Victory? IRS Says Record 150K Comments Make IRS Muzzle Rule Unlikely This Year

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In a potentially stunning victory for grassroots activists across the political spectrum, IRS Commissioner John Koskinen yesterday appeared to retreat from the headlong rush to impose draconian restrictions on the free speech rights of non-profit organizations.  While slowing down this ill-conceived rulemaking is a step in the right direction, the proposal should be permanently withdrawn as it is fatally flawed.

Video and transcript follow.

"So last November, Treasury and the IRS proposed regulations designed to clarify the extent to which a 501(c)(4) organization can engage in political activity without endangering its tax-exempt status.

"While I was not involved in the drafting of the proposal, which was released before I was confirmed as commissioner, I believe it is extremely important to make this area of regulation as clear as possible. Not only does that help the IRS properly enforce the law, but clearer regulations will also give a better roadmap for applicants, and it will help those already operating as 501(c)(4) organizations properly administer their organizations without unnecessary fears of losing their tax-exempt status because of an activity in which they are engaged.

"During the comment period, which ended in February, we received more than 150,000 comments. That's a new American record for an IRS rulemaking comment period. And in fact, I'm told if you take all the comments on all the Treasury and IRS regulations for the last seven years, double that number, you are close to the number of comments that we have on this single regulation.

"We are beginning to review those and analyze them. Obviously it's going to take a little while to sort through them all because we treat them seriously.  These are people across the political spectrum who have taken the time to write to give us their views on both what the definition of political activities ought to be, how much of it you should be able to engage in, and then to which organizations should it apply.

"It will take us awhile once we finish reviewing the comments and hold a public hearing to consider possibly re-proposing a modified regulation and obtaining more public comments. So as I've said in the past, it means it is unlikely we are going to be able to complete this process before the end of the year."