AG Grewal Takes Action in Response to IRS's Controversial Elimination of Donor Reporting Requirement for “Dark Money” Groups – New IRS Policy Excuses “Social Welfare Organizations” from Reporting Donor Names

TRENTON – New Jersey Attorney General Gurbir S. Grewal is demanding that the Internal Revenue Service (IRS) and the U.S. Treasury Department release information about how the Trump Administration decided earlier this year to eliminate a decades-old requirement that “dark money” organizations engaged in political activity annually identify their donors to the IRS.

Since the U.S. Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, social welfare organizations exempt from taxation under Section 501(c)(4) of the Internal Revenue Code have significantly increased their spending on political activity. Section 501(c)(4) social welfare organizations are permitted to keep their donors’ identities hidden from members of the public under federal law, so the money they spend on political activity is often called “dark money.”

Although Section 501(c)(4) social welfare organizations are not required to disclose their donors to the general public, they have been required to report the names and addresses of their substantial contributors in their annual filings with the IRS.

The IRS’s donor reporting rule was in effect since 1971, until the IRS and Treasury Department abruptly abandoned the rule earlier this year. The agencies announced the policy change in July without prior notice to the public.

“Not only has the IRS made it easier for dark money groups to hide the sources of the money they are pouring into the political process, but the IRS has gone about it in the least transparent way possible,” said Attorney General Grewal.

“We are working to get to the bottom of why the IRS has taken this step and what outside influences led the IRS to abandon the donor reporting rule that has existed since the Nixon Administration, “ Attorney General Grewal said.

The IRS’s elimination of the reporting requirement also impacts the mission of the Charities Registration Section of the New Jersey Division of Consumer Affairs. The Division requires certain social welfare organizations and other tax-exempt organizations to submit to the Charities Registration Section copies of their IRS filings—including the forms for donor names and addresses. This information facilitates the Attorney General’s enforcement of laws pertaining to charitable fundraising and non-profit corporations.

Attorney General Grewal formally requested that the IRS and Treasury Department disclose records relating to the IRS’s new policy in a pair of Freedom of Information Act requests submitted to the federal government on Monday.

The record requests ask the federal government to turn over internal records about the development of the policy, records of communications with the White House and external groups, as well as other information.

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