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Republicans urge stop to U.S. IRS tax-exempt groups rule rewrite

February 7, 2014

By Patrick Temple-West, Kevin Drawbaugh and Bernard Orr

WASHINGTON (Reuters) – Senior congressional Republicans on Thursday called for a halt to a U.S. tax rule rewrite that would affect powerful political pressure groups, charging that the overhaul could be politically motivated by the Obama administration.

“Abandon this proposed rule,” 11 top Republicans said in a letter signed by House of Representatives Speaker John Boehner and sent to Internal Revenue Service Commissioner John Koskinen.

“Finalizing this proposed rule would make intimidation and harassment of the administration’s political opponents the official policy of the IRS,” the letter said.

The demand was the latest jab by Republicans at the Obama administration in a fight over IRS treatment of conservative political pressure groups organized under tax code Section 501(c)4 as tax-exempt, so-called “social welfare” organizations.

Amid controversy about money in politics, Republicans accuse the IRS of being too tough on tax-exempt status applications from 501(c)4 groups aligned with the Tea Party movement.

After conceding that some IRS staffers went too far in recent years in delaying and vetting some applications, the tax agency moved recently to clarify the 501(c)4 rules by putting new limits on the political activities of these groups.

But Republicans have attacked this effort on a broad front. On Wednesday, a legal activist group with ties to Republicans asked a U.S. District Court to delay the rule-writing process.

Republicans also have criticized the IRS for not moving to revise the tax-code section for labor union tax-exempt groups.

On Wednesday at a congressional hearing, Koskinen said he does not control the rule-writing process, which started before he became commissioner in December. In any case, he said, the rules “are not going to be finalized in the near future.”

In a statement on Thursday, a Treasury Department spokeswoman said: “Treasury and the IRS issued the proposed guidance as a first step in a careful, thoughtful process to clarify the rules governing social welfare and other tax-exempt organizations.”

The proposed rules have already received more than 21,000 public comments, which Koskinen said might be a record number.

The public comment period ends on February 27.

Separately on Thursday, the Senate Finance Committee said its investigation of IRS treatment of tax-exempt applications will not be completed before committee Chairman Max Baucus, a Democrat, leaves to become U.S. ambassador to China.

The committee’s inquiry is one of six that Koskinen said are ongoing probes into the IRS’s handling of tax-exempt applicants.

(Editing by Kevin Drawbaugh, Bernard Orr)