Before exploring H.R.3865 further, let's recall the reality of the IRS non-scandal of 2013, which continues to be widely mis-reported to this day (on February 13, the New York Times falsely described the essential issue as "heightened scrutiny the IRS gave to non-profit applications from Tea Party-affiliated groups" -- never mind that it didn't happen, at least not at all like that).
The Supreme Court's 2010 decision in Citizens United v. Federal Election Commission unleashed huge amounts of previously dirty money into American politics, giving a lawful competitive advantage to everyone with money to burn. Not that those people were previously disadvantaged. They already had 527 organizations to take as much money as they had to give, but the 527s had the unfortunate legal requirement of having to report publicly who gave them money, and how much. And this was unfair to rich people who are shy about revealing the politicians they buy.
Citizens United also contributed to the rush to set up 501(c)(4) non-profit vehicles, which had the enticing additional option of being able to keep its donors secret. Citizens United, the organization, is itself a 501(c)(4) with pretty clear political/ideological bias. The case it took to the Supreme Court began when it was prevented from running a documentary hit piece against Hillary Clinton in 2008. Now Citizens United is threatening another lawsuit should the IRS try to enact new rules controlling 501(c)(4) activities.
In other words, the fake IRS "scandal" was a very real part of a much larger Supreme Court scandal. Karl Rove was one of the first in a rising tide of 501(c)(4) applications during 2010-2012. According to reports, from roughly 1750 applications each in 2009 and 2010, the total rose to 2265 in 2011 and 3357 in 2012. The IRS was swamped and casting about for ways to triage the applications and handle them more efficiently. And there's the rub. That would have been easy under the original law, the Revenue Act of 1913, as codified in the U.S. Code, in its relevant entirety:
26 U.S.C., Title 26 Ch. 1, Part 1, sec. 501(c)(4)".
(4)(A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes. [emphasis added]
(4)(B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.
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