Group Warns of Chilling Effect of Widespread Data Collection

December 9, 2019

U.S. Department of the Treasury
CC:PA:LPD:PR (REG-102508-16)
Room 5203, Internal Revenue Service
P.O. Box 7604, Ben Franklin Station
Washington, D.C. 20044

Re: Comments on REG-102508-16: Guidance Under Section 6033 Regarding the Reporting Requirements of Exempt Organizations (Sept. 10, 2019) (RIN 1545-BN28)

Dear Sir or Madam,

I write on behalf of the Center for Freedom and Prosperity, a 501(c)(4) dedicated to the preservation of tax competition, financial privacy, and fiscal sovereignty. We strongly support the IRS's proposal to eliminate requirements that tax-exempt organizations, except for those designated under 501(c)(3) of the Internal Revenue Code, disclose the names and addresses of their contributors on Schedule B of their Forms 990 or 990-EZ.

Robust privacy rights are essential for a well-functioning democracy. The difference in power between the individual and the state is vast, and the right to privacy is a key component in protecting the former against the abuses of the latter. Privacy rights take on even more importance when it comes to participation in the political system, where checks are necessary to ensure that the passions of the majority not result in the violation of the rights of the minority. We maintain the right of the secret ballot, for instance, despite the nominal benefit that publicizing votes could provide for the prevention of fraud.

Similarly, the possibility of identifying a few bad actors is insufficient justification for the widespread collection of data that is not necessary for ordinary tax enforcement. While some argue that the risk of data exposure is small and therefore organizations do not suffer under the current rules, even if the chance of any given organization's contributor information being improperly disclosed is small, the chilling effect can be large.

Our organization has been accused by a prominent politician of “trading with the enemy” because we stand up for the rights of taxpayers. Such rhetoric may be par for the course within politics, but nevertheless is sinister when uttered by the politically powerful given documented cases of ideological abuse of donor information.¹ Given well-known examples of abuse in the recent past, and knowing that we are targeted by powerful figures, donors to our organization are especially fearful of political retribution.

Not all breaches are the result of malicious actions. On top of the danger of bad actors, donors must also weigh the federal government's shoddy record of information security when considering the risks associated with routine reporting of their data.² The IRS, for instance, has been repeatedly found by auditors as deficient in the protection of sensitive information. The Government Accountability Office most recently found that “continuing and newly identified control deficiencies limited the effectiveness of information system security controls for protecting the confidentiality, integrity, and availability of the agency's financial reporting systems. As a result, financial reporting and sensitive taxpayer data on IRS computer systems will remain vulnerable . . .”³

In our work at the international level, we witness how fear of political targeting corrodes trust in institutions and weakens civic engagement, as well as the critical role of financial privacy in mitigating these risks. In many nations it is understood that challenging the government invites retribution.

Adopting the proposed rule will help ensure the same does not become true within the United States.

Sincerely,

Brian Garst
Vice President
Center for Freedom and Prosperity
Alexandria, VA