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May 15, 2013 10:55 AM Two Rather Important Details About the IRS “Scandal”

By Ed Kilgore

I know we’re already getting into the post-factual stage of what Roll Call’s Stu Rothenberg is gleefully calling the “triple play” of Obama “scandals,” where the focus is on alleged cover-ups and who-knew-what-when and Big Narratives and all sorts of third- and fourth-order considerations. But there are two aspects of the “IRS Scandal” that keep nagging at me.

The first is nicely covered by TNR’s Noam Scheiber today: the applications for 501(c)(4) status that are at issue are not part and parcel of some burdensome government regulation of political speech. They are voluntary, and simply provide the applicant an advance assurance of tax-exempt status before they file their tax returns for a given year. If they are reasonably sure they aren’t afoul of the rules for 501(c)(4) organizations, they don’t need the certification at all. So the idea that the IRS was “shutting down” Tea Party and other groups by sitting on their applications or requiring them to deal with burdensome questionnaires is an exaggeration from the get-go. Besides, most groups like this don’t (and shouldn’t) wind up having the sort of “profits” that generate tax liability to begin with.

But the whole role of the IRS in this “scandal” raises a much more fundamental question. If the entity in question wasn’t the IRS but the FEC (hard as it is to imagine the FEC having any “teeth” to “bite” political advocacy and campaign groups), would anyone other than campaign finance wonks care about this whole issue? Probably not. And that’s not because in this kind of case the IRS was in a position to kick down doors and take serious action against the groups in question (which, again, probably had little or no tax liability unless they were really running a crooked game). It’s because the IRS is a great national devil-figure with a history of using over-aggressive tactics against people without the resources to fight them, and the idea of that agency “targeting” anyone is quite naturally frightening, even if the actual consequences of being “targeted” in these cases were not that serious.

Yeah, some groups undoubtedly incurred unnecessary legal expenses in dealing with IRS pettifogging, and the more paranoid among them probably feared ancillary tax actions against individuals. But before we all decide this incident represented a big step towards totalitarian government, a closer look at the actual situation would be helpful.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • bleh on May 15, 2013 11:22 AM:

    ... a closer look at the actual situation would be helpful.

    Um, did someone miss the memo?

    It's no longer about the "actual situation," if ever it was. It's a combo of Obama-hating rage-gasm among the Teatards and public de-friending by the Kewl Kidz. Both are driven entirely by emotional needs that override all other considerations in their demands to be satisfied. Neither has the slightest thing to do with "the actual situation," the facts, logic, the responsibilities of governance, or the actual needs of the country, and neither will be affected or deterred by any of these things.

    Personally, I think Obama -- and most of the rest of us -- should just go on vacation for a month or two, let them have their fun, and come back after the cigarette.

  • c u n d gulag on May 15, 2013 11:22 AM:

    Remember, during W's mis-adnminstration, when they were cutting the IRS's budget, they were also redirecting them to examine working people tax returns, as opposed to wealthier people's tax returns?
    And so, the burden on the remaining employees fell on having more returns to check, because the working class is far larger than the wealthy.
    This angered more voters, because before, they weren't concerned about audit's - because they mostly fell on the rich - and they WANTED THEM audited!

    Also too - remember the scandals, when W's IRS investigated Liberal groups that criticized him, like the NAACP, and an Episcopal Church in CA?
    No, me neither.

    And so, because of new (unclear?) rules after Citizens United, and the metastisizing Pee Poopy movement and the rich Kochsuckers backing them, the under-staffed IRS workers apparently decided to make sure that the "social welfare" tax exemption was going to groups which... well... which were genuinely concerned with the welfare of society, and wasn't going to groups who were radically against taxes.

    This is all part of the "Government sucks," so let's defund it some more!
    And then, when it sucks more, bitch that "government sucks" and needs more cutting!
    And then, bitching after THOSE cuts, that "GOVERMENT REALLY SUCKS!!!"

    Well... DUH!!!

    And, of course, as our defunded government gets worse and worse at doing what it once did pretty well, they scream, "GET RID OF GOVERNMENT! IT SUCKS!!!!!!!!!!!!!!"

  • Joe Friday on May 15, 2013 11:26 AM:

    The complaint is that these groups were subjected to extra scrutiny, my complaint is that many of these groups were actually granted tax-exempt status when they are quite obviously political organizations pretending to be social welfare organizations.

    There was more than a quarter billion dollars spent by 501(c)(4) organizations during the 2012 elections, and all the donors are secret.

    THAT IS NOT DEMOCRACY.

  • elisabeth on May 15, 2013 11:37 AM:

    i went to meet 3 friends (over 50, still employed, all with Ph.Ds) for dinner, thinking the crumbling of the Obama administration would be our table talk. Surprise, it didn't come up till around the time we asked for the check and only because I broached it. One friend was/is much more interested in sexual assaults in the armed services, the other two are just not interested. I wonder if there isn't a silent majority that wants to see attention to real issues and to see some bills pass, not just attention to "scandals."

  • Mudge on May 15, 2013 11:38 AM:

    Scheiber's article puts an interesting spin on things. Apparently 501c(4) organizations (unlike a 501c(3)) are self-declared and require no pre-approval from the IRS. They can do their business then file an auditable Form 990 at tax time. The submission of a voluntary application for 501c(4) status would thus be asking for specific approval of their business activities so that the IRS would have no trouble with their forthcoming Form 990.

    To specifically target right wing applicatiosn is to functionally give them preference on the voluntary evaluation list.

  • MuddyLee on May 15, 2013 11:53 AM:

    If Boehner and McConnell are making a big deal about this, then you can bet that it's part of repub/tea party Obama Derangement Syndrome. When organizations are trying to get nonprofit (no taxes) status then why shouldn't there be some hoops to jump through - especially given the potential consequences of having too much crazy money trying to buy elections.

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  • Hannah on May 15, 2013 3:09 PM:

    First of all, I didn't know that 501(c)4s didn't have to apply for that status, when 501(c)3s do (and it's a huge amount of work).

    I've kept books for non-profits (501(c)3, not 501(c)4), and done tax returns (Form 990) for a few of them. It's a lot of work, especially the long form. Pages and pages, and for those NPs on smaller budgets that truly make no profit it can be a bit onerous, but the IRS needs to keep NPs honest, right?

    One bit of information the IRS asks for is how much has been spent on "lobbying". There isn't anything specific on advertising, but I have to wonder how much the Rovianesque political groups claim for that (i.e. expensive TV ads for them vs web & newspaper ads for real NPs), or if they claim it at all, or hide it in some other expense.

    What the IRS should do is audit the 990s. And the GOPers should be challenged to allocate the IRS the money to hire folks to audit all of the 501(c)4s or shut up about this "scandal".

    Also re expenses: in Part IX of long form 990 for both, expenses need to broken down into three categories: program, management/general and fundraising. I have to wonder where Rove's group puts their massive advertising expenditures. Or if they've even filed?

  • Peter C on May 15, 2013 4:58 PM:

    I think it is important to reiterate: there is a HUGE difference between 'evaluated for APPROVAL' and 'targetted for INVESTIGATION'. We're not talking about punitive audits here; these organizations requested official sanction. If you ask the government to grant your questionable request for a special tax status, it is unreasonable to expect them to be less than thorough.

    If your workload at the IRS unexpectedly doubles because the Koch Brothers are suddenly given the green light by the Supreme Court to flood political campaigns with money from people who'd rather remain anonymous, you might want to flip through the pile of applications and pull out the easy ones from social welfare organizations like the 'Teen suicide awarness-promotion Society', and do those first. That's not being hyper-political; it's being a conscientious civil servant.

  • Hannah on May 15, 2013 5:14 PM:

    One more thing related to my post above.

    There is a section of the return for the long form that asks what programs, giving details, where your expenditures were used, and the amount of expense for those programs. The IRS' reviewing that would be a good step one in any audit. Also checking the NP's website to see if it matches what they are saying on their 990. A website might be a bit more truthful about the true purpose of the org. - that's where they would be "hooking" people to their cause.