[Congressional Record Volume 142, Number 80 (Tuesday, June 4, 1996)]
[House]
[Pages H5761-H5764]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    INTERNAL REVENUE CODE GUIDELINES

  The SPEAKER pro tempore (Mr. Coble). Under the Speaker's announced 
policy of May 12, 1995, the gentleman from Colorado [Mr. Skaggs] is 
recognized during morning business for 5 minutes.
  Mr. SKAGGS. Mr. Speaker, I want to address my colleagues today about 
an action I took at the end of last week in requesting the chairman of 
the Committee on Ways and Means of the House and the chairman of the 
Subcommittee on National Economic Growth, Natural Resources, and 
Regulatory Affairs of the Committee on Government Reform and Oversight 
to hold hearings to look into some very troubling transactions that 
have recently been reported in an article in the Miami Herald.
  Mr. Speaker, let me try to set the context for this by reading a bit 
from a recent publication of the Internal Revenue Service that starts 
out saying that charities, 501(c)(3) organizations, should be careful 
that their efforts to educate voters stay within Internal Revenue 
Service Guidelines. Quoting more particularly: ``Organizations exempt 
from Federal income tax as organizations described in section 501(c)(3) 
of the Internal Revenue Code are prohibited by the terms of their 
exemption from participating or intervening directly or indirectly in 
any political campaign on behalf of or in opposition to any candidate 
for public office.'' It elaborates on that saying that they cannot 
endorse any candidate, make any donations, engage in fundraising, 
whatever.
  What events raise questions under this statement of the law governing 
these 501(c)(3) organizations? Mr. Speaker, this is a copy of a letter, 
as we can see, on letterhead titled Senator Bob Dole, majority leader, 
which starts out as follows: ``Dear friend, I want you to join me in an 
historic campaign to rein in the Federal Government in order to set 
free the spirit of the American people.'' It goes on, somewhat later on 
this first page: ``President Clinton and the liberal big government 
advocates would like you and all Americans to believe the public is 
turning against our efforts.''
  It goes on for two or three pages before one learns that this is a 
letter paid for and soliciting funds in behalf of the Citizens Against 
Government Waste, an organization organized under section 501(c)(3) of 
the Internal Revenue Code and therefore subject to exactly the 
prohibition stated in the Internal Revenue Service advisory earlier 
this year.

  Mr. Speaker, this was brought to my attention through an article in 
the Miami Herald which I would ask to include in the Record along with 
copies of the letters in question that I quoted from. Clearly that kind 
of letter being submitted in behalf of an individual who is running for 
President of the United States making the kind of arguments that are 
very relevant to his campaign for President of the United States but 
being paid for under the auspices of a tax-exempt 501(c)(3) 
organization raise some very, very serious questions. They evidently 
were designed to stimulate support for the Presidential campaign of 
Senator Dole and also concluded suggestions that recipients of the 
letter make contributions to the organizations that paid for the 
letter.
  We are told that the sponsoring organizations, which also included 
the Heritage Foundation, then turned around and provided the names and 
addresses of persons who contributed in response to these letters, to 
the Presidential campaign of Senator Dole so that presumably they could 
be used for solicitations by his campaign. The Internal Revenue Code 
explicitly prohibits 501(c)(3) organizations from engaging in just this 
kind of political activity directly or indirectly in support of or in 
opposition to a candidate's campaign.
  The Miami Herald article that I refer to also makes it clear that 
neither the 501(c)(3) organizations' expenditures in preparing and 
distributing the letters nor the lists of contributors that were then 
provided by these organizations to the Dole for President campaign have 
been reported as contributions to the Dole campaign. If the figures are 
correct, these mailings to some 10 million Americans cost nearly $1 
million. The value of the contributor lists are worth possibly $40,000 
or more. But here was no reporting either under the FEC laws and again 
no explanation was made as to how this could occur in compliance with 
the clear prohibitions in the Internal Revenue Code against this kind 
of campaign activity by 501(c)(3)s.
  It raises a whole range of questions which I believe appropriate 
committees of the House ought to look into regarding the coordination 
between the Presidential campaigns and these nonprofit organizations 
who benefited by the mailings, how much they cost, how the lists were 
developed, whether or not it was all coordinated with the Dole 
campaign.
  I hope my colleagues will take the action as I requested and conduct 
a thorough investigation of this matter.
  Mr. Speaker, I include the following materials for the Record:

                 [From the Miami Herald, May 25, 1996]

            Dole Campaign Gets Help From Nonprofits He Aided

                            (By Frank Greve)

       Washington.--Bob Dole, shortly after he announced last year 
     that he was running for

[[Page H5762]]

     president, sent millions of Americans letters urging them to 
     contribute to the Heritage Foundation. And to Citizens 
     Against Government Waste. And to a half-dozen other right-of-
     center groups.
       Dole's advocacy could get his campaign into trouble with 
     the Federal Election Commission. It also could get tax-exempt 
     groups he helped into hot water with the Internal Revenue 
     Service.
       That's because tax-exempt groups can't participate in 
     partisan politics, Dole can't take help from them, and the 
     letters he wrote for them helped his campaign raise money.
       Here's how it worked: The nonprofits paid for the letters, 
     which promoted both Dole and their cause. The nonprofits kept 
     the donations, but passed on to the Dole campaign, free of 
     charge, the name of every contributor he inspired. Those hot 
     prospects--maybe 200,000 of them--subsequently got letters 
     from Dole asking them to contribute to his campaign.
       Dole has not reported these mailing lists as contributions, 
     arguing that they were part of a barter not covered by 
     federal election law. The lists could be worth $40,000 or 
     more, according to direct-mail specialists. Under Federal 
     Election Commission law, campaigners can't take anything from 
     federally chartered nonprofits. Mailing lists are explicitly 
     banned.
       Nor have the tax-exempt groups acknowledged any political 
     help to Dole. IRS law, reiterated in a public warning last 
     month, forbids their participation in ``any activities that 
     may be beneficial or detrimental to any candidate.''
       Both Dole and the nonprofits argue that their deals were a 
     simple swap: a politician's fund-raising help for the names 
     of donors attracted.
       ``We are clearly within our rights to have engaged in this 
     practice,'' Christina Martin, deputy press secretary for the 
     Dole campaign, said. ``We don't think there are any problems, 
     but if there are, they lie with the nonprofits and the IRS, 
     not the Dole campaign.''
       In fact, other presidential candidates, including Ronald 
     Reagan, have traded endorsements for mailing lists in the 
     past. But times may be changing, particularly at the IRS.
       Tax-exempt groups that participate in politics in any way 
     are ``going to get in trouble,'' Marcus Owens, director of 
     the tax service's Exempt Organizations Division, warned in an 
     interview, noting that he had a record high of more than 30 
     such cases pending.


                           a recent crackdown

       Just last month, Owens and the IRS cracked down on tax-
     exempt groups that advocated electing or unseating particular 
     candidates. That had been a staple motivator in fund-raising 
     appeals of many groups.
       Without referring to Dole's deals in particular, Owens said 
     trades involving mailing lists ``could very well be viewed as 
     political intervention, because a mailing list is a very 
     valuable item for a political campaign.''
       ``The IRS is shooting straight at the heart of a rather 
     common practice,'' said Frances Hill, a University of Miami 
     law professor who concentrates on exempt organizations. 
     ``Having a candidate sign a fund-raising letter for a [tax-
     exempt organization] during a campaign is not something I 
     would advise.''
       For Dole's presidential drive, the initial letters on the 
     groups' behalf may have been more valuable than the 
     contributor lists they generated.
       ``I want you to join me in an historic campaign to rein in 
     the federal government in order to set free the spirit of the 
     American people,'' Dole began in a typical appeal, this one 
     on behalf of Citizens Against Government Waste, a Washington-
     based foe of pork-barrel spending.
       ``President Clinton and the liberal, big-government 
     advocates,'' Dole continued, are undermining his budget-
     balancing efforts, ``laying the groundwork for future tax 
     increases.''
       Not until Page 3 of the four-page appeal does Dole mention 
     Citizens Against Government Waste as his important ally and 
     urge a contribution to the group.
       Appeals like these enabled Dole to arouse--free--millions 
     of activists essential to his voter base. Postage along cost 
     the nonprofits $80,000 per million-letters. An estimated 10 
     million letters were sent.
       The Citizens Against Government Waste appeal, using 
     envelopes and stationery with Dole's name on it in ornate 
     script, was highly successful, reported Thomas Schatz, the 
     group's president.
       He added that giving the donor list derived to the endorser 
     is a ``standard practice'' in the direct-mail industry. The 
     transaction was merely ``a trade,'' Schatz added, and it 
     served his group well.
       Exchanges of endorsements for mailing lists are ``purely a 
     business decision,'' according to John Von Kannon, treasurer 
     of the Heritage Foundation, a Washington think tank. Heritage 
     gained as much or more from Dole's signature as Dole gained 
     from the mailing list, Von Kannon said, so no campaign 
     contribution was made.
       ``There's law as written and law as enforced,'' stressed 
     lawyer William Lehrfeld, an adviser to Washington's 
     conservative nonprofits. Politicians and nonprofits have 
     consorted together for as long as priests have fought 
     abortion and campaigners have sought pulpit endorsements, 
     Lehrfeld contended. The only real question, he added, is 
     where the IRS chooses to draw the line.
       IRS rulings lag years behind current practices, so it's 
     impossible to know exactly what the agency's recent warnings 
     mean. While declining to address Dole's dealings directly, 
     Owens raised some questions about them.
       Among them were the timing of Dole's appeals, the degree of 
     political content in them, and whether participating groups 
     were prepared to offer to other politicians the mailing lists 
     Dole helped create.


                             ruling awaited

       The Federal Election Commission also moves slowly and has 
     not yet ruled on a case involving an exchange of endorsements 
     and mailing lists, according to spokesman Ian Stirton. Until 
     such a ruling is made, the commission's interpretation will 
     not be known.
       The Clinton campaign has ``absolutely not'' engaged in the 
     practice, according to Hal Malchow, head of Clinton's direct-
     mail effort. Nor did the 1992 campaign use mailing lists from 
     tax-exempt groups, said Ann Lewis, deputy manager of the 
     Clinton campaign.
       Among Democrats, Sen. Edward Kennedy of Massachusetts 
     recently endorsed a direct-mail appeal for Handgun Control 
     Inc. with the expectation of obtaining the donor list. 
     Kennedy intends to pay for the names, his office and the 
     nonprofit said when a reporter raised the issue.
                                                                    ____

       Dear Friend: I want you to join me in an historic campaign 
     to rein in the federal government in order to set free the 
     spirit of the American people.
       I want to wage a bold effort to slash the waste out of the 
     federal government and balance the budget. But I need your 
     help.
       As a starting point in this critical process, I have 
     already called for and started working toward the elimination 
     of the Departments of Housing and Urban Development, 
     Commerce, and Energy.
       Clearly, these are three of the most ineffective, 
     burdensome and wasteful departments of government. What's 
     more, the states can do a much better job of administering 
     welfare than bureaucrats here in Washington.
       The tens of billions of dollars per year saved by 
     eliminating these unnecessary and meddlesome departments will 
     amount to a good down payment on balancing the budget.
       But we must go much, much further!
       We must cut many additional billions of dollars in waste 
     and slow the growth of government if we are to balance the 
     budget and save our children and grandchildren from a future 
     in which the lion's share of their earnings will go to pay 
     off our debts.
       One of the best ways you can join and help me in this war 
     on wasteful spending and the deficit is by answering the very 
     important Survey I have enclosed for you.
       This National Survey to Slash Wasteful Spending & the 
     Deficit is a powerful way you can make your opinions known in 
     Washington right now.
       What's more, this Survey will demonstrate that support for 
     cutting wasteful spending is growing stronger every day.
       President Clinton and the liberal, big-government advocates 
     would like you and all Americans to believe the public is 
     turning against our efforts to balance the budget and cut 
     wasteful government.
       Your Survey will help me prove them wrong! Please take a 
     moment now to answer and return your Survey.
       I cannot overemphasize how critical it is for you to 
     personally participate in this nationwide Survey. Please 
     answer today!
       If you fail to publicly support this new waste-cutting 
     campaign, I fear that our current effort to slash the size, 
     cost and power of wasteful government may fail and the 
     deficit will skyrocket well beyond its current $200 
     billion a year level. Here's why I say that.
       Have you noticed recently that the big-government advocates 
     want you and all Americans to believe that cutting spending 
     is ``hurting children and helping rich people?''
       These are not isolated cases of fair-minded opposition to 
     one or another specific cuts in government waste.
       This is a concerted campaign to stop all efforts to cut 
     wasteful government spending by portraying all government 
     spending as ``sacred'' and the waste-cutters as 
     ``heartless.''
       It is a campaign waged by big-government advocates who live 
     off of government waste and refuse to recognize the terrible 
     damage which 40 years of wasteful, runaway deficit spending 
     has done to America.
       You and I and all the budget-cutters in Congress are, in 
     fact, facing nothing short of an all-out political battle.
       We face a battle between those of us who want to avert a 
     deficit crisis by cutting wasteful government spending and 
     those who view all government spending as ``sacred,'' care 
     little about the deficit and are laying the groundwork for 
     future tax increases.
       Let me give you just one example.
       Did you notice how, with the active help of President 
     Clinton, the big-government advocates have tried to portray 
     the new Congress' efforts to reduce only the growth rate of 
     spending on school lunches as an actual cut in the program?
       The new Congress proposed spending more on school lunches 
     than ever before in American history.
       Yet, the advocates of big government are trying to convince 
     the American people that we would deny food to starving 
     children.

[[Page H5763]]

       It is untrue. It is distorted. It is pure political 
     propaganda.
       Their goal is to convince the American people that cutting 
     spending simply can't be done--that it's too painful.
       They are once again trying to build their case which says 
     that America has this massive national debt not because 
     Washington spends too much money, but because YOU don't pay 
     enough in taxes.
       Your Survey will help to counter this propaganda campaign 
     by showing that you're too smart for their scare tactics.
       Your Survey will demonstrate that you want common sense 
     cuts in government waste because you know that the deficit 
     produced by this wasteful spending will devastate every 
     American's future.
       Your Survey will show that you understand and are deeply 
     concerned that right now every child born in America will pay 
     $187,000 over their lifetime just to pay the interest on 
     the debt we've already accumulated. That means they will 
     pay $3,500 in taxes every year of their working lives just 
     to pay this interest on our debt.
       Your Survey will show me and the new Congress which 
     wasteful spending you want cut first in our drive to protect 
     the taxpayers and our children's future by balancing the 
     budget.
       And your Survey will bolster the convictions of the members 
     of Congress who are being attacked the most because the big 
     government advocates are hoping to defeat them in the next 
     election.
       I urge you to show your support for our cuts in wasteful 
     government and tell us which reforms you think are the most 
     urgent by answering your Survey today. Your Survey answers 
     will be tabulated and the results will be aggressively 
     publicized both here in Washington and to opinion leaders and 
     the news media throughout the country.
       And when you return your Survey, I must ask you to also 
     make a special contribution to the organization which is not 
     only sponsoring this vital national Survey, but is the 
     leading organization in the fight against deficit-producing 
     government waste.
       One of the most important groups in fighting wasteful 
     government spending is Citizens Against Government Waste 
     (CAGW), a private, nonprofit organization.
       Establishing in 1984, CAGW began as an organization solely 
     devoted to fighting for the implementation of Ronald Reagan's 
     Grace Commission recommendations.
       Since then, CAGW has been credited with leading the way in 
     helping to cut over $250 billion in government spending. 
     Today, CAGW researches and identifies the most blatant waste 
     in government and shows how it can be eliminated.
       CAGW has a long and successful record of winning major cuts 
     in wasteful spending without sacrificing America's defenses. 
     My colleagues and I for years have applauded CAGW for 
     providing valuable information needed to cut wasteful 
     government.
       But CAGW's greatest contribution has been how they have 
     rallied the American people in opposition to government waste 
     and the deficit. The big government advocates laughed at 
     CAGW, when years ago they began an aggressive campaign to 
     show the American people how the deficit and government waste 
     were jeopardizing their futures.
       Last November, many of those who used to laugh at CAGW were 
     swept out of office! In fact, CAGW was a leading force in the 
     popular revolt against big, wasteful, deficit-ridden 
     government.
       But now we need CAGW and you, as a CAGW Charter Member, to 
     wage this new campaign to demonstrate widespread support for 
     the deeper cuts in wasteful government spending and balancing 
     the budget, and to help counter the outrageous charge that 
     cutting the deficit-producing waste will ``hurt children and 
     help rich people.''
       The only way CAGW can wage such an aggressive campaign is 
     if you will send a Charter Membership contribution of $25, 
     $35, $50 or more when you return your Survey.
       When you join CAGW, you will make it possible for CAGW to 
     tabulate and report your Survey results to leaders of the 
     budget-cutting efforts on Capitol Hill. Also, your membership 
     contribution will enable CAGW to expand this campaign to 
     generate a truly nationwide outpouring of support for 
     smaller, leaner government.
       And most importantly, your contribution will provide the 
     critical dollars CAGW needs to help my colleagues and me 
     counter the outrageous charges of being ``cruel and 
     heartless'' budget-cutters.
       The best way we can counter the charges against our waste-
     cutting efforts is by overwhelming the big-government 
     advocates with detailed examples of how they are wasting our 
     tax dollars and how they are endangering the future of our 
     children and grandchildren.
       Unfortunately, my budget-cutting colleagues and I simply 
     don't have the resources to single-handedly counter the 
     intense and misleading propaganda from the advocates of big 
     government. We are counting on you to help us by joining and 
     supporting CAGW's efforts. Please make every effort to send a 
     membership contribution of $25, $35, $50, or more when you 
     return your Survey.
       The road ahead will only get tougher. Those who live off 
     and depend on government waste will fight harder and harder. 
     If we are to continue slashing wasteful spending and the 
     deficit, we must have your support as a CAGW member in 
     rallying the American people to our cause.
       But the success of CAGW's efforts all depends on your 
     decision to return your Survey and send a generous membership 
     contribution today.
       This is one of those special times in history when you can 
     help decide the outcome of a critical national debate. Will 
     we be able to make the cuts in wasteful government spending 
     which are necessary to save our children's future or will 
     big-government advocates stop us?
       With your contribution and your Survey, you can help ensure 
     that our efforts to continue cutting waste will not be 
     blocked by the narrow, selfish special interest groups. 
     Please respond today and be as generous as you can. My 
     colleagues and I are counting on you.
           Sincerely,
                                                 Senator Bob Dole.

       P.S. The next few months will be critical in our battle to 
     slash wasteful government spending. If we are to succeed, we 
     need your support today. Please answer your Survey right away 
     and return it with your most generous contribution to CAGW 
     possible. My colleagues and I want and need to hear from you. 
     Please answer today.
                                                                    ____

       Dear -- --: As your Senate Majority Leader, I want to get 
     Washington off your back and out of your pocket.
       I want to take power from Washington and put it back in 
     your hands.
       I want the federal government to focus on the jobs it does 
     best, such as defending the nation, conducting foreign 
     relations, and putting criminals in jail.
       This message--these clear ideas--is the engine of political 
     change in America today. It put Congress in conservative 
     hands for the first time in forty years.
       And working with my close friends at The Heritage 
     Foundation (who have spent two decades trying to cut 
     government) I want to change how Washington taxes, spends and 
     regulates.
       Families, not bureaucrats, should control what their 
     children are taught.
       Billions can be saved and service improved by rethinking, 
     cutting and merging the 14 Cabinet Department as they exist 
     today.
       I want to start by getting rid of the departments of 
     Education, Housing and Urban Development, Energy, and 
     Commerce.
       And as a Heritage member you can help me by reading the 
     enclosed fact sheet I have prepared with the help of 
     Heritage's respected policy experts.
       It offers real leadership. Real help for our country.
       Why start with these four?
       Because they are examples of what's gone wrong in 
     Washington. Their missions are either duplicated elsewhere, 
     obsolete, or should never have been in federal hands in the 
     first place. Yet they cost $70 billion and employ 74,000 
     bureaucrats.
       America is better off without them. See for yourself.
       71 other government bodies already duplicate functions of 
     the Department of Commerce--yet we spend $3.6 billion on it 
     alone each year.
       HUD spends more than $200 million annually on programs that 
     breed despair by trapping poor Americans in crime ridden 
     slums--not because there are no better options, but because 
     the housing authorities don't want to change.
       The Department of Energy's budget has increased by 155% 
     since its creation in 1977 despite the lack of any threat to 
     America's energy supplies.
       The Department of Education has a new $65 billion program 
     that could dictate everything from how schools can discipline 
     kids to the salaries of assistant coaches. This department 
     was created as a political payback to the teachers' unions by 
     Jimmy Carter's White House. Since then, our children's test 
     scores have plummeted and control has been taken from parents 
     and communities.
       Your fact sheet tells you what else is wrong with these 
     four cabinet departments, what can be fixed, what should be 
     tossed out, how the job can be done better and at less cost 
     to you.
       Take a few minutes to read it and tell me what you think by 
     filling out the nine question survey enclosed with my letter.
       Your answers will be tabulated by The Heritage Foundation 
     and given to me, every other member of Congress, the White 
     House and the news media.
       I will use the results--and your support--to keep the 
     political heat turned up in Washington. Because, unlike the 
     rest of America, much of official Washington really doesn't 
     want change.
       Already, Bill Clinton and the special interests who profit 
     from the current system (like the National Education 
     Association) are fighting pitched battles to protect the turf 
     that has made too many of them rich and powerful.
       President Clinton, the ``New Democrat'' who campaigned as a 
     reformer, has become the spokesman for the status quo.
       But I am committed to giving you the reforms you want and 
     America needs.
       The liberals spent the last 30 years tinkering, spending 
     and writing laws to create a ``Great Society'' but all we've 
     gotten is debt and despair.
       Their thirst for special interest legislation cracks and 
     fragments our cultural unity. Rather than ``One nation under 
     God'' we have become a nation of unconnected special interest 
     groups.
       This is what Heritage and I are working to fix.

[[Page H5764]]

       That's why I hope you will take a few minutes to read your 
     fact sheet and let me know if you support getting rid of 
     these departments entirely.
       It's simple. Just complete the survey and mail it to my 
     attention at The Heritage Foundation.
       Why have I chosen The Heritage Foundation?
       Because I trust they are honest. I have counted upon their 
     accurate and well documented work for the last 22 years.
       As a member, you know Heritage believes in free enterprise, 
     limited government, traditional values and a strong national 
     defense. These are the answers to our problems.
       Heritage was a driving force behind the success of my 
     friend Ronald Reagan's two terms in office. They are real 
     hawks when it comes to protecting your freedoms.
       Heritage does the hard work of looking at government, 
     evaluating what it does and what it really costs. Their work 
     is closely watched and quoted by all of the major networks 
     and news organizations--which is no small feat when you know 
     the press is mostly run by lifelong liberals.
       When you send back your survey, please include a 
     contribution to The Heritage Foundation to help them continue 
     this painstaking work that we in Congress rely on so heavily.
       Ed Foulner, Heritage's president, has told me that you have 
     given $25 to the Foundation.
       I congratulate you on your generosity, and I urge you to 
     give another $25, or even $75, to Heritage for this vital 
     work.
       As you know, The Heritage Foundation lives by the free 
     market system they advocate. Heritage accepts no government 
     funds and relies on voluntary gifts to support their work.
       So please take a moment to read our fact sheet on shutting 
     down the Departments of Education, HUD, Energy and Commerce 
     forever. Tell us what you think by completing the survey and 
     mailing it back today. In advance, I thank you for your 
     support.
           Sincerely,
                                                         Bob Dole,
                                           Senate Majority Leader.

       P.S. I want to change how Washington taxes, spends and 
     regulates.
       But with Bill Clinton in the White House, true reform will 
     not come easily. It requires all who want it to work 
     together.
       That's why I am working with The Heritage Foundation to 
     restore our future by limiting government to its core 
     functions such as national defense and fighting crime.
       I want to start by cutting the Department of Education, 
     Housing and Urban Development, Energy, and Commerce. This 
     saves billions of your tax dollars immediately.
       How do you feel about this?
       Tell me today. Please complete the enclosed survey and 
     return it to me at The Heritage Foundation. And your gift of 
     $25 or $75 to help Heritage with this vital work is greatly 
     appreciated. Thank you.

                          ____________________