Thursday, May 30, 2013

Time for my take on the IRS "Scandal"...

"Never ascribe to malice that which is adequately explained by incompetence"

Its been a couple weeks now since the IRS "scandal" broke in the press. The basic story line is this. An unknown number of Internal Revenue Agents who were assigned to the Determination Unit, based in Cincinnati, OH began to look for certain phrases like Tea Party, Patriots, Freedom, etc. as they investigated what organizations should and which shouldn't receive the 501 (c) (4) status they sought.

What does 501 (c) 4 status mean? Wiki says the following: (Bold mine)

501(c)(4) organizations are generally civic leagues and other corporations operated exclusively for the promotion of "social welfare", such as civics and civics issues, or local associations of employees with membership limited to a designated company or people in a particular municipality or neighborhood, and with net earnings devoted exclusively to charitable, educational, or recreational purposes.[35] An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting the common good and general welfare of the people of the community.[36]
501(c)(4) organizations may inform the public on controversial subjects and attempt to influence legislation relevant to its program[37]and, unlike 501(c)(3) organizations, they may also participate in political campaigns and elections, as long as its primary activity is the promotion of social welfare.[38] The tax exemption for 501(c)(4) organizations applies to most of their operations, but contributions may be subject to gift tax, and income spent on political activities - generally the advocacy of a particular candidate in an election - is taxable.[39] 501(c)(4) organizations are not permitted direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.[36]
Contributions to 501(c)(4) organizations are usually not deductible as charitable contributions for U.S. federal income tax, with a few exceptions.[40] 501(c)(4) organizations are not required to disclose their donors publicly.[41].

You got that? c3's can not be involved in a political campaign or supporting a candidate in any way shape or form. A c4 can in a limited way, as long as its "primary activity" is social welfare. 

This is important and I encourage you to give this short interview from Sirius XM's POTUS Channel #124 with Melanie Sloan a good listen. Its about 17 minutes long, but Sloan lays out the differences really well and discusses the fundamental problem that occurred when the IRS changed its own language and made it less clear with regard to what kind of organizations can actually be a 501 C4. Ms. Sloan is the head of Citizens for Responsibility and Ethics in Washington and has taken the IRS to task several times over this exact issue.

Sit back and listen to this: 

(Audio courtesy of Tim Farley/POTUS/Sirius/XM #124)

There's been a great amount of hand wringing about this scandal from both sides. No one really disputes that some IRS employees went too far in how they attempted to determine if certain groups deserved the desired status or not. That said, this status isn't intended to be granted upon demand. It has to be proven and substantiated the purpose and activities of a requesting group. With the growing number of requests for 501 C-4 status on the rise since the Citizens United ruling, methods were developed to try and work through the requests more efficiently. Groups have tried to take advantage of the IRS for a long time and its not beyond the pale to think that an applying group with phrases like Tea Party, Patriots, Freedom, etc...might not be the  "social welfare" organizations they claimed to be.

Its a good time to point out that many who find fault with the IRS often cite tax fraud and cheats as being a big problem that needs addressed. Everyone should pay their fair share, no doubt. Also keep in mind, that every time the actions and methods of those in the Determination Units were passed on to the higher ups, they were told uniformally to stop immediately.

Poor judgement was present in large quantities on this project, and new rules have to be put into place to avoid this from happening again. But, as Ezra Klein pointed out so well in today's Washington Post's Wonkblog, let's not confuse scandal with scrutiny.

It was proper that the tea party groups received heavy scrutiny. As the New York Times has firmly established, many of them were primarily political groups that potentially didn’t qualify for 501(c)(4) status.

When CVFC, a conservative veterans’ group in California, applied for tax-exempt status with the Internal Revenue Service, its biggest expenditure that year was several thousand dollars in radio ads backing a Republican candidate for Congress.
The Wetumpka Tea Party, from Alabama, sponsored training for a get-out-the-vote initiative dedicated to the “defeat of President Barack Obama” while the I.R.S. was weighing its application.
And the head of the Ohio Liberty Coalition, whose application languished with the I.R.S. for more than two years, sent out e-mails to members about Mitt Romney campaign events and organized members to distribute Mr. Romney’s presidential campaign literature.

And more:

The problem wasn’t that the IRS closely scrutinized questionable applications from tea party groups. It’s that they didn’t closely scrutinized the applications from other questionable groups as well. The scrutiny was the part they did right. The targeting was the part they did wrong.

According to sworn testimony at a House hearing last Friday, the notion that only Conservative groups were singled out was addressed:

“If the targeting wasn’t targeting, if the targeting wasn’t based on philosophy, how come only conservatives got snagged?” Roskam confidently asked.
“They didn’t, sir,” Miller responded. “Organizations of all walks and all persuasions were pulled in. That’s shown by the fact that only 70 of the 300 organizations were tea party organizations, of the ones that were looked at by TIGTA [Treasury Inspector General for Tax Administration].”
Roskam angrily cut off Miller and asserted his statement was at odds with the inspector general’s testimony, then ended his questioning.
But Treasury inspector general J. Russell George testified during the hearing that no evidence indicated the additional review of the 300 groups was politically or ideologically motivated. He blamed the incident on mismanagement.
Of the 298 groups subjected to additional review, 72 were “tea party” groups, 11 were “9/12″ groups and 13 were “patriots” groups, according to the inspector general’s report.
So, it is clear things were done wrong in the field with regard to processing 501 c4 applications. The "BOLO's " (Be on the lookout for) lists were wrong and shouldn't have been used. Going forward, new, improved, cleaner procedures have to be developed and put into practice. ALL applicants should be given the same scrutiny, regardless of party affiliation.

That's what I know. What I don't know is how we connect all of this to the Obama Administration. I know there's a political party that would love nothing more than to see this turn into an honest to goodness scandal, but it doesn't seem like that's going to happen.

The Internal Revenue Service has a hell of a job on its hands. Its fashionable these days, especially on the right, to bash the entire organization as corrupt, bought and sold, un-American, criminal, etc. Which is a load of crap, of course. The employees of the IRS are people. As in any cross section of a large group of people, you'll find all kinds. Keep this in mind, in 1996, the IRS employed roughly 107,000 employees across the Country. Today, it employs 97,000. Ask yourself, is there that much less work for them to do? The IRS is losing manpower, seeing its budget cut back over recent years, etc. No excuses, but there's a price tag to be paid for austerity measures.

I don't know where these investigations will take us. I think we will beat this until there just nothing left to beat and a respectable, hard working agency will have been unfairly slandered. A few bad apples (or well intentioned confused ones) will have caused a lot of damage. This isn't going away and every day seems to bring a new round of outrage from politicians both conservative and liberal, who God forbid, don't want to miss their kick at the IRS's can.

Let's keep our eyes wide open on this. Let's understand what it is and what it isn't.


No comments:

Post a Comment