IRS at Center of Firestorm: Ugly Update

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May 13, 2013; Washington Post

The firestorm unleashed by Friday’s admission by IRS officials that the agency had targeted some applications for tax-exempt recognition based on political keywords such as “conservative” and “Tea Party” continues.

Monday’s reports discuss a draft of the report that’s to be issued soon by the Treasury Department Inspector General, which should include a timeline of IRS activities, as well as the fact that additional keywords and terms were used at various points in time to select applications for special scrutiny. In other stories, some Democratic leaders have joined Republicans in calling for hearings on the IRS, and the House Ways and Means Committee has scheduled hearings for Friday, May 17. The President acknowledged the IRS issue briefly in a press conference without expressing a definitive opinion on the revelations. 

The U.S. Treasury Department Inspector General’s report has not yet been released, but a draft of the report circulating on Capitol Hill and shared with some media sources is damning. It appears from a timeline in the draft report that the targeting of Form 1024 applications for 501(c)4 recognition by conservative groups began in March 2010. Lois Lerner, Exempt Organizations (EO) Director of the IRS, became aware of the practice in June 2011. She insisted that “the criteria be immediately revised.” The criteria are broadened in July 2011 to include “organizations involved with political, lobbying, or advocacy,” and further broadened in January 2012 and May 2012.

Independent Sector issued a press release condemning the abuses: “The IRS’s proper role in approving, and subsequently regulating, exempt organizations is not determining the worthiness of their cause, but their compliance with the law.” Interestingly, the organization also reaffirmed its belief that “…the IRS, due in large part to the post-Watergate reforms that increased the agency’s independence and insulated it from partisan politics, is the most appropriate agency for oversight of the tax exempt sector.” This may be a sign that interest groups are evaluating the potential effects of the scandal and are positioning themselves to adapt.

Roll Call reports that U.S. House Minority Leader Nancy Pelosi (D-CA) performed a similar positioning move in her press release, citing the U.S. Supreme Court’s Citizens United decision and expressing the opinion that this is the time to take action to address campaign finance reform. “We must overturn Citizens United, which has exacerbated the challenges posed by some of these so-called ‘social welfare’ organizations.” Congress cannot “overturn” Supreme Court decisions, of course, but Pelosi’s intent is clear.

Senate Finance Committee Chair Max Baucus (D-MT) and Senate Homeland Security and Government Operations Chair Carl Levin (D-MI) announced that each of their committees would hold hearings on the IRS and its activities in reviewing applications for tax-exempt recognition. “These actions by the IRS are an outrageous abuse of power and a breach of the public’s trust. Targeting groups based on their political views is not only inappropriate but it is intolerable,” Baucus said in a statement.

Some Republicans have stepped up their rhetoric, too. Rep. Michelle Bachmann (R-MN) accused the administration of using the IRS scandal in an attempt to distract attention from questions over the administration’s actions related to the attack on the US mission in Benghazi, Libya, on September 11, 2012. Freshman Sen. Marco Rubio (R-FL) has called for the resignation of the acting IRS Commissioner. In a letter to Treasury Secretary Jack Lew, Rubio said, “No government agency that has behaved in such a manner can possibly instill any faith and respect from the American public.”

Meanwhile, the President is attempting to distance himself from the story. At a morning joint press conference with British Prime Minister David Cameron, President Obama said, “If it turns out that IRS employees acted in anything less than a neutral and non-partisan way, then that is outrageous.” He also expressed a desire to wait for the inspector general’s report before going further.

Since the IRS has already admitted that it did act in a partisan way by targeting groups with politically conservative keywords in their applications, this statement is hard to fathom. Since the draft IG report is circulating on Capitol Hill and in the media, the White House should have access to a copy. It’s strange that the Administration is choosing to remain behind the curve on this story rather than leading the calls for prompt corrective action at the IRS. The nonprofit sector deserves better advocacy for impartial tax regulation than President Obama has expressed so far.

House and Senate hearings, beginning with House Ways and Means on Friday, will likely use the Inspector General’s report as a jumping-off point for their investigations. House Ways and Means Oversight Subcommittee chair Charles Boustany (R-LA) has demanded answers by Wednesday to a letter sent to the IRS last Friday. The report and the response from the IRS will fuel the next round of political statements, as well as give the nonprofit sector additional information on how pervasive the IRS abuses are and how they might affect nonprofit regulation for the foreseeable future.—Michael Wyland

  • michael

    Now reports are surfacing of journalists getting increased scrutiny from the IRS. Couple that with the twin outrage of the Obama Administration tapping the phones of the Associated Press and a frightening picture is emerging of abuse of power which reasonable people could call “Nixonian