Such a review threatens to “chill the legitimate exercise of First Amendment rights,” wrote two Republican senators, Orrin G. Hatch of Utah and Jon Kyl of Arizona, in a letter sent to the I.R.S. on Wednesday.

Republicans were quick to point out that the I.R.S. was put under tight restrictions about access to Americans’ tax returns as a result of political shenanigans by the Nixon administration involving tax audits.

Kyl and Hatch’s request also comes on the heels of an allegation by Sen. Charles Grassley (R-Iowa) that the Obama administration improperly disclosed the confidential taxpayer information of Koch Industries during a background call with journalists:

Mr. Grassley called the matter “a very serious allegation.” The White House said it was a simple misunderstanding.

It grew out of a briefing that officials held for reporters in August in discussing possible changes in the tax code for corporations.

A administration official, speaking on the condition of anonymity in the background briefing, pointed to Koch Industries as an example of “multibillion-dollar businesses that are structured as partnerships in ways that allow them to avoid paying sizable corporate taxes.”

Mr. Grassley, in requesting an investigation, said that the official’s statement implied “direct knowledge of Koch’s legal and tax status,” in possible violation of taxpayers’ privacy laws, and may have been “politically motivated.” The White House, in a statement, denied any improper accessing of confidential taxpayer information. “The official’s statement was not based on any review of tax filings and we will not use this example in the future,” the White House said.

The White House, in other words, claims it was simply pointing to Koch Industries as an example of a broad phenomenon, much like the president did when he discussed Koch’s brainchild, Americans for Prosperity, and the possibility that it could be receiving foreign funding. It wasn’t actually sifting through Koch’s taxpayer information. But Grassley’s accusation has been sufficient to prompt an investigation by the Treasury Department’s Inspector General into the issue.

Sens. Hatch and Kyl, for their part, are apparently afraid that Senate Finance Committee Chairman Max Baucus’s request for the IRS to investigate will be a partisan process. In response, they wrote in their own letter to the IRS on Wednesday that, ”I.R.S. audits and investigations are specifically intended to be separated from the political process. We expect the I.R.S. will adhere to those standards despite requests to the contrary from high-level political officials.”

That’s what the group Citizens for Responsibility and Ethics in Washington (CREW) urged today in a letter to Baucus, chairman of the Senate Finance Committee, which CREW notes has the jurisdiction to hold hearings or launch its own independent investigation into such organizations.

The accompanying press release says, “No Need to Punt to the IRS,” and includes the following from the group’s director, Melanie Sloan:

“Senator Baucus has correctly identified the gaping hole in our tax code that allows these faux tax-exempt groups to circumvent the law thanks to the flawed Citizens United decision,” said Melanie Sloan, CREW Executive Director. “Yet, as Chairman of the Finance Committee, Senator Baucus can do something about this. He does not need to punt the matter to the IRS; rather, the Finance Committee can and should immediately begin its own investigation.  The committee has the jurisdiction and authority to subpoena witnesses and documents to get a handle on the extent of the abuse of the tax code and begin working towards a legislative solution.”

The letter submitted by CREW points out numerous instances in which the Senate Finance Committee has launched similar investigations in the past, including a thorough investigation into The Nature Conservancy’s non-cash charitable contributions in 2003. In recent years, the committee has also conducted investigations into groups affiliated with ACORN, the tax-exempt ministries of six televangelists, the Institute for Healthcare Improvement, and others.

Now that Congress is on recess, of course, there’s little chance that anything will happen before the midterm elections. But a slate of hearings during the lame duck session is entirely possible.

Under federal tax law, these groups can’t be engaged in political activity as their primary purpose, nor can they be used by individuals to advance their own private political interests. But recent media reports, Baucus notes, have indicated that such laws are being flouted:

“Political campaigns and powerful individuals should not be able to use tax-exempt organizations as political pawns to serve their own special interests.  The tax exemption given to non-profit organizations comes with a responsibility to serve the public interest and Congress has an obligation to exercise the vigorous oversight necessary to ensure they do,” said Baucus.  “When political campaigns and individuals manipulate tax-exempt organizations to advance their own political agenda, they are able to raise and spend money without disclosing a dime, deceive the public and manipulate the entire political system.  Special interests hiding behind the cloak of independent non-profits threatens the transparency our democracy deserves and does a disservice to fair, honest and open elections.”

In his letter (below), Baucus asks Shulman to review all major 501(c)(4), (c)(5) and (c)(6) organizations engaged in political campaign activity and make sure that they are operating within the guidelines of their declared tax-exempt purpose. He goes on to ask Shulman to draw up a report for the Finance Committee on the IRS’s findings as soon as possible.

Revoking an organization’s tax exempt status is a notoriously tricky and rare occasion. For one, such groups are often incorporated with impossibly vague mandates like putting forth a “pro-growth, pro-jobs message” (Americans for Job Security) or “educating citizens about economic policy and mobilizing those citizens as advocates in the public policy process” (Americans for Prosperity).

Second, the IRS as an agency is not currently staffed, equipped, or particularly motivated to enforce federal election law and, on the occasions that it has acted against groups, the decisions tend to get mired in lengthy court proceedings. But maybe Baucus’s request will light the necessary fire beneath the agency before midterms.

Here’s a copy of the letter:

September 28, 2010

The Honorable Douglas H. Shulman

Commissioner

Internal Revenue Service

1111 Constitution Avenue, N.W.

Washington, DC  20224

Via Electronic Transmission

Dear Commissioner Shulman:

The Senate Finance Committee has jurisdiction over revenue matters, and the Committee is responsible for conducting oversight of the administration of the federal tax system, including matters involving tax-exempt organizations.   The Committee has focused extensively over the past decade on whether tax–exempt groups have been used for lobbying or other financial or political gain.

The central question examined by the Committee has been whether certain charitable or social welfare organizations qualify for the tax-exempt status provided under the Internal Revenue Code.

Recent media reports on various 501(c)(4) organizations engaged in political activity have raised serious questions about whether such organizations are operating in compliance with the Internal Revenue Code.

The law requires that political campaign activity by a 501(c)(4), (c)(5) or (c)(6) entity must not be the primary purpose of the organization.

If it is determined the primary purpose of the 501(c)(4), (c)(5) and (c)(6) organization is political campaign activity the tax exemption for that nonprofit can be terminated.

Even if political campaign activity is not the primary purpose of a 501(c)(4), (c)(5), and (c)(6) organization, it must notify its members of the portion of dues paid due to political activity or pay a proxy tax under Section 6033(e).

Also, tax-exempt organizations and their donors must not engage in private inurement or excess benefit transactions.  These rules prevent private individuals or groups from using tax-exempt organizations to benefit their private interests or to profit from the tax-exempt organization’s activities.

A September 23 New York Times article entitled “Hidden Under a Tax-Exempt Cloak, Private Dollars Flow” described the activities of the organization Americans for Job Security.  An Alaska Public Office Commission investigation revealed that AJS, organized as an entity to promote social welfare under 501(c)(6), fought development in Alaska at the behest of a “local financier who paid for most of the referendum campaign.”   The Commission report said that “Americans for Job Security has no other purpose other than to cover money trails all over the country.”  The article also noted that “membership dues and assessments … plunged to zero before rising to $12.2 million for the presidential race.”

A September 16 Time Magazine article examined the activities of Washington D.C. based 501(c)(4) groups planning a “$300 million … spending blitz” in the 2010 elections.  The article describes a group transforming itself into a nonprofit under 501(c)(4) of the tax code, ensuring that they would not have to “publically disclose any information about its donors.”

These media reports raise a basic question: Is the tax code being used to eliminate transparency in the funding of our elections – elections that are the constitutional bedrock of our democracy? They also raise concerns about whether the tax benefits of nonprofits are being used to advance private interests.

With hundreds of millions of dollars being spent in election contests by tax-exempt entities, it is time to take a fresh look at current practices and how they comport with the Internal Revenue Code’s rules for nonprofits.

I request that you and your agency survey major 501(c)(4), (c)(5) and (c)(6) organizations involved in political campaign activity to examine whether they are operated for the organization’s intended tax exempt purpose and to ensure that political campaign activity is not the organization’s primary activity. Specifically you should examine if these political activities reach a primary purpose level – the standard imposed by the federal tax code – and if they do not, whether the organization is complying with the notice or proxy tax requirements of Section 6033(e).  I also request that you or your agency survey major 501(c)(4), (c)(5), and (c)(6) organizations to determine whether they are acting as conduits for major donors advancing their own private interests regarding legislation or political campaigns, or are providing major donors with excess benefits.

Possible violation of tax laws should be identified as you conduct this study.

Please report back to the Finance Committee as soon as possible with your findings and recommended actions regarding this matter.

Based on your report I plan to ask the Committee to open its own investigation and/or to take appropriate legislative action.

Sincerely,

Max Baucus

Chairman

The House has reauthorized TEF funding twice, and the White House wants the program OKed for another year. But the Senate has not managed to get the funding through.

Today, 30 Democratic senators wrote a letter to Majority Leader Harry Reid (D-Nev.) and Max Baucus (D-Mont.), the head of the Senate Finance Committee, asking for them to include another year of TEF funding — estimated to cost about $2.5 billion — in any upcoming legislation. Here’s the full text:

Dear Majority Leader Reid and Chairman Baucus:

We appreciate the many months you have spent working to pass legislation that would provide critical tax cuts and support for American workers.  Thanks to your leadership, the United States Senate has passed key provisions from the American Jobs and Closing Tax Loopholes Act of 2010, including an extension of expiring unemployment insurance benefits, an extension of expiring FMAP assistance, and an extension of the Medicare physician payment rates.

As you continue your efforts to bolster the economy and create jobs, we ask that you include a one-year extension of the Temporary Assistance for Needy Families (TANF) Emergency Contingency Fund in any upcoming legislative packages.  We further request $2.5 billion to ensure the TANF Emergency Contingency Fund is adequately funded through fiscal year 2011; the original $5 billion appropriated for 2009 and 2010 is nearly exhausted.

As you know, the American Recovery and Reinvestment Act of 2009 (ARRA) created a new Emergency Contingency Fund under the TANF block grant. States have used this fund to create subsidized jobs in the private and public sectors. By the time it expires at the end of September, the fund will have created approximately 250,000 jobs for low-income individuals (parents and older youth) who would otherwise be unemployed. States are also using this fund to provide basic cash assistance and short-term benefits to increasing numbers of poor families with children as unemployment remains high and more workers exhaust their unemployment benefits.

The TANF Emergency Contingency Fund is set to expire on September 30, 2010 and states are in the process of eliminating their employment programs and considering reductions in assistance for very poor families.  As states continue to struggle with the recession, we believe the extension of the TANF Emergency Contingency Fund would create jobs in the near term and stimulate the economy. At least thirty-six states (including the District of Columbia) have received approval to receive TANF Emergency Funds for new or expanded subsidized employment programs. And the number of unemployed parents and older youth in subsidized jobs would grow even more substantially if states had an additional year to operate the program.

We have just a few weeks before the successes of the TANF Emergency Contingency Fund experienced across the country are reversed.  Without immediate Congressional action, tens of thousands of jobs will be lost in the coming days and weeks.  Job losses in the states and counties with the large subsidized employment programs could see substantial increases in their unemployment rate.  Small businesses that have relied on the fund to expand during the recession and rehire laid-off employees will once again face financial uncertainty.  And states may implement reductions in cash assistance, assistance which is effective in stimulating the economy because the poor families receiving it spend virtually every cent in their local economy immediately to meet basic needs.

History tells us that even as the economy begins to grow again, it takes time for jobs to follow.  Allowing the TANF Emergency Contingency Fund to expire is simply not a viable option for our current economy.  We once again ask for your help to immediately extend the TANF Emergency Contingency Fund which will bolster job creation, keep much-needed income in local economies, support local businesses, and make it possible for low-income parents to cover basic expenses.

Thank you for your important work to help American families who are struggling amid this historic recession.  We look forward to working with you to ensure that state governments have the necessary resources to assist poor families with employment programs and other basic needs.

The signers are: John Kerry (Mass.), Sherrod Brown (Ohio), Jack Reed (R.I.), Jeff Bingaman (N.M.), Kirsten Gillibrand (N.Y.), Patrick Leahy (Vt.), Bob Casey (Penn.), Ron Wyden (Ore.), Ted Kaufman (Del.), Byron Dorgan (N.D.), Chris Dodd (Conn.), Tom Harkin (Ohio), Daniel Akaka (Ha.), Tom Udall (N.M.), Debbie Stabenow (Mich.), Patty Murray (Wash.), Sheldon Whitehouse (R.I.), Jon Tester (Mont.), Frank Lautenberg (N.J.), Barbara Boxer (Calif.), Charles Schumer (N.Y.), Herb Kohl (Wis.), Roland Burris (Ill.), Jeff Merkley (Ore.), Carl Levin (Mich.), Bernie Sanders (Vt.), Robert Menendez (N.J.), Benjamin Cardin (Md.), Barbara Mikulski (Md.), Al Franken (Minn.) and Arlen Specter (Penn.).

“It’s inconceivable to pull the rug out from under the same families who have been devastated by this recession,” Kerry said in a statement. “It makes no sense to shred a program that’s been creating jobs and helping low-income parents make ends meet for the last two years.”

Sen. Max Baucus (D-Mont.) is trying to hand over $24 billion in much needed Medicaid funding for states, known as FMAP. A Senate Finance Committee aide writes, “Chairman Baucus continues to work to build the support of 60 Members needed to pass the FMAP funding and is in close contact with [Sen. Harry] Reid on a potential vehicle to extend that policy.”

And House members including Rep. Jim McDermott (D-Wash.) are working to try to re-up funding for the Temporary Assistance for Needy Families (TANF) Emergency Fund. (Senate Republicans blocked a reauthorization of TANF funding in March.) Rep. Nancy Pelosi (D-Calif.), the Speaker of the House, has continued to pressure the Senate to pass House bills authorizing and offsetting the spending.

Speaking earlier this week, Pelosi said that these initiatives have been “paid for, but they have not passed yet: enhanced FMAP funding — paid for; a comprehensive jobs bill — paid for; assistance for teachers – paid for.” She argued:

America’s state legislators and governors have been clear that one of the best ways Congress can help the budgetary crises our states are facing is enhanced FMAP funding.  That’s because it is fungible and flexible. Enhanced FMAP has been both an opportunity and a challenge for you. When Congress included $87 billion in enhanced FMAP investments in the Recovery Act, it helped keep cops on the beat and teachers in the classroom and helped address the health needs of your constituents.  Many of your state budgets have been predicated on continued enhanced FMAP funding.

As you all know, the House passed an extension of FMAP last December in our comprehensive jobs bill. And now, FMAP is stalled in the Senate, even though it has a majority of support in that body.  In order to pass, it must have bipartisan support. You are the most eloquent and persuasive voices on this subject; you know best why this is necessary.  I urge you to tell Republicans in the Senate about the real cost to your communities of their opposition — cuts to hospitals, nursing homes, and public safety, elimination of domestic violence and homelessness initiatives, and slashed budgets for mental health and child welfare services.

She also pushed for edujobs funding, passed by the House and dropped from the Senate supplemental war-funding bill.

The wrangling comes as local government say they might slash as many as 500,000 workers in the next year if Congress does not provide Medicaid, TANF and education-jobs funding for states. A report released yesterday by the National League of Cities, the National Association of Counties and United States Conference of Mayors says that local governments might slash up to 9 percent of their workforces due to congress reneging on promised funds.

“Local governments across the country are now facing the combined impact of decreased tax revenues, a falloff in state and federal aid and increased demand for social services,” the report says. “In this current climate of fiscal distress, local governments are forced to eliminate both jobs and services.”

“An intervention to delay a looming Medicare physician payment cut will provide temporary stability for seniors and their physicians,” AMA President J. James Rohack said in a statement. “[B]ut the AMA is deeply disappointed that Congress will once again fail to permanently correct the Medicare physician payment formula that Republican and Democrat members of Congress, President Obama and policy experts have said should be repealed.”

Under current law, doctors treating Medicare patients will, on average, see a 21 percent pay cut beginning June 1. Yesterday, Democrats in the House and Senate introduced an enormous jobs package that also includes funding to prevent that cut from happening. (Many doctors have said that they couldn’t afford to see Medicare patients if the reduction was to take effect.)

Under the Democrats’ plan, Medicare doctors would see “reasonable” payment updates for the remainder of 2010 and through 2011. Then, in 2012 and 2013, “rates would continue to increase if spending growth on physician services is within reasonable limits, with an extra allowance for primary and preventive care,” according to a summary of the bill. Doctors would not see pay cuts in those years.

But in 2014, the current formula that’s dictating the 21 percent cut would go back into effect — a problem of which the AMA is only too well aware.

“Lawmakers must realize that the underlying policy problem will return larger than ever in 2014,” Rohack warned. “The pending Medicare proposal treats the symptoms – it’s not a cure for the disease.”

Of course, 2014 is several elections away. A number of these lawmakers may not even be around to have to deal with it.

The bill would extend the filing deadline for the existing tiers of emergency unemployment benefits — not to be confused with the creation of additional tiers — through the end of 2010. Under current law, that deadline will arrive at the end of May, threatening to lock hundreds of thousands of jobless Americans into their current tier of benefits without the option of reaching the next level.

The Baucus bill — which will be released jointly by the House Ways and Means Committee — also includes emergency funding to extend COBRA benefits, to prevent Medicare doctors from being hit with a huge pay cut June 1, and to extend a tax credit encouraging mining companies to promote worker safety.

Additionally, the bill would “increase or eliminate” the cap on the Oil Spill Liability Trust fund, which is currently $1 billion.

Democrats will want to pass this package quickly (and the June 1 deadline on some of these provisions begs their urgency). But the bill has a long road ahead, as the appetite for deficit spending, particularly in the Senate, is at an historic low. And if Sen. Bob Bennett’s primary loss in Utah offered any warning to lawmakers up for re-election this year, it’s that voters — at least in some areas — have lost that spending appetite as well.

That, Bloomberg writes, spells bad news for a growing group of long-term unemployed workers who have exhausted all available help.

[Lawmakers] are quietly drawing the line at 99 weeks of aid, a mark that hundreds of thousands of Americans have already reached. In coming months, the number of those who will receive their final government check is projected to top 1 million.

As we noted recently, there’s really no group keeping a tally of how many Americans are exhausting their benefits. The Labor Department, for example, defines “long-term unemployment” as anything beyond 27 weeks, meaning that some workers falling into that category could have 18 months of benefits remaining. And a recent study from the Pew Charitable Trusts revealed that roughly 3.4 million people have been out of work for at least a year — which again, does nothing to indicate how many folks have exhausted their government benefits.

Bloomberg, for its part, based its estimates on state figures, which paint a pretty dismal portrait of the long-term unemployment problem.

Interviews with state officials found that in New York, 57,000 people have received their last check. In Florida, 130,000 are no longer eligible as are about 30,000 Ohioans.

Those numbers will grow, according to Goldman Sachs Group Inc, which projects that more than 400,000 may soon begin losing benefits every month.

For all the uncertainty surrounding the economic recovery, this much seems clear: Congress has no plans to extend unemployment benefits beyond their current length.

“You can’t go on forever,” said Senate Finance Committee Chairman Max Baucus, of Montana, whose panel oversees the benefits program. “I think 99 weeks is sufficient,” he said.

“There’s just been no discussion to go beyond that,” said Senator Byron Dorgan, a North Dakota Democrat.

“I think the administration’s proposal is a common-sense way to make sure that money should be repaid, and I believe it should be included in financial reform legislation to be considered on the Senate floor,” Schumer said today at a Senate Finance Committee hearing.

In January, President Obama proposed taxing big banks’ profits at 0.15 percent, both to pay for the multi-billion dollar cost of bailouts and to deter risk-taking. Today, Sen. Max Baucus (D-Mont.), the head of the Senate Finance Committee, said he would hold hearings on the proposal. But Sen. Chris Dodd (D-Conn.) has thrown water on the idea of attaching the bank tax to the broader financial regulatory reform bill due to be taken up next week.

Actually, no.

The proposed individual mandate, which doesn’t apply to everyone, would require most Americans to buy private insurance on government-backed marketplaces, called exchanges. The government insurance policy Hatch refers to — commonly known as the public option — wasn’t included in the Senate-passed bill and it wasn’t a part of the White House proposal unveiled earlier this week.

Hatch, a member of the Senate Finance Committee, knows this, but evidently doesn’t see a problem with publicly misrepresenting the nature of the proposed reforms. It’s not as irresponsible as death panel claims, but it’s disingenuous nonetheless.

It’s no wonder that there’s so much opposition to health care reform – until folks are told what’s in the bills.