Americans’ favorite government agency to hate, the Internal Revenue Service (IRS), has managed to make itself even more loathed by conservatives. How? It is coming under fire for (over?) scrutinizing conservative, tea party groups’ tax-exempt status, which just plays too well into the Republican narrative of persecution on all fronts – from the liberal media to the War on Christmas. However, this particular issue is not so simple.
Let me begin by saying the IRS is not – and should not be – political. Because it wields such power, there must be an overwhelming number of safeguards to ensure its impartiality. If it becomes clear there was serious wrong-doing at the IRS, those responsible should be punished and held accountable. President Obama rightly called the targeting of conservative groups “outrageous.”
However, this story is part of a much wider problem: the huge amount of cash flowing into campaigns from anonymous groups and the government’s inability – or unwillingness – to do much about it. It all starts with the 2010 Supreme Court decision Citizens United vs. Federal Elections Commission, which eliminated caps on groups’ political spending in the name of free speech. It also allowed these groups to apply for tax-exempt status with the IRS, under Section 501(c)4 of the tax code. There are two major perks to filing your organization as a 501(c)4: you don’t pay taxes and you don’t have to disclose your donors.
However, this section of the tax code was not created for groups like Karl Rove’s Crossroads GPS or the liberal Organizing for America, both of which have explicit political purposes. Though 501(c)4s can engage in some political activity, such as lobbying, their primary purpose must be promoting social welfare – an ill-defined term, to say the least.
Not surprisingly, after Citizens United, applications for 501(c)4 status doubled. And the IRS does not have the tools to make sure no shenanigans are going on. So when does a group that has filed for 501(c)4 status cross the line and become too political for the IRS? It’s hard to say, in large part due to the lack of clear, institutional definitions. It reminds me of how Supreme Court Justice Potter Stewart described pornography in the Court’s 1964 ruling Jacobellis v. Ohio: I know it when I see it.
Guess how much conservative groups, including the Koch brothers’ Americans for Prosperity (AFP), spent in total in the 2012 election cycle. $254,000,000. AFP received tax-exempt status in 2004 and said it planned to spend ZERO dollars on elections in its application with the IRS. Zero. Guess how much it spent in the 2012 election, according to Open Secrets. $36,352,928. Talk about a lot of social welfare promotion.
I don’t mean to frame this as something that only affects conservatives, but there is no question more outside conservative groups sprang up than liberal ones in the wake of Citizens United. And there is also no question conservative groups spent more than liberal ones on elections, though they were not met with much success in 2012.
So, if you work in the tax-exempt organizations branch of the IRS, what do you do?
With all this in mind, let’s return to the story of “targeting” that broke this weekend. IRS civil servants in Cincinnati, where 501(c)4 applications are processed, looked for words including “patriot” and “tea party” in applications to find groups that may have been overly political and, therefore, required extra scrutiny. Of the 298 groups receiving a second look, 72 had “tea party” in their name, and 13 had “patriot.” Other terms may have been used, but they have not been disclosed yet. One thing you may not hear in conservative talking points is that every group received 501(c)4 status. That’s right – in the witch hunt conservatives are alleging took place, no witches were found, let alone burned.
The problem here isn’t that the IRS was looking to make sure it wasn’t giving tax-exempt
status to the groups that flood swing states with partisan attack ads – that’s their job. The problem is that it lacked the institutional mechanisms to do it effectively and free from bias, resulting in non-political appointees in Ohio improvising judgement calls without much oversight. That’s a very serious problem.
But the real problem is that the IRS didn’t go far enough: every group applying for 501(c)4 status deserves a very thorough vetting by the IRS, regardless of its ideological leanings. The IRS needs the right tools to protect the American people from groups anxious to thwart the tax code and spend millions on elections. If it isn’t going to monitor shadowy outside political spending, who is? Congress? Fat chance. And now that the agency is coming under fire from all sides, it’s even less likely to go after these groups in the future, giving them even more free reign.
So, is there a problem? Absolutely, but without the right context you’ll miss the real story.
- IRS admits scrutiny of conservative groups was wrong – Reuters (reuters.com)
- IRS Scrutiny of Tea Party is Wrong, and Highlights Problems with Vague Rules (notaboutquality.com)