Nestled in House Spending Bill: Campaign Finance Deregulation

September 10, 2017
Cezary Podkul

WASHINGTON—House Republicans are backing several provisions that could reshape campaign-finance rules ahead of next year’s midterm elections as spending negotiations continue this fall.

The measures are included in a GOP package of spending bills being debated in the House. While the House package is unlikely to advance in the Senate, its provisions could become bargaining chips in the negotiations leading up to the next government-funding deadline, now Dec. 8.

Under one deregulatory measure in the spending package, churches may be able to contribute to candidates without fear of losing their tax-exempt status, furthering President Donald Trump’s promise to “get rid of and totally destroy” a law that forbids such activity.

Corporations also would be able to ask their employees to donate to unlimited numbers of trade associations’ political-action groups instead of limiting employee solicitations to one group per year.

Other measures included in the bill would continue to prevent the Internal Revenue Service and the Securities and Exchange Commission from implementing rules that would affect political activities of 501(C)(4) nonprofits and publicly traded corporations, respectively.

And the government would still be prohibited from requiring federal contractors to disclose their political contributions and campaign expenditures.

The multiple provisions—called riders—are prompting pushback from campaign-finance watchdogs, who generally favor tighter restrictions on money in politics. The provisions have been sought by religious or business groups, who have argued they are otherwise hamstrung from fully participating in the political process.

Riders are frequently inserted into appropriation bills as a way to pass controversial policies without having them voted on individually, because they would “ride along” with a larger spending bill.

It is unclear which House members inserted the language into the bill, which was drafted by the Republican majority. House Democrats tried to strike many of the provisions but didn’t succeed. The House is expected to debate and possibly vote on a package of spending bills that includes the riders as early as this week.

On Friday, the House passed a bill to fund the government until Dec. 8. Lawmakers hope to pass a longer-term spending bill in December.

“It’s as many riders as has been done in this area. Probably the most,” said Fred Wertheimer, president of the group Democracy 21 and an architect of the 2002 McCain-Feingold campaign-finance overhaul bill. His concern, he said, is that the riders would enable “secret money” to “flow into elections.”

On Thursday, Democracy 21 and about 20 other organizations sent a letter to House members asking them to oppose the riders.

The religious rider would allow churches to skirt the so-called Johnson Amendment. Named after its primary sponsor when he was senator, the late Lyndon Johnson, the 1954 rule prohibits 501(C)(3) nonprofit organizations—such as churches—from endorsing or opposing political candidates. While the IRS has rarely enforced the ban, the rider could give violators a free pass.

The Family Research Council, a conservative Christian group, is lobbying to repeal the Johnson Amendment and has worked with House Majority Whip Steve Scalise (R., La.) to introduce a bill that would do so, according to its website.

“A nonprofit organization should not lose its tax-exempt status or be threatened with audits because it exercises its constitutional right to speak in favor of political candidates who share the organization’s values and mission,” the group argues.

House Majority Whip Steve Scalise (R-La.), shown in May, seeks to prevent ‘unelected IRS bureaucrats from stifling the free speech of religious leaders and others,’ a spokesman said.
House Majority Whip Steve Scalise (R-La.), shown in May, seeks to prevent ‘unelected IRS bureaucrats from stifling the free speech of religious leaders and others,’ a spokesman said.PHOTO: ALEX BRANDON/ASSOCIATED PRESS

The group didn’t return a request for comment. A spokesman for Mr. Scalise, who was shot at a congressional baseball practice in June and has been in rehabilitation ever since, said his bill would prevent “unelected IRS bureaucrats from stifling the free speech of religious leaders and others under the auspices of the Johnson Amendment.”

Another provision would continue to prevent the IRS from implementing a long-stalled rule that would better define the limits on political activities of organizations exempt from income taxes under section 501(C)(4) of the tax code. By law, such organizations are supposed to be “operated exclusively” for social-welfare purposes, but the IRS has interpreted the law to allow them to spend as much as 49% of their money on political causes.

Campaign-finance watchdogs like Mr. Wertheimer have pushed the IRS for years to limit its definition of social-welfare spending to eschew political expenditures. The long-running issue gained public notice in 2013, when the IRS apologized for targeting 501(c)(4) applications by tea-party and other conservative groups for closer scrutiny. The IRS subsequently proposed a rule aimed at clarifying limits on political activity by such groups. But many GOP lawmakers—as well as a range of advocacy groups—raised concerns, leading to the congressionally imposed moratorium.

The rider on the rule over disclosure of political spending by corporations wouldn’t allow the SEC to “study, develop, propose, finalize, issue, or implement” the rule-making during the government’s next fiscal year, a stronger prohibition than under existing law.

Business groups including the U.S. Chamber of Commerce have opposed greater disclosure of political activity. They have argued to the SEC that forcing businesses to disclose political giving would hurt companies and their stockholders by “burdening, and in some cases preventing, corporations’ participation in the political process.”

—Kristina Peterson contributed to this article.