These specialists must determine whether a group applying for 501(c)(4) status can prove that “social welfare” is its “primary activity,” meaning at least 51 percent of its operations. But regulations do not define how to measure this activity, according to Tuesday’s report from the Treasury inspector general for tax administration, and the technical unit did not provide guidance on some cases for many months, if at all.
“No one took charge,” Friedlander said. “No one saw the implications and the sensitivity. . . . In a bureaucracy, nobody wants to rock the boat. We don’t really want to tell them to stop the salami from getting made. So [the Washington lawyers] say, ‘We’ll keep working on this.’ ”
Friedlander, Ran and Esrig were not directly privy to the choices made in this episode, and details beyond the inspector general’s report are still emerging.
Nationwide, about 900 of the IRS’s nearly 100,000 employees deal with tax-exempt organizations. Cincinnati’s determinations unit handled about 61,000 applications last year. In recent years, office culture in Cincinnati has been defined by constant reorganization to offset a voluminous workload: Regulations in the Pension Protection Act of 2006 triggered a wave of reapplications, and between 2009 and 2012, the annual number of 501(c)(4) aspirants nearly doubled, to 3,357. Many had a political tinge that complicated the determinations process.
There has also been a reliance on transactional, numbers-focused management rather than consensus-seeking leadership, according to Esrig, who said she had little contact with IRS headquarters during her short tenure in determinations in Cincinnati.
“As an area manager, decisions were made and I would have to implement them,” she said. “But I didn’t often have an opportunity to provide input.
“You have to build support in the field and get people involved, and when you don’t do that, when people are just told what to do . . . ” she said, trailing off.
This brings us to IRS headquarters, built between 1928 and 1936 in the style of
18th-century French Renaissance architecture, next to the Justice Department on Constitution Avenue NW in the District. Its looming, columnar edifice looks like a monument to decision making.