IRS' Internet Review Worries Groups

Wednesday, December 27th 2000, 12:00 am

By: News On 6

WASHINGTON (AP) â€” The Internal Revenue Service is examining how to apply laws restricting the political, commercial and lobbying activities of tax-exempt organizations to the groups' Internet Web sites. Some groups fear the move could lead to excessive government intrusion and stifle free speech.

IRS officials, who quietly published a notice in October seeking comment on the issue, say they're merely considering whether to modernize laws that affect some 1.3 million entities exempt from taxes under section 501(c) of the tax code. Others aren't so sure.

``This request raises many concerns,'' said House Majority Leader Dick Armey, R-Texas. ``The idea of turning the tax man into a net cop would have a chilling effect on free speech on the Internet.''

Section 501(c) covers a wide range of tax-exempt organizations, including religious institutions, charities, foundations, public service entities and nonprofit groups.

Those falling under Section 501(c)(3) â€” which accept tax deductible contributions â€” can't engage in political activity and can take part in only ``insubstantial'' lobbying. There are rules regarding income from activities such as advertising, fund-raising and issue advocacy.

In a low-profile notice released Oct. 16, the IRS asked for comment on a host of questions about how these rules translate to the increasing use of the Internet.

Some tax-exempt organizations have raised concern that the IRS could hold them accountable â€” and possibly revoke their tax-exempt status â€” for their Web page links to political groups or for statements made in Web newsgroups or chat rooms.

``I am very concerned with the IRS proposal because of the difficulty I would have with policing links from the site,'' said Jim Harper, who runs a 501(c)(3) privacy policy site called Privacilla.org. ``I would easily have more than 1,000 links, each of which the IRS could find to be 'advocacy' because of the content on the other end.''

Another 501(c)(3) group, the Citizens' Council on Health Care based in St. Paul, Minn., said in an e-mail that the IRS could produce rules that would ``seriously limit public discourse and freedom of speech. Even if the Web site is eventually found to be innocent of the IRS charge, damage to the organization will be extensive.''

But officials with the Treasury Department say the idea for updated IRS guidelines originated with tax-exempt groups themselves, including Independent Sector, a coalition of leading nonprofit and philanthropic groups, and the American Bar Association's tax section.

Washington attorney Pamela Olson, chairwoman of the ABA tax section, said the rules are ``an area where we definitely need guidance. I think Treasury is listening closely to the comments.''

Judy Kindell, IRS tax law specialist in the exempt organizations division, said the intent is to apply existing law regarding tax-exempt groups to new practices made possible by the Internet. The IRS, she said, is not attempting to enact new restrictions or rewrite the law.

``We're not trying to broaden our authority at all. We're just trying to do our job and move it to the Internet age,'' Kindell said.

Some of the negative comments, Kindell added, ``go back to the underlying prohibition, not what happens when you take existing activities and move them to the Internet.''

The IRS will accept comment on the issue through Feb. 13 and it is possible officials will decide to take no further action. If new guidelines are developed, Kindell said, it could take months or even years before they are finalized.

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On the Net:

IRS: http://www.irs.gov

Sending e-mail comment to the IRS: TE/GE-Exempt-2irs.gov

ABA Tax Section: http://www.abanet.org/tax