Ten Festering Wounds in the Obama Administration’s IRS Scandal

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“IRS-gate,” as political opponents of President Obama’s Administration have named the completely inappropriate targeting of Tea Party-ish organizations applying for 501(c)(4) social welfare organization status for special review, has been a royal political and administrative muck-up. Whether perpetrated by out-of-control rogue IRS agents or conducted with the knowledge of higher-ups, the IRS scandal is likely to cause damage to the governmental process inside and outside of the Service. Its reverberations extend far beyond whether some Tea Party groups were made to suffer through IRS questions outside the realm of what’s typical for social welfare organization applicants.

  1. Disrespectful revelation: Lois Lerner’s admission that some IRS agents in one office (Cincinnati, which is charged with nonprofit reviews) had subjected Tea Party and other right wing groups to over-the-top grilling over their applications to become 501(c)(4)s took place on Friday. Everyone in Washington knows what a Friday news leak is: a story meant to fade away over the weekend. If the question at Lerner’s presentation at the American Bar Association that spurred her acknowledgement and apology for the behavior of the IRS wasn’t teed up, the timing and content of the answer certainly was. With an Inspector General’s report to be released soon after, Lerner and her colleagues knew the story was about to break. Her ability to answer with a statement that seemed all but rehearsed was an attempt to make the story happen on a Friday and have it die in the Saturday papers. Except in the new world of social media, it doesn’t work that way. By the time Lerner left the ABA conference dais, the audience was looking at the Associated Press story reporting on Lerner’s ABA admission that had already run. One lawyer grabbed Lerner as she made her way out of the room and showed her the story on his cell phone. The attempt to have the story wither over the weekend failed—embarrassingly so—as a statement of disrespect to the public that deserved not to be manipulated and played by the White House press controllers.
  2. Drip, drip, drip: Having unleashed a firestorm that wouldn’t go away, the IRS hastily convened a telephone press conference, during which Lerner presented some additional information but obfuscated and dodged reporters’ questions as best she could, leaving David Cay Johnston of the Columbia Journalism Review, among others, flustered with the IRS’s inability to answer questions. Of course the answers were there, but the White House chose, as it has done in a number of recent controversies, to let information slowly emerge in dribs and drabs rather than getting out ahead of the story with a full statement.
  3. Misinformation: The IRS statements on Friday have been revealed to be incomplete and inaccurate, with the increasing sense that the inaccuracies were not by accident. It wasn’t one office, but more than one IRS office. It wasn’t just some low-level staff; higher-ups were aware and had intervened. And when former IRS commissioner Doug Shulman had strenuously told Congress in 2012 that nothing like this had been going on, other senior IRS personnel knew differently. As a matter of governmental competence and ethics, they should have corrected the misinformation given to Congress, but they didn’t. In effect, by withholding information that senior people in the IRS knew to be true in 2011 and even 2010, the IRS was perpetrating a lie to Congress and, in effect, to the American electorate.
  4. Feckless White House press office: Jay Carney’s response to the brewing IRS scandal on Friday has to be one of the lowest moments for the White House Press Office since Nixon’s Ron Ziegler tried to explain that his previous false public statements were, once the truth came out, then “inoperative.” His subsequent statements about the IRS controversy from the press office have not improved: one thing to have to be the flak-catcher for press questions, but there still has to be some integrity to the person in the position if they want to have the semblance of a career once they leave and if they expect the press and the public to bother listening to what they say at the dais every day. Carney’s performance was truly sad, relegating all future statements he might make on the IRS issue also “inoperative.” 
  5. The absent POTUS: Even if it had been simply rogue IRS agents, rather than the agency officially, going after Tea Party groups for their political beliefs, it goes to the heart of what makes American democracy workable. The idea is that you can believe anything you want and stand up for it. This is an increasingly tattered premise for a nation that maintains a political prison on the island of Cuba, continues to conduct illegal renditions, unleashes drone attacks on targets in sovereign nations not officially at war with the U.S., and apparently now clandestinely taps the phone records of Associated Press reporters, but isn’t the United States supposed to be defending democracy, which holds at its core freedom of speech, political thought, and action? President Obama held public appearances on Friday; he should have immediately denounced the IRS state of affairs, regardless of how wide and deep it might go, as an affront to American democracy. Instead, he stayed silent. When he finally spoke out,  said he was withholding judgment to see whether the story was true—a line consistent with Carney’s statements. Amazing! The head of the tax-exempt unit of the IRS had already publicly apologized for the treatment of the Tea Party applicants. The only factual question for the President was not whether it had happened, but how high in the agency or elsewhere in the federal government the responsibility went.
  6. 501(c)(4) phony social welfare functions: Here’s the shocking part. While some of the questions that IRS agents sent to the Tea Party-ish applicants were out of bounds, especially about their donors and their voter registration activities, there was plenty that the IRS could have asked these groups—and every other applicant for a 501(c)(4) status. The big joke is that, overall, organizations form 501(c)(4)s not because they want to pursue social welfare programming, but because they want to be directly engaged in partisan electoral activities without having to reveal their donors. Does anyone think that the recent wave of 501(c)(4)s from the right or the left —the number of applications to be 501(c)(4)s increased from 1,741 in 2010 and 1,777 in 2011 to 2,774 in 2012– are because of social welfare programs? To use a term popularized by Vice President Biden, malarkey! They are all but political action committees, but unlike PACs, they don’t have to reveal their donors, so they can make donations to real PACs while camouflaging the sources of the funding. Shared among the Tea Party-ish applicants for 501(c)(4) status was an in-your-face political intent combined with a dare-you attitude toward the federal government if the IRS were to deny their applications, given that many of the libertarian-oriented groups viewed even the process of having to apply for 501(c) status as an infringement on their rights. The left-wing 501(c)(4)s, including President Obama’s Organizing for America, may be less oriented to thumb-snubbing the government, but are no less dedicated to partisan political activity. This could explain the initially tepid response from the left as a sort of “there but for the grace of God go I” stance; in some future administration, the pendulum could swing and thump their 1024 application forms similarly. Worse, there’s a sense among some on the progressive side that the Tea Party groups and their alleged big-money backers “deserved” this, because they’re bad and wrong while we’re good andright. On the contrary, when the government suppresses legitimate, legal political speech, the only good or bad involved is the suppression itself.
  7. IRS misunderstanding its authority: What hasn’t been mentioned in most circles is that the IRS’s approach to 501(c)(4) social welfare organizations is simply wrong. The IRS regulation misinterprets the law. The law says that the social welfare organizations must be operated exclusively for the social welfare, but the IRS reinterpreted that to mean that there shouldno “preponderance” of (partisan electoral) political activities over social welfare activities—without ever clearly defining political activities or what a preponderance might mean. Less than half of dollar expenditures? Less than half of activities? What kinds of political activities get to be redefined, for the purposes of the less-than-half test, as social welfare programming, even though they are political? Are some activities more political or more social welfare in their content? The Committee for Responsibility and Ethics in Washington (CREW) filed suit in federal court against the IRS on this matter and, to our thinking, nailed the IRS for its misreading of the law. As CREW points out, the IRS allows (c)(4)s to exist so long as they “primarily” carry out social welfare functions; the law says that they must “exclusively” do so. While the IRS has had some difficulty in the past defining things such as partisan political or electoral activity, there can be no doubt to the difference between the words “primarily” and “exclusively.” If the controversy over these incidents with Tea Party-oriented groups, generally tiny, by the way, diverts attention from what the IRS should be doing to go after the big “dark money” (c)(4)s that have been pouring money into partisan political ads that have zero social welfare intent or content, that would be disastrous.  In its current workplan, the IRS had no special plans to reexamine how it was dealing with 501(c)(4)s.  Now is the time, and the Service should not let itself be distracted by its truly problematic targeting of 501(c)(4) applicants with right-wing code language in their names. 
  8. The level of these infractions: The initial language of the IRS about low-level functionaries in the Cincinnati office didn’t last long, as news about the IG’s report attaching IRS executives to the timetable began to leak. But any effort to pin responsibility on low-level players is a sign of the reprehensible strategy that this administration has used in the past to absolve agency executives and higher-ups of responsibility. Combine that with this administration’s consistent hostility toward whistleblowers and you can imagine what the IRS agents thought and felt as they heard about their “going rogue.” Hopefully, they were getting ready to show up at a House or Senate hearing to identify which higher-ups knew what if the low-level rogue strategy persisted. In this case, the timeline reveals Lerner’s involvement and indicates the awareness of her superiors and others But remember the IRS is part of the Department of the Treasury. Did longstanding Treasury chief Tim Geithner know? Did current boss Jack Lew know? President Truman planted a placard on his desk that said, “the buck stops here.” Shouldn’t the public know where the buck stops in this case, and be assured that the appropriate people will be sacked for their roles in undermining democracy?
  9. Reverberations: The incredibly slow and initially hands-off White House approach to the IRS imbroglio has given the green light to conspiracy theorists who imagine as only they could that this scandal was leaked in order to draw press attention away from Benghazi and other second-term problems of the Administration. The real importance of the IRS scandal, plus the revelations from lower-level people regarding Benghazi and the really dubious Department of Justice actions against Associated Press investigative reporters, is that it has the potential to derail the legitimate and important things that the Administration has pledged to make happen in the remainder of Obama’s term. It undermines the public’s trust that the Administration will stand by its words and deliver on immigration reform, gun control, the implementation of the Affordable Care Act (with the IRS having major ACA oversight regarding nonprofit hospitals) and tax reform, just to name a few issues on the docket for this year.
  10. Partisanship: Though Democrats were slow to come to this issue, as the IRS crisis expanded by the minute, more have come on board to call for investigations into the details of the story. Nevertheless, they were slow to speak out on actions led to Tea Party groups’ waiting several additional months or even years to get 501(c)(4) approvals, or in some cases perhaps being deterred from pursuing their applications altogether. More distressing was the reaction from some on the political left. Some have dismissed the issue, along with the right-wing (c)(4)s’ concerns, as “Republicans complaining about the IRS when corporations don’t pay taxes” or “criticizing the treatment of Tea Party groups when they went after ACORN, Planned Parenthood, and Big Bird.” Unbelievably, some administration insiders alluded to the fact that this occurred at the IRS under the leadership of a commissioner who was a holdover appointee of President George W. Bush. This shouldn’t be a political schoolyard battle of one-upsmanship, getting back at opponents for their even worse behaviors. Wrong is wrong. The left is stronger when it stands for principles of democracy and free speech without moral or political equivocation.

Ultimately, there is a reason for the IRS scandal, and it’s the problem of money and politics. So long as money—secret money through 501(c)(4)s—is the holy grail of political success, people will game the system with phony social welfare organizations that do no social welfare and the system will be structured to allow abuses or narrow politically-based targeting and retribution. If the buck stops at the top, President Obama’s culpability in this is his longstanding abandonment of campaign finance reform. Because he and his allies have been able to work the system of Super PACs and 501(c)(4)s to their advantage, to the point where Obama has long eschewed participating in public financing and has taken no steps toward overturning the Supreme Court’s Citizens United decision or any other part of the money scaffolding of political campaigns, the President has in essence condoned the latitudes given to moneyed players and their instruments of choice to manipulate the electoral system.

CREW’s position in response to the IRS scandal is definitely correct: in getting to the bottom of the IRS scandal to figure out who knew what when, the nation shouldn’t lose sight of the deeper issue of phony 501(c)(4) social welfare organizations and an IRS that is implementing regulations based upon a misreading of the law. But equally important is what the IRS scandal says about campaign finance: the need for comprehensive reform that gets money out of politics and, as one wag said, politics out of money. If this IRS scandal doesn’t revive a national conversation about campaign finance that leads to public funding of political campaigns, it is hard to imagine what would. 

    • Glenn

      While I heartily agree with everything stated in your article there is an important fact that needs to be at the core of efforts to change the current culture of distruction throughout America. POWER, MONEY, INFLUENCE DOES NOT MAKE RIGHT. Because we now accept a false premise that truth is relative to the current situation or circumstance, we longer have a foundation of truth or right and wrong.

    • DC Deanna

      Great, passionate article about a shameful situation… but next time, can we have more links to your sources? It’s important to some readers to be able to see quotes in context, and understand who exactly “some officials” or “some Democrats” are.

    • rick cohen

      Dear DC Deanna: You’re right, and usually I load up my Cohen Report pieces with plenty of links. This time I didn’t, in part because Michael Wyland had written three fabulous newswires on the IRS controversy for us on Monday and Tuesday with links galore. Please look at Michael’s excellent articles Monday, Tuesday, and today, and most of the sources I used are pretty much in there. Next time, I’ll hyperlink to my usual standard. And I appreciate your reminder about how important those links really are to readers.


    • michael

      Great piece Rick and right on. Only quibble is your conclusion. The deeper issue is not ‘money and politics’ but the use of government power to punish Americans for their political beliefs. Keep in mind that this is the same agency which will soon have enormous power over your health care data,

      It was best said today by the Univ of Wisconsin law prof, Ann Althouse: The unequal, politically skewed enforcement of a law is a far more serious problem than the level of harshness of a neutrally enforced law. We can disagree about what the tax laws should be and how strictly or harshly they should be enforced, but everyone knows it is fundamentally wrong to vary the degree of enforcement, selecting victims by their politics. If government cannot be trusted to avoid that fundamental wrong, it cannot be trusted with any power at all. It would be better to wipe the tax code clean and rebuild it without any complicated corners where government officials — great or small — have a place to do their dirty work.

    • Richard Brewster

      Thanks Rick. Best commentary I’ve seen on this, by far.

    • rick cohen

      Thanks Richard. That means a lot coming from you.

    • rick cohen

      I’ve heard similar from many of my conservative friends. They liked my piece but for the conclusion.

    • Non-Profit Trustee

      While much of this is correct, the authors still misunderstand the whole political activities issue, and CREW’s position is definitely NOT correct.

      First, what is “political activity.” Is it you and me talking politics over breakfast at the diner? Should we have to report our “activites” and “expenses” for that? Of course not. All kinds of churches, social clubs, associations – indeed almost any effort by two or more Americans to come together in some way – can have political implications at some time. So when the tax code speaks of “political,” it means raw, partisan politics. Otherwise, you’d be taxing the revenues – that is, membership dues and gifts – to the NRA, Planned Parenthood, the Sierra Club, Rails to Trails, the PTA, the West Nowhere Small Town Chamber of Commerce, St. Mary’s Church, the Elks Club, the East Nowhere Historic Preservation Society, the Women’s Club, the Men’s Club – you get the picture: everything. What sense does it make to tax people’s efforts to get together for social interaction? So let’s start with some clarity there – “political activity” has to be defined, and Congress, the Courts, and the IRS, through many actions, laws, rules, and decisions, have defined it pretty well – partisan electoral politics.

      With that in mind, we see that most Tea Party groups are NOT political groups. They discuss issues and politics, but very few of the them engage directly in partisan politics and elections, no more so than people who gather under banners such as “Stop Fracking in South Nowhere” are engaging -as that group – in partisan politics, even though they may largely share common political beliefs. The Tea Parties, like most small associations, discuss politics, issues, public policy, charitable works – how to make a better America as they see it. And most members share common views. That does not make the Tea Party itself a “political” organization any more than Habitat for Humanity.

      Note that CREW itself fits the bill. Anybody who knows Washington knows that CREW – founded by former Democratic Congressional Staffers – is a very “partisan” organization, as most would think of it. It loves to file complains against Republicans, and it generally promotes “progressive” causes. But it is not a “political” organization, despite that.

      Second – the tax code itself assumes that these organizations may do some political activity, because Congress made specific provisions for “non-exempt activities,” that is to say, activities other than the “education and social welfare” purposes for which such organizations are founded. So the IRS position that allows these groups to do some politicking is not silly or wrong.

      Third, there is actually very little political activity undertaken by these groups, relatively speaking. All told, all partisan political activity by these groups amounts to about $350 million in 2012 elections, out of over $7 Billion spent – or less than 5% of the total. Nor is this new. These groups have always done some politicking. The NAACP, for example, ran ads critical of George Bush’s civil rights record in Texas shortly before the 2000 election. Indeed, in the 1990s these groups spent in the hundreds of millions in elections. The only thing new is the sudden idea that this is a major crisis. The reason for that is obvious to anyone who looks – it’s a “crisis” because Democrats, since Citizens United, have feared that such spending will be too beneficial to Republicans.

      All of this reveals the emptiness of the “public financing” plea at the conclusion. How do you stop private citizens from participating in politics? Don’t we have a right to free speech? Do you really mean to tell me I can’t pay for an ad on the radio or TV? Don’t we have a right to peaceably assemble? To petition government? The Supreme Court has consistently held that you cannot limit speech by citizens in campaigns. You can limit contributions to candidates, but that won’t affect the activities of these c4 and other groups which are not giving to candidates but spending to speak on their own. How will having the government (the same guys as the IRS?) take over funding of campaigns address that issue at all.

      So a decent article,, but with some huge misunderstandings and ultimately a lame conclusion. Maybe the best notion is to go the other direction – get the government out of trying to regulate political speech. Isn’t that the better conclusion to draw from a scandal that involves the government abusing its power to regulate political speech and association?