Nestled in House Spending Bill: Campaign Finance Deregulation

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 tucked into a GOP package of spending bills currently 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.

The inclusion of the deregulatory measures in the spending package is prompting pushback from campaign-finance watchdogs, who worry they may ultimately become law.

If they do, 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 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 again be prohibited from requiring federal contractors to disclose their political contributions and campaign expenditures.

These multiple provisions -- called riders -- are frequently inserted into appropriation bills as a way to pass controversial policies without having them voted on individually, since they will "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 next 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.

Mr. Wertheimer is particularly worried about the rider allowing 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.

A spokesman for Rep. Scalise said in an email he "has long supported efforts to protect the First Amendment rights of houses of worship and other nonprofit organizations" and that his bill would prevent "unelected IRS bureaucrats from stifling the free speech of religious leaders and others under the auspices of the Johnson Amendment." The Family Research Council did not return a request for comment.

Another provision would continue to prevent the Internal Revenue Service 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 up to 49% of their money on political causes.

Campaign finance overhaul advocates 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.

Similarly, the SEC has been considering a rule requiring publicly traded corporations to disclose all their political contributions. The rider would not allow the agency 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.

Write to Cezary Podkul at cezary.podkul@wsj.com

(END) Dow Jones Newswires

September 09, 2017 10:14 ET (14:14 GMT)