Claims: Obama administration’s new nonprofit rules violate the Paperwork Reduction Act

Patrick Howley Political Reporter
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The Obama administration violated federal law with its new proposed IRS rule for nonprofit groups and for making a false statement about that rule, according to claims by multiple attorneys reviewed by The Daily Caller.

The administration’s extensive new IRS rule for 501(c)(4) nonprofit groups was secretly devised by disgraced former IRS official Lois Lerner and other Obama administration officials while the IRS was targeting conservative nonprofit groups between 2010 and 2012.

The rule, which contains many provisions, would place much more stringent controls on what would be considered political activity by the IRS, effectively limiting the standard practices of a wide array of nonprofit groups.

The Republican-proposed Stop Targeting of Political Beliefs by the IRS Act to block the new rule passed a House committee Tuesday but is not expected to pass into law. But the Obama administration’s rule may be shut down for its own illegality.

The Paperwork Reduction Act, passed in 1980 and amended in 1995 during the House speakership of Newt Gingrich, requires government agencies to estimate its new programs’ paperwork burden for the public before receiving Office of Management and Budget (OMB) approval.

But the Obama administration’s IRS misstated its new rules’ paperwork burden, a legal expert told TheDC.

“The IRS grossly underestimates the record-keeping burden” of the new rule, Center for Competitive Politics senior fellow Eric Wang told TheDC, claiming two violations of the Paperwork Reduction Act.

The IRS estimated in its “Notice of Proposed Rulemaking” that the new rule would only cost nonprofit groups two extra hours of record-keeping time. But Wang said that the agency’s estimate refers to only one small “sliver” of the new record-keeping requirements put forth by the rule.

“The two-hour estimate they provided is for this new requirement about 501(c)(4) groups giving grants to other 501(c) groups,” which requires the recipient to fill out paperwork certifying that the grants were not used for candidate-related political activity. But that provision is “only one-tenth of the substance of the proposed rule,” according to Wang.

“They are required to provide an estimate of the record-keeping burden for the entirety of the rule, and they’ve only provided an estimate — and a faulty estimate at that — for a narrow provision of the rule,” Wang said.

Wang also claimed that “the [two-hour] estimate is too low even for the grant-making provision,” citing an analogous record-keeping provision for grants on nonprofit groups’ Form 990s, which require five hours for groups to fill out, according to IRS estimates.

“The IRS may not proceed to a final rulemaking under the [Paperwork Reduction Act] without addressing this fatal flaw in the [proposed rule’s] gross understatement of the record-keeping burden,” Wang stated in public comments on the new rule proposal submitted to the IRS and Office of Management and Budget.

“The [IRS’] severe underestimation of the record-keeping burden … contravenes the law, and the rulemaking may not proceed unless this fundamental error is corrected,” according to Wang’s comments.

The watchdog group Judicial Watch sent a letter to OMB requesting that the new rule be withdrawn because the IRS’ proposal “does not analyze the substantial burden this new term will place on nearly all of the more than 100,000 501(c)(4) organizations.”

“The [IRS] fails to mention, let alone review and evaluate as required under [the Paperwork Reduction Act], the burden of the collection of information arising out of its replacement of longstanding language,” according to the Judicial Watch letter, which was signed by attorney and legal expert Alan P. Dye.

“Second, ‘burden’ is broadly defined in the [Paperwork Reduction Act] to include all of the ‘time, effort, or financial resources expended by persons to generate, maintain, or provide information to or for a Federal agency,’ including any time or other expenditure needed to review instructions, acquire technology, or search data sources … Yet, the [IRS]  has completely ignored these components of burden,” according to the Judicial Watch letter.

“Third, the new inclusion of volunteer hours imposed an additional layer of record keeping and burden upon these nonprofit organizations, many of which rely heavily upon local volunteers … Anyone who has worked with volunteers knows that record keeping can be notoriously difficult — how many volunteers are going to want to fill out time cards for their service? How many volunteers are going to be turned off from civic engagement due to this paperwork burden?” the Judicial Watch letter stated.

The new rule defines previously acceptable activities by nonprofit groups as prohibited “candidate-related political activity.” Communications and activities including voter registration drives and publishing voter guides, among others, are now classified as political activity. Grants and donations that 501(c)(4)s give to other nonprofits are now subject to new record-keeping and increased scrutiny to prevent the money’s use for broadly defined political activity.

The rule was “drafted in a manner, in my view, to shut down tea party groups” said House Ways and Means Chairman Rep. Dave Camp.

The White House and IRS did not return requests for comment.

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