As congressional Republicans (and some Democrats) settle down to the prospect of months or even years of investigating the IRS’ selective scrutiny of political groups applying for 501(c)(4) tax-exempt status, it’s important to maintain some perspective, if that’s possible. The “victims” here didn’t have sinister auditors showing up at their doors and pouring through financial records; didn’t get hit with big bills for back taxes; weren’t in danger of being hauled off to the hoosegow. Best we can tell, they simply were delayed interminably in being granted a tax-exempt designation and forced either to abandon their aspirations to spend money without disclosure of donors, or if they persisted, to jump through an awful lot of hoops and fill out an awful lot of paperwork that other groups didn’t have to deal with.
We will hear that the affected groups’ abilities to exercise their First Amendment rights were thwarted or “chilled,” under the obnoxious but well-established Supreme Court principle that money is speech. But lest we forget, there is no constitutional right to a tax exemption for this kind of “speech,” or to an exemption from campaign finance laws normally requiring disclosure of donors. So aside from affixing responsibility for the selective scrutiny, the real question going forward is what the law ought to provide in this area. And if excessive IRS discretion is the problem, then the solution is legislation to remove it by clarifying grounds for receiving 501(c)(4) status.
As Ezra Klein notes this morning, there are two main issues that point towards a legislative fix:
In which direction does our outrage point? Do we think the tea party groups really are primarily non-political social welfare organizations and they should’ve received 501(c)4 designation more smoothly? Or do we think that they’re clearly political organizations and their applications should’ve been closely scrutinized and maybe even rejected - but so too should the applications from a host of other politicized groups on the left and the right?….
Do we want a personnel outcome, a political outcome, or a policy outcome? Is the right endgame simply that some IRS employees get fired? That the Obama administration gets embarrassed? Or is that Congress tightens the language governing who does and doesn’t qualify for 501(c)4 status so that the IRS doesn’t have so much discretion — and career employees don’t resort to these confused tactics — when reviewing applications? Note that if we go the legislative route, we could either widen the 501(c)4 designation, making it clear that political groups qualify, or we could narrow it, making it clear that they don’t.
If Democrats don’t want to flounder in Scandal-land for the foreseeable future over this highly technical and easy-to-demagogue situation, they should take the lead on crafting and promoting a legislative fix. This would have the effect of drawing brighter lines in the murky laws of tax-exempt political activity, and casting brighter lights on the big fish in this pond, the gigantic groups (mainly on the right, but some on the left) that are able to pour many millions of dollars into campaign activity without disclosing donors or paying taxes.
UPDATE: The New York Times’ Nick Confessore has a useful report on the refusal of the IRS to look closely at the activities of really large 501(c)(4) groups—most famously Karl Rove’s American Crossroads GPS and the Obama-aligned Priorities USA—even as it was stonewalling and questioning the small fry.
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