The report from the Treasury Inspector General for Tax Administration details the mess made by the Internal Revenue Service and its process of singling out conservative groups for extra scrutiny of their applications for 501(c)(4) “social welfare organizations” tax-exempt status. In order to get that designation, the IRS must ensure that those groups don’t act like political organizations. But everything that happened between 2010 and 2012 shouldn’t have happened.
The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Ineffective management: 1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary information requests to be issued.
According to the report, here’s what did not happen: Neither President Obama nor the White House directed the IRS to target his critics. But he is going to have shake things up at the independent agency to make sure this boneheaded situation doesn’t happen again.
“We asked the Acting Commissioner, Tax Exempt and Government Entities Division; the Director, [Exempt Organizations]; and Determinations Unit personnel if the criteria were influenced by any individual or organization outside the IRS. All of these officials stated that the criteria were not influenced by any individual or organization outside the IRS,” notes the IG report, which counters the nefarious accusations made by some Republicans. “Instead, the Determinations Unit developed and implemented inappropriate criteria in part due to insufficient oversight provided by management…. As a result, inappropriate criteria remained in place for more than 18 months.”
Another problem highlighted by the IG was that “the criteria developed showed a lack of knowledge in the Determinations Unit of what activities are allowed by I.R.C. § 501(c)(3) and I.R.C. § 501(c)(4) organizations.” As Nick Confessore reported yesterday in the New York Times, there is an “ambiguity of existing rules” that allowed big organizations to skate by without scrutiny but ensnared smaller groups. Not only that, those IRS employees told investigators that “they considered the Tea Party criterion as a shorthand term for all potential political cases.”
That being said, the IG report found that “[w]hile the team of specialists reviewed applications from a variety of organizations, we determined during our reviews of statistical samples of I.R.C. § 501(c)(4) tax-exempt applications that all cases with Tea Party, Patriots, or 9/12 in their names were forwarded to the team of specialists” for extra scrutiny.
Two of the nine recommendations proposed by the IG would especially ensure that the scrutiny of 501(c)(4) “social welfare” groups is legit. Number six calls for training before each election cycle on “what constitutes political campaign intervention versus general advocacy.” Number eight calls on the director of the exempt organizations division to get the IRS and the treasury department to include “guidance on how to measure the ‘primary activity’” of such groups in treasury’s priority guidance plan on tax issues.
More changes are bound to come to the IRS now that a criminal investigation has been ordered by Attorney General Eric Holder. But there also need to be changes of the personnel variety to address the incompetence revealed in the report.
The president expressed the right amount of outrage on Monday. “If, in fact, IRS personnel engaged in the kind of practices that have been reported on … then that’s outrageous, and there’s no place for it,” he said. “They have to be held fully accountable, because the IRS as an independent agency requires absolute integrity.” Well, now we know. So, what’s Obama’s going to do?
Real and perceived coercive actions by the IRS undermine our faith in that agency and in our government. The folks at the IRS and the American people must believe there is power behind the president’s stern words. “He needs to fire somebody,” the legendary Democratic power broker Vernon Jordan told Politico. “He needs action, not conversation.” I have to agree.
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