 113-353 - 113th Congress (2013-2014)
February 18, 2014, As Reported by the Ways and Means Committee

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House Report 113-353 - STOP TARGETING OF POLITICAL BELIEFS BY THE IRS ACT OF 2014




[House Report 113-353]
[From the U.S. Government Printing Office]


113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-353

======================================================================



 
       STOP TARGETING OF POLITICAL BELIEFS BY THE IRS ACT OF 2014

                                _______
                                

 February 18, 2014.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Camp, from the Committee on Ways and Means, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3865]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3865) to prohibit the Internal Revenue Service from 
modifying the standard for determining whether an organization 
is operated exclusively for the promotion of social welfare for 
purposes of section 501(c)(4) of the Internal Revenue Code of 
1986, having considered the same, report favorably thereon with 
an amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. Summary and Background...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     2
          C. Legislative History.................................     3
 II. Explanation of the Bill..........................................4
          A. Applicable Standard for Determining Whether an 
              Organization is Operated Exclusively for the 
              Promotion of Social Welfare........................     4
III. Votes of the Committee...........................................7
 IV. Budget Effects of the Bill.......................................8
          A. Committee Estimate of Budgetary Effects.............     8
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     8
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     8
          D. Macroeconomic Impact Analysis.......................     9
  V. Other Matters to be Discussed Under the Rules of the House.......9
          A. Committee Oversight Findings and Recommendations....     9
          B. Statement of General Performance Goals and 
              Objectives.........................................    10
          C. Information Relating to Unfunded Mandates...........    10
          D. Applicability of House Rule XXI 5(b)................    10
          E. Tax Complexity Analysis.............................    10
          F. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................    10
          G. Duplication of Federal Programs.....................    11
          H. Disclosure of Directed Rule Makings.................    11
 VI. Changes in Existing Law Made by the Bill, as Reported...........11
VII. Dissenting Views................................................12

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Stop Targeting of Political Beliefs by 
the IRS Act of 2014''.

SEC. 2. APPLICABLE STANDARD FOR DETERMINATIONS OF WHETHER AN 
                    ORGANIZATION IS OPERATED EXCLUSIVELY FOR THE 
                    PROMOTION OF SOCIAL WELFARE.

  (a) In General.--The standard and definitions as in effect on January 
1, 2010, which are used to determine whether an organization is 
operated exclusively for the promotion of social welfare for purposes 
of section 501(c)(4) of the Internal Revenue Code of 1986 shall apply 
for purposes of determining the status of organizations under section 
501(c)(4) of the Internal Revenue Code of 1986 after the date of the 
enactment of this Act.
  (b) Prohibition on Modification of Standard.--The Secretary of the 
Treasury may not (nor may any delegate of such Secretary) issue, 
revise, or finalize any regulation (including the proposed regulations 
published at 78 Fed. Reg. 71535 (November 29, 2013)), revenue ruling, 
or other guidance not limited to a particular taxpayer relating to the 
standard and definitions specified in subsection (a).
  (c) Application to Organizations.--Except as provided in subsection 
(d), this section shall apply with respect to any organization claiming 
tax exempt status under section 501(c)(4) of the Internal Revenue Code 
of 1986 which was created on, before, or after the date of the 
enactment of this Act.
  (d) Sunset.--This section shall not apply after the one-year period 
beginning on the date of the enactment of this Act.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    H.R. 3865 provides that the criteria as in effect on 
January 1, 2010, used to determine whether an organization is 
operated exclusively for the promotion of social welfare for 
purposes of section 501(c)(4) of the Internal Revenue Code 
shall remain in effect. The Department of the Treasury 
(Treasury Department) and the Internal Revenue Service (IRS) 
would be barred from issuing or finalizing any regulation, 
including the proposed regulations issued on November 29, 2013 
(see 78 Fed. Reg. 71535), that would change the applicable law. 
The proposal would sunset one year after enactment.

                 B. Background and Need for Legislation

    Under regulations in place for over 50 years, an 
organization is eligible for a tax exemption under section 
501(c)(4) of the Internal Revenue Code if it is primarily 
engaged in promoting the common good and general welfare. 
Section 501(c)(4) social welfare groups can engage in political 
campaign intervention, so long as the organization is primarily 
engaged in activities that promote social welfare. Examples of 
activities that promote social welfare (and are not, therefore, 
considered political campaign intervention) include: get-out-
the-vote (GOTV) drives, voter registration efforts, and 
candidate forums. Thus, a section 501(c)(4) social welfare 
organization can engage in these activities without 
jeopardizing its tax-exempt status.
    On November 29, 2013, the Treasury Department proposed 
regulations (78 Fed. Reg. 71535) that categorically exclude 
from the definition of the promotion of social welfare certain 
activities defined as ``candidate-related political activity.'' 
Candidate-related political activity includes: GOTV drives, 
voter registration efforts, and candidate forums. Under the 
proposed regulations, section 501(c)(4) organizations could 
engage in some candidate-related political activity, but such 
activity would no longer be considered the promotion of social 
welfare, and could jeopardize their tax-exempt status. Other 
tax-exempt organizations, such as 501(c)(3) charitable 
organizations, 501(c)(5) unions, and 501(c)(6) chambers of 
commerce would be unaffected by the proposed rule.
    The Ways and Means Committee's ongoing investigation has 
found that the primary activities of many of the right-leaning 
501(c)(4) groups that were targeted by the IRS included: GOTV, 
voter registration, and candidate forums. The proposed new 
rules would adversely affect many of these groups, forcing them 
to cease many of these activities to avoid jeopardizing their 
exempt status. The investigation also has revealed that the 
rationale given by the Treasury Department and the IRS for the 
proposed rule change--that confusion about how to apply the law 
governing 501(c)(4) organizations was to blame for the 
targeting--is baseless. Indeed, it was recently revealed that 
the new proposed rules have been secretly under consideration 
since at least 2011, well before the IRS's targeting of right-
leaning groups came to light.
    The Treasury Inspector General for Tax Administration audit 
report, ``Inappropriate Criteria Were Used to Identify Tax-
Exempt Applications for Review,'' issued on May 14, 2013, found 
that groups were subjected to extra scrutiny on the basis of 
name--for example, ``Tea Party''--and policy position starting 
in early 2010. The Committee's investigation has further found 
that Tea Party applications were being received, processed and 
approved before this time. Thus, H.R. 3865 fixes the standards 
for determining exempt status at January 1, 2010, which pre-
dates the targeting. The bill would further provide a one-year 
delay on the promulgation of the proposed new rules, as well as 
other guidance, so that the Committee can complete its 
investigation, including an examination of the process by which 
these regulations were drafted.

                         C. Legislative History


Background

    H.R. 3865 was introduced on January 14, 2014, and was 
referred to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 3865, the 
Stop Targeting of Political Beliefs by the IRS Act of 2014, on 
February 11, 2014, and ordered the bill, as amended, favorably 
reported (with a quorum being present).

Committee hearings

    The Committee has held numerous hearings about IRS 
targeting. On May 17, 2013, the full Committee received 
testimony on the IRS's practice of discriminating against 
applicants for tax-exempt status based on the political 
leanings of the applicants. Witnesses included Steve Miller, 
then-Acting Commissioner of the IRS, and J. Russell George, 
Treasury Inspector General for Tax Administration. On June 4, 
2013, the full Committee received testimony on organizations 
that were targeted as part of the IRS's practice of 
discriminating against applicants for tax-exempt status based 
on their personal beliefs from victims. On June 27, 2013, the 
full Committee received testimony on the IRS's 30-day report on 
the practice of discriminating against applicants for tax-
exempt status based on their personal beliefs from Daniel 
Werfel, then-Principal Deputy Commissioner and Deputy 
Commissioner for Services and Enforcement of the IRS.
    The Committee also has held hearings at the subcommittee 
level. On September 18, 2013, the Subcommittee on Oversight 
received testimony on the current state and practices of the 
IRS's Exempt Organizations Division following the May 14, 2013, 
TIGTA audit report and then-Principal Deputy Commissioner 
Werfel's June 25, 2013, report from Daniel Werfel, then-Acting 
Commissioner of the IRS. On February 5, 2014, the Subcommittee 
on Oversight received testimony on issues facing the IRS, 
including consideration of the proposed new rule, from newly 
confirmed IRS Commissioner John Koskinen.

                      II. EXPLANATION OF THE BILL


   A. Applicable Standard for Determining Whether an Organization is 
        Operated Exclusively for the Promotion of Social Welfare


                              PRESENT LAW

Section 501(c)(4) organizations, in general

    Section 501(c)(4) provides a tax exemption for civic 
leagues or organizations not organized for profit, but operated 
exclusively for the promotion of social welfare, and no part of 
the net earnings of which inures to the benefit of any private 
shareholder or individual.\1\ Treasury regulations provide that 
an organization is operated exclusively for the promotion of 
social welfare if it is engaged primarily in promoting in some 
way the common good and general welfare of the people of a 
community.\2\ An organization is not operated primarily for the 
promotion of social welfare if its primary activity is 
operating a social club for the benefit, pleasure, or 
recreation of its members, or is carrying on a business with 
the general public in a manner similar to organizations that 
are operated for profit.\3\
---------------------------------------------------------------------------
    \1\Sec. 501(c)(4). Unless otherwise stated, all section references 
are to the Internal Revenue Code of 1986, as amended.
    \2\Treas. Reg. secs. 1.501(c)(4)-1(a)(1) and (2)(i).
    \3\Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(i).
---------------------------------------------------------------------------

Political campaign activities of section 501(c)(4) organizations

    Treasury regulations further provide that the promotion of 
social welfare does not include ``direct or indirect 
participation or intervention in political campaigns on behalf 
of or in opposition to any candidate for public office'' 
(herein, ``political campaign intervention'').\4\ However, 
social welfare organizations are permitted to engage in 
political campaign intervention so long as the organization is 
primarily engaged in activities that promote social welfare.\5\
---------------------------------------------------------------------------
    \4\Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(ii).
    \5\See Rev. Rul. 81-95, 1981-1 C.B. 332.
---------------------------------------------------------------------------
    Whether an activity constitutes political campaign 
intervention (and thus does not promote social welfare) depends 
on all the facts and circumstances of the particular case.\6\ 
The rules concerning political campaign intervention apply only 
to activities involving candidates for elective public office; 
the rules do not apply to activities involving officials who 
are selected or appointed, such as executive branch officials 
and judges.
---------------------------------------------------------------------------
    \6\See, e.g., Rev. Rul. 2007-41, 2007-25 I.R.B. 1421 (June 18, 
2007) (analyzing 21 different factual scenarios involving section 
501(c)(3) charitable organizations for political campaign 
intervention); Rev. Rul. 81-95, 1981-1 C.B. 332 (referencing section 
501(c)(3) standards in determining whether activities of a section 
501(c)(4) organization constitute political campaign intervention).
---------------------------------------------------------------------------
    Similar rules apply for determining whether other types of 
section 501(c) organizations have engaged in political campaign 
intervention, including charities (section 501(c)(3)), labor 
and horticultural organizations (section 501(c)(5)), and 
business leagues (section 501(c)(6)). However, while sections 
501(c)(4), (5), and (6) organizations may engage in some 
political campaign intervention without jeopardizing exempt 
status, section 501(c)(3) organizations are prohibited from 
engaging in any political campaign intervention.\7\
---------------------------------------------------------------------------
    \7\Sec. 501(c)(3).
---------------------------------------------------------------------------
    The lobbying and advocacy activities of a section 501(c)(4) 
organization generally are not limited, provided the activities 
are in furtherance of the organization's exempt purpose.

Proposed regulations relating to the political campaign activities of 
        section 501(c)(4) organizations

    On November 29, 2013, the Department of the Treasury and 
the Internal Revenue Service (``IRS'') published proposed 
regulations regarding the political campaign activities of 
section 501(c)(4) organizations.\8\ The proposed regulations 
seek to replace the present-law facts-and-circumstances test 
used in determining whether a section 501(c)(4) organization 
has engaged in political campaign intervention with an 
enumerated list of activities that constitute political 
campaign activities (and which therefore do not promote social 
welfare).\9\
---------------------------------------------------------------------------
    \8\Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social 
Welfare Organizations on Candidate-Related Political Activities REG-
134417-13, 78 Fed. Reg. 71535 (November 29, 2013); incorporating Prop. 
Treas. Reg. secs. 1.501(c)(4)-1(a)(2)(ii), (a)(2)(iii), and (c).
    \9\Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social 
Welfare Organizations on Candidate-Related Political Activities REG-
134417-13, 78 Fed. Reg. 71535 (November 29, 2013), p. 71536.
---------------------------------------------------------------------------
    The proposed regulations replace the political campaign 
intervention reference in the existing section 501(c)(4) 
regulations (i.e., ``direct or indirect participation or 
intervention in political campaigns on behalf of or in 
opposition to any candidate for public office'') with a new 
defined term, ``candidate-related political activity.''\10\ 
Candidate-related political activity means: (1) communications 
that express a view on, whether for or against, the selection, 
nomination, election, or appointment of one or more clearly 
identified candidates (often referred to as express advocacy 
communications); (2) certain public communications (as defined) 
within 30 days of a primary election or 60 days of a general 
election that refer to one or more clearly identified 
candidates, or in the case of a general election, one or more 
political parties; (3) communications the expenditures for 
which are reported to the Federal Election Commission; (4) 
contributions (including gifts, grants, subscriptions, loans, 
advances, or deposits) of money or anything of value to or the 
solicitation of contributions on behalf of a candidate, a 
section 527 political organization, or a section 501(c) 
organization that engages in candidate-related political 
activity; (5) conduct of a voter registration drive or ``get-
out-the-vote'' drive; (6) distribution of any material prepared 
by or on behalf of a candidate or by a section 527 political 
organization; (7) preparation or distribution of a voter guide 
that refers to one or more clearly identified candidates, or in 
the case of a general election to one or more political 
parties; and (8) hosting or conducting a forum for candidates 
within 30 days of a primary election or 60 days of a general 
election.\11\
---------------------------------------------------------------------------
    \10\Prop. Treas. Reg. secs. 1.501(c)(4)-1(a)(2)(ii) and (iii).
    \11\Prop. Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(iii)(A).
---------------------------------------------------------------------------
    For purposes of defining candidate-related political 
activity, the proposed regulations define the term 
``candidate'' to mean ``an individual who publicly offers 
himself, or is proposed by another, for selection, nomination, 
election, or appointment to any federal, state, or local public 
office or office in a political organization, or to be a 
Presidential or Vice-Presidential elector, whether or not such 
individual is ultimately selected, nominated, elected, or 
appointed,'' including officeholders who are the subject of a 
recall election;\12\ this includes certain judicial and 
executive branch appointments.
---------------------------------------------------------------------------
    \12\Prop. Treas. Reg. sec. 1.501(c)(4)-1(a)(2)(iii)(B)(1).
---------------------------------------------------------------------------
    The proposed regulations apply only to section 501(c)(4) 
organizations.\13\ Other section 501(c) organizations 
(including section 501(c)(3) charitable organizations, section 
501(c)(5) labor and horticultural organizations, and section 
501(c)(6) business leagues) will continue to use present-law 
rules concerning political campaign intervention.
---------------------------------------------------------------------------
    \13\Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social 
Welfare Organizations on Candidate-Related Political Activities REG-
134417-13, 78 Fed. Reg. 71535 (November 29, 2013), p. 71537.
---------------------------------------------------------------------------
    The proposed regulations are not immediately effective. 
They are proposed to be effective on the date they are 
published in the Federal Register as final regulations.\14\
---------------------------------------------------------------------------
    \14\Prop. Treas. Reg. sec. 1.501(c)(4)-1(c). In the notice of 
proposed rulemaking, the IRS seeks comments on a number of issues, 
including: (1) whether the existing regulation that provides that an 
organization is operated exclusively for social welfare if it is 
engaged primarily in promoting in some way the common good and general 
welfare of the people of a community should be modified; and (2) 
whether the rules included in the proposed regulations should be 
extended to other section 501(c) organizations or to section 527 
political organizations. Notice of Proposed Rulemaking, Guidance for 
Tax-Exempt Social Welfare Organizations on Candidate-Related Political 
Activities REG-134417-13, 78 Fed. Reg. 71535 (November 29, 2013), p. 
71537.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    On May 14, 2013, the Treasury Inspector General for Tax 
Administration issued an audit report concluding that the IRS 
used inappropriate criteria to identify certain applications 
for tax exemption for heightened review. In response to the 
Inspector General's report, the Committee on Ways and Means 
continues to investigate the procedures and criteria used by 
the IRS in reviewing applications for exemption, particularly 
applications filed by organizations seeking recognition of 
their status as social welfare organizations under section 
501(c)(4).
    The Committee believes that, in light of the ongoing 
investigation and the need for a more deliberative process, it 
is appropriate, for a one-year period, to: (1) require that the 
IRS use the standards and definitions in effect as of January 
1, 2010, for determining whether an organization is operated 
exclusively for the promotion of social welfare for purposes of 
section 501(c)(4); and (2) prohibit the Secretary of the 
Treasury and the IRS from issuing, revising, or finalizing any 
regulations (including the proposed regulations issued November 
29, 2013) or other guidance modifying such standards and 
definitions. This one-year period will afford the Committee the 
opportunity to complete its investigation and will allow the 
IRS and the Congress to consider more fully the numerous 
concerns that have been raised about the proposed regulations, 
including whether the proposed regulations will have the effect 
of discouraging legitimate tax-exempt activity.

                        EXPLANATION OF PROVISION

    Under the provision, the standards and definitions as in 
effect on January 1, 2010, which are used to determine whether 
an organization is operated exclusively for the promotion of 
social welfare for purposes of section 501(c)(4), shall apply 
for determining the tax-exempt status of organizations under 
section 501(c)(4).
    The provision also provides that neither the Secretary of 
the Treasury nor any delegate of the Secretary may issue, 
revise, or finalize any regulation (including the November 29, 
2013 proposed regulations described above), revenue ruling, or 
other guidance that is not limited to a particular taxpayer 
relating to the standards or definitions used to determine 
whether an organization is operated exclusively for the 
promotion of social welfare for purposes of section 501(c)(4).
    The provision applies with respect to any organization 
claiming tax-exempt status as an organization described in 
section 501(c)(4) that was created on, before, or after the 
date of enactment.
    The provision sunsets such that it does not apply after the 
one-year period beginning on the date of enactment.

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 3865, the ``Stop Targeting of Political 
Beliefs by the IRS Act of 2014.''
    The bill, H.R. 3865, was ordered favorably reported to the 
House of Representatives as amended by a rollcall vote of 23 
yeas to 13 nays (with a quorum being present). The vote was as 
follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp.......................        X   ........  .........  Mr. Levin........  ........        X   .........
Mr. Johnson....................        X   ........  .........  Mr. Rangel.......  ........        X   .........
Mr. Brady......................        X   ........  .........  Mr. McDermott....  ........        X   .........
Mr. Ryan.......................        X   ........  .........  Mr. Lewis........  ........  ........  .........
Mr. Nunes......................        X   ........  .........  Mr. Neal.........  ........  ........  .........
Mr. Tiberi.....................        X   ........  .........  Mr. Becerra......  ........        X   .........
Mr. Reichert...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Boustany...................        X   ........  .........  Mr. Thompson.....  ........        X   .........
Mr. Roskam.....................        X   ........  .........  Mr. Larson.......  ........        X   .........
Mr. Gerlach....................        X   ........  .........  Mr. Blumenauer...  ........        X   .........
Mr. Price......................        X   ........  .........  Mr. Kind.........  ........        X   .........
Mr. Buchanan...................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Mr. Smith......................        X   ........  .........  Mr. Crowley......  ........        X   .........
Mr. Schock.....................        X   ........  .........  Ms. Schwartz.....  ........  ........  .........
Ms. Jenkins....................        X   ........  .........  Mr. Davis........  ........        X   .........
Mr. Paulsen....................        X   ........  .........  Ms. Sanchez......  ........        X   .........
Mr. Marchant...................        X   ........  .........
Ms. Black......................        X   ........  .........
Mr. Reed.......................        X   ........  .........
Mr. Young......................        X   ........  .........
Mr. Kelly......................        X   ........  .........
Mr. Griffin....................        X   ........  .........
Mr. Renacci....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 3865, as 
reported.
    The bill, as reported, is estimated to result in a 
negligible reduction in Federal budget receipts for 2014-2024.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the Congressional Budget Office (``CBO''), the 
following statement by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 14, 2014.
Hon. Dave Camp,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3865, the Stop 
Targeting of Political Beliefs by the IRS Act of 2014.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                    Douglas W. Elmendorf, Director.
    Enclosure.

H.R. 3865--Stop Targeting of Political Beliefs by the IRS Act of 2014

    H.R. 3865 would amend federal law relating to certain tax-
exempt nonprofit organizations. Specifically, the bill would 
require the Internal Revenue Service (IRS) to continue to use 
certain standards and definitions in effect on January 1, 2010, 
for determining whether an organization qualifies for tax-
exempt status under section 501(c)(4) of the Internal Revenue 
Code. In addition, H.R. 3865 would prohibit the agency from 
issuing, revising, or finalizing any regulation related to 
those standards and definitions. The legislation's provisions 
would sunset one year after enactment.
    CBO estimates that implementing the legislation would have 
no significant impact on IRS administrative costs, which are 
subject to appropriation. The staff of the Joint Committee on 
Taxation (JCT) estimates that enacting H.R. 3865 would result 
in a negligible loss of revenues over the 2014-2024 period, 
therefore, pay-as-you procedures apply.
    JCT has determined that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                    D. Macroeconomic Impact Analysis

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the staff of the Joint Committee on Taxation with 
respect to the provisions of the bill amending the Internal 
Revenue Code of 1986: the effects of the bill on economic 
activity are so small as to be incalculable within the context 
of a model of the aggregate economy.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 3865 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service 
Restructuring and Reform Act of 1998 (the ``IRS Reform Act'') 
requires the staff of the Joint Committee on Taxation (in 
consultation with the Internal Revenue Service and the Treasury 
Department) to provide a tax complexity analysis. The 
complexity analysis is required for all legislation reported by 
the Senate Committee on Finance, the House Committee on Ways 
and Means, or any committee of conference if the legislation 
includes a provision that directly or indirectly amends the 
Internal Revenue Code and has widespread applicability to 
individuals or small businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Code and that 
have ``widespread applicability'' to individuals or small 
businesses, within the meaning of the rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(j)(2) of H. Res. 5 (113th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(k) of H. Res. 5 (113th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires one 
directed rule making within the meaning of such section. 
Specifically, Sec. 2 of the bill provides that, for one year 
beginning on the date of enactment, the Secretary of the 
Treasury may not (nor may any delegate of such Secretary) 
issue, revise, or finalize any regulation (including the 
proposed regulations published at 78 Fed. Reg. 71535 (November 
29, 2013)), revenue ruling, or other guidance not limited to a 
particular taxpayer relating to the standard and definitions as 
in effect on January 1, 2010, which are used to determine 
whether an organization is operated exclusively for the 
promotion of social welfare for purposes of section 501(c)(4) 
of the Internal Revenue Code of 1986.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    With respect to clause 3(e) of rule XIII of the Rules of 
the House of Representatives, the bill, as reported, includes 
no provisions proposing to repeal or amend an existing statute 
or part thereof. Therefore, no additional materials otherwise 
required to be included in this report or any accompanying 
document under that clause are required to be included with 
respect to this bill.

                         VII. DISSENTING VIEWS

    This Committee has started the new year where it left off--
showing painfully little interest in legislating--and instead 
pursuing its politically based agenda of seeking to unearth 
scandal in the IRS where none exists and undermining the 
Affordable Care Act.
    H.R. 3865 would impose an unnecessary one-year delay on any 
guidance, including the newly proposed 501(c)(4) regulations, 
on the tax-exempt requirements for social welfare 
organizations. The Democrats on the Ways and Means Committee 
were unanimous in their opposition to this bill, as it 
reiterates the misplaced priorities of the Committee's 
majority.
    This markup was the latest in a series of hearings, press 
releases, and other statements by the Republicans to revive the 
failing IRS controversy on the processing of Tea Party 
applications. Indeed, the title of H.R. 3865 is ``Stop 
Targeting of Political Beliefs by the IRS Act of 2014.''
    Republicans are using the proposed IRS regulations to try 
and reignite their baseless allegations that the White House, 
through the IRS, orchestrated an attack on its political 
enemies. Even though after the IRS has provided more than 
500,000 pages of documents to Congressional committees, five 
dozen interviews of current and former IRS employees have taken 
place and lawmakers at fifteen congressional hearings have 
questioned IRS officials there has been absolutely no evidence 
that the IRS processing of Tea Party applications was 
politically motivated ``targeting'' or connected to the White 
House.
    All six investigations (TIGTA, Federal Bureau of 
Investigations (FBI), and four Congressional investigations) 
were launched based on a fundamentally flawed report from the 
Treasury Inspector General for Tax Administration (TIGTA) who 
is now the subject of an ethics complaint to the Council of 
Inspectors General.
    It has been repeatedly demonstrated that progressive groups 
were also negatively affected by the incompetent handling of 
501(c)(4) applications. Had the Treasury Inspector General not 
left out vital information--producing a fundamentally flawed 
audit report--it may have dissuaded Republicans from 
immediately accusing the White House of keeping an ``enemies 
list'' and trying to turn the audit into a scandal that they 
are intent on keeping alive, no matter the facts.
    H.R. 3865 is nothing more than an attempt to recast the 
proposed 501(c)(4) regulations as a new ``scandal'' to replace 
the old ``non-scandal.''.
    The Republican's argument would make people think that 
Treasury just spontaneously decided to issue proposed 
regulations on 501(c)(4) organizations. That is not the case.
    The proposed regulations were actually a recommendation of 
TIGTA. In the May 14, 2013 audit report on tax-exempt 
applications, TIGTA recommended to the IRS Chief Counsel and 
the Department of the Treasury that guidance on how to measure 
the ``primary activity'' of 501(c)(4) social welfare 
organizations be included for consideration in the Department 
of the Treasury Priority Guidance Plan. Treasury did include 
this on the 2013-2014 Treasury Priority Guidance Plan released 
in August 2013. The proposed regulations were then issued in 
November 2013.
    Furthermore, Republicans called for the implementation of 
TIGTA's recommendations. A Republican Committee Member 
introduced H.R. 2532, which would require the IRS Commissioner 
to implement all of TIGTA's recommendations, including the 
recommendation to clarify the 501(c)(4) regulations. In 
addition, the joint explanatory statement on the Consolidated 
Appropriations Act of 2014 (H.R. 3547) states ``The IRS' new 
management is expected to implement the Treasury Inspector 
General for Tax Administration recommendations regarding the 
inappropriate criteria being used to identify tax-exempt 
applications for review.''
    Commissioner Koskinen testified that the proposed 
regulations are generating massive public interest. To date, 
more than 21,000 comments have been submitted--``a record 
[number of comments],'' Koskinen said. The comment period ends 
on February 27, 2014. Many of our Democratic colleagues and 
outside allies have also weighed in on the proposed regulations 
to ensure that non-partisan voter registration and get out the 
vote efforts are not negatively impacted. But we start from the 
premise that the regulation needs to be clarified for 
organizations across the political spectrum and the Code should 
not be used to shield political activities and donors.
    The fundamental Republican problem here does not lie with 
these proposed regulations that are nowhere close to becoming 
final. The fundamental problem is one of campaign finance and 
that the Republicans will stop at nothing to keep their donors 
secret.
    It is clear that the entire purpose of this one-year delay 
is to keep the Republicans' donors secret through the next 
election cycle. In the last election cycle, outside groups 
reported to the FEC political expenditures of nearly $1 
billion. Between 2010 and 2012, applications for 501(c)(4) 
status nearly doubled, from 1,735 to 3,357. The designation 
allows organizations to keep their donors secret. Spending 
during the 2012 election by 501(c)(4)s soared to more than $250 
million, from $92 million in 2010 and just $1 million in 2006, 
according to the Center for Responsive Politics.
    It should be noted that all of these groups are welcome to 
be involved in the political election process and still face no 
tax by forming as section 527 organizations, commonly called 
PACs, and disclosing their donors to the public.
    The irony of this bill is that, in seeking to delay these 
regulations for a year under the guise of a ``scandal,'' what 
really remains hidden are donors to groups pouring millions of 
dollars into campaign advertising.
    In all, more than 150 IRS employees have worked 70,000 
hours--time taken away from taxpayer services--to accommodate 
the ongoing requests for information from congressional 
investigators. Now, because all of these taxpayer dollars have 
been wasted with absolutely no evidence of corruption, the 
Republicans have pivoted to the 501(c)(4) regulations as their 
new bogeyman. It is a shameful use of this prestigious 
Committee that we, the undersigned, strongly oppose.
                                   Sander M. Levin.
                                   Charles B. Rangel.
                                   Jim McDermott.
                                   John Lewis.
                                    Richard E. Neal.
                                    Xavier Becerra.
                                    Lloyd Doggett.
                                    Mike Thompson.
                                    John B. Larson.
                                    Earl Blumenauer.
                                    Ron Kind.
                                    Bill Pascrell,  Jr.
                                    Joseph Crowley.
                                    Allyson Y. Schwartz.
                                    Danny K. Davis.
                                    Linda T. Sanchez.