The IRS and its BOLO Advisories

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June 25, 2013; New Yorker

John Cassidy, writing for the New Yorker, is crowing that he knew it all along: the IRS scandal, far from being a conspiracy to obstruct right-wing groups, was merely an attempt on the part of a bureaucracy to simplify their search for elusive miscreants scheming on nonprofit status for political intent. He points out that the IRS performed searches and issued BOLO advisories for the word “progressive” in people’s applications, too, as well as “medical marijuana,” “Occupied Territory advocacy,” “green energy organizations,” and “healthcare legislation.”

This isn’t the only recent obstruction of whole classes of applications; he also points out that the tax agency has held up the applications for many journalist groups. (NPQ, of course, has been writing about this for a few years. Some applications were held up for so long that they finally expired waiting for approval.) A handbook was put out to walk people through the language they should and should not use in this regard. In those cases, the IRS appeared to suspect that these were really for-profit (we wish) companies trying to put on a nonprofit hat.

This revelation raises a slew of additional questions, both about the IRS’s procedures and the Inspector General’s investigation. Why didn’t Lois Lerner, who ran the IRS’s tax-exempt unit at the time of the controversies, or Steve Miller, the former acting IRS commissioner, reveal that the BOLOs addressed more than right-wing groups? Why didn’t the TIGTA report mention these other terms in the BOLOs? Why weren’t groups targeted for the use of “progressive” or “medical marijuana” (such as Alliance for a Better Utah, which said it has been waiting for two years for an IRS decision and had been subjected to extensive Tea Party-like lists of questions) brought to testify before Congressional committees, like the aggrieved Tea Party groups? Do the reports of these additional BOLO terms mean that the IRS was actually, sad to say, even more incompetent in its processing of 501(c)(4) applications than it appeared after the original TIGTA report? Given that the TIGTA report appears to have been seriously flawed, does this IRS issue merit an outside IG to get to the heart of how the nation’s tax collection agency has devolved into this dispiriting mess?

In the end, everyone agrees that the 501(c)(4) category is a troubled and murky area of the tax code.  It is important enough to warrant tough scrutiny over the implementation of the law by the IRS and Congressional reconsideration of what is actually meant by “social welfare organizations” in the first place.  The benefit of the IRS controversy, so to speak, is that it will compel the nonprofit sector and the government to rethink a category of tax exempt entities that merits clarification at a minimum, but more likely a major overhaul.—Ruth McCambridge