IRS

September 22, 2014; Politico

Politico’s interview with former IRS official Lois Lerner ended up becoming something of a disservice to the need to clarify the scandal that led to Lerner’s firing, her Fifth Amendment appearance in front of the House Oversight and Government Reform Committee, and the months of articles that have ensued debating issues such as what might have happened to her emails. Accompanied by her personal attorneys and her lawyer husband, Lerner appears to have declined to entertain questions from Politico about the substance of her involvement in the contretemps involving the IRS’s review of 501(c)(4) and some 501(c)(3) applications. Whether she declined in advance or at the interview itself, the Politico article doesn’t have her weigh in on any of the substantive questions behind the controversy that led to her brief congressional appearance and subsequent retirement.

Rather, the interview focused on Lerner’s continuing protestations of innocence, the personal vilification she has suffered since leaving the IRS, and her essentially now-toxic career that has made her a pariah.

“I didn’t do anything wrong,” Lerner told Politico in her first official interview since the scandal broke. “I’m proud of my career and the job I did for this country.” She added, “Regardless of whatever else happens, I know I did the best I could under the circumstances and am not sorry for anything I did.”

While Politico didn’t get much from Lerner, it got a lot from several other observers, including extensive reports of Lerner’s personal charitable behavior, including paying for a babysitter’s education and going to New Orleans after Hurricane Katrina to rescue lost or abandoned pets. However, other comments suggested that Lerner didn’t have a huge background of tax law knowledge. Politico quoted Marc Owens, who ran the tax-exempt unit of the IRS in the 1990s, to suggest that Lerner’s limited knowledge might been a factor in the scandal in which Tea Party-related terminology was used to identify potentially troubled applicants: “When managers are not familiar with the laws they are enforcing, they make bad decisions.”

NPQ has long argued that the focus on Lerner’s personal culpability is something of a side issue. If she has done something in contravention of the law, she should be prosecuted. To take it out of the political sturm und drang of Beltway politics, the Lerner case might be better off under the scrutiny of an independent prosecutor.

But the comment from Owens hints at systemic problems in the tax-exempt unit. Owens believes that some of the big projects that the tax-exempt unit took on during her tenure contributed to an overworked staff looking for shortcuts in its review of applications for 501(c) status. If the issue is one of knowledge, the decision to cut the training budget of the IRS tax-exempt unit 96 percent between 2009 and 2013 seems to have been completely counterintuitive and unwise in light of the increasing number and complexity of 501(c) applicants. Owens also notes that Lerner cancelled the annual publication of the IRS manual, which had been a regular source of information on the Service’s treatment of nonprofit groups—a data source that would have been useful for observers and the IRS itself to understand the changing dimensions of the nonprofit sector and the implications for the staff of the Service’s tax-exempt unit.

In their attempts to make this a political issue, Congressional Republicans have made this scandal focus on Lerner personally amidst charges that she might have been a secret “liberal” or a Democrat. The reality is that the IRS scandal involved more people than Lerner, with decisions or lack of decisions made by the IRS commissioner, the IRS general counsel, and managers and staff in the tax-exempt division itself. The problems fundamentally concern the IRS’s capacity and structure for reviewing 501(c)(4) and 501(c)(3) applications, far beyond the individual behavior of Lerner.

If Politico were to have used the Lerner interview as more than an opportunity for her to explain how her life has been disrupted by vilification and threats, as sad as that is for her personally, it could have asked her about the implications of the comments attributed to Marc Owens:

  • What were the obstacles that the tax-exempt unit faced in trying to carry out its work?
  • Were the staffing and resources available to the unit up to the task?
  • Did the staff (and perhaps Lerner herself) need more and better training?
  • Are the rules and regulations for determining the qualifications of 501(c)(4) social welfare organizations clear enough and practical for effective and fair implementation?
  • Was the delegation of the review process to IRS staff in Cincinnati a good idea or a managerial mistake?
  • Were the special projects that Lerner initiated on nonprofit hospitals, universities, and other topics useful advancements or inappropriate distractions from the core tasks of the IRS tax exempt unit?

Let’s hope that eventually the nation gets beyond the debate that focuses on Lois Lerner and begins to assess what the IRS ought to do to more effectively and accurately review 501(c)(4) and 501(c)(3) applications to meet the letter and meaning of the law. Let’s hope that Congress reaches a moment of clarity and recognizes the need for adequate staffing and other resources so that the IRS is up to the job. Those needs existed before Lois Lerner answered a planted question at an American Bar Association seminar to acknowledge what has become the worst scandal in the modern history of the Internal Revenue Service. The nonprofit sector and the staff of the IRS tax-exempt unit deserve better.—Rick Cohen