Democratic senators at a hearing on Wednesday pressed Treasury Department nominees on guidance the department issued last year reducing donor disclosure requirement for certain tax-exempt groups.
“This makes it easier for dark-money groups to be able to do their business in secret,” Senate Finance Committee ranking member Ron Wyden (D-Ore.) said.
The Finance Committee held a hearing on four nominations to Treasury and tax court positions. These included the nominations of Brent McIntosh, the current Treasury general counsel, to be a Treasury undersecretary, and Brian Callanan, the current Treasury deputy general counsel, to succeed McIntosh as general counsel.
Democrats focused many of their questions to McIntosh and Callanan on the process Treasury undertook before issuing the donor disclosure guidance.
Under the guidance, which Treasury issued with the IRS, certain tax-exempt groups — including social-welfare organizations such as the National Rifle Association and the American Civil Liberties Union — will no longer be required to report the names and addresses of major donors on annual forms.
Republicans have said the guidance is important in order to protect taxpayers’ privacy and First Amendment rights. But Democrats have long taken issue with the guidance, which they say could make it easier for foreign government and “dark money” groups to influence U.S. elections. Last year, the Senate approved a resolution to overturn the guidance, though the House did not take it up.
Wyden and Sen. Maggie Hassan (D-N.H.) asked the Treasury nominees about the decision to not provide a comment period before issuing the donor guidance.
Hassan noted that two states, Montana and New Jersey, have challenged the guidance in court because there wasn’t a public notice and comment period. She argued that the guidance could make it harder for the government to go after pharmaceutical companies who funded nonprofits that provided fraudulent information about drug addiction.
“In effect, the Treasury has hamstrung law enforcement’s ability to follow the money and hold pharma accountable for fraud,” she said.
McIntosh said the IRS made the decision to issue the guidance without a notice and comment period. He said he was aware that the guidance was going to be issued but he didn’t decide that the guidance wouldn’t come in the form of a regulation.
McIntosh also said he thinks there is a “long tradition” of the IRS relieving reporting requirements without notice and comment.
Callanan said that other units at Treasury and the IRS first analyzed the guidance action, and that he reviewed their analysis and “was comfortable with the substantive and procedural legal considerations, that it was within the statutory authority.”
Sen. Bob Casey Jr. (D-Pa.) asked the nominees if Treasury’s Financial Crimes Enforcement Network (FinCEN) was consulted before the guidance was issued.
Callanan said that FinCEN generally doesn’t make use of tax-return information, and that the legal path for FinCEN to access such information is “exceedingly narrow.” He said that he didn’t know if FinCEN was consulted but would look into it.
Callanan also said, in response to a letter Wyden and Casey sent to the IRS earlier this month, that lawyers for the IRS’s criminal tax function were consulted.
Sen. Catherine Cortez Masto (D-Nev.) asked if Treasury was lobbied to reduce tax-exempt groups’ donor disclosure requirements.
Callanan said he was aware of a public letter from a number of tax-exempt groups, and that there were a number of lawmakers who had asked about the issue, including Sen. Ron Johnson (R-Wis.).
Wyden said he has “deep concerns” about McIntosh and Callanan’s nominations because of their roles at Treasury when the donor guidance was issued and because of their involvement in Treasury’s rejection of House Democrats’ request for President Trump’s tax returns.
Wyden had put a hold on the nominations in June, because he found Treasury’s responses to his questions about the handling of the tax return request unsatisfactory. Last week, Wyden announced that he would let the nominations move forward, after Treasury provided information that the senator said confirmed that the department’s actions are “unprecedented.”
“Mr. McIntosh and Mr. Callanan are currently the top lawyers at the Treasury Department,” Wyden said. “It has appeared that Treasury’s leadership is more interested in protecting Donald Trump and party interests than guaranteeing the department follows the law. So in my judgment, that’s not the kind of conduct that gets you a promotion.”