Conservative political groups, Congress, President Obama, and the public are outraged that an Inspector General’s report found that the IRS might have used key words to target conservative groups for extra scrutiny when they applied for tax exempt status under Section 501 (c) 4.
None of them were turned down, although some applications were delayed. The only group to lose tax exempt status was a Democratic group.
Clearly, even the perception that any group or taxpayer was targeted by the IRS is very upsetting. We expect the IRS to be totally neutral. Two people have been fired by the Obama administration, another placed on administrative leave, and the Justice Department and FBI are conducting a criminal investigation.
Republicans are in ecstasy. They have several committees fully engaged in an investigation of the situation. There is no evidence whatsoever thus far that indicated the “targeting” was influenced by anyone let alone the president. But Republicans are accusing first, and then investigating.
First of all, most of the groups approved probably should not have been approved at all because IRS regulations on who gets tax exempt status does not follow the law. The IRS Code says groups getting tax exempt status must be “exclusively” engaged in social welfare. The IRS has been using a standard of “primarily” meaning it is approving groups that are political—like the Tea Party.
Secondly, The NY Times reported Sunday that that some of the targeted groups may have used most of their resources to engage in political activity and backed Republican candidates for office, potentially violating the terms of the “social welfare” designation.
The Times reports:
“When CVFC, a conservative veterans’ group in California, applied for tax-exempt status with the Internal Revenue Service, its biggest expenditure that year was several thousand dollars in radio ads backing a Republican candidate for Congress.
The Wetumpka Tea Party, from Alabama, sponsored training for a get-out-the-vote initiative dedicated to the “defeat of President Barack Obama” while the I.R.S. was weighing its application.
And the head of the Ohio Liberty Coalition, whose application languished with the I.R.S. for more than two years, sent out e-mails to members about Mitt Romney campaign events and organized members to distribute Mr. Romney’s presidential campaign literature.”
Representatives of these organizations have been screaming about their treatment by the I.R.S. for months saying they were unfairly targeted by the agency, harassed with inappropriate questionnaires and put off for months or years as the agency delayed decisions on their applications.
But these groups have been involved in election activities that tax experts and former I.R.S. officials said would provide a legitimate basis for flagging them for closer review.
“Money is not the only thing that matters,” Donald B. Tobin, a former lawyer with the Justice Department’s tax division who is a law professor at Ohio State University told the Times. “While some of the I.R.S. questions may have been overboard, you can look at some of these groups and understand why these questions were being asked.”
The I.R.S. is already separately reviewing roughly 300 tax-exempt groups that may have engaged in improper campaign activity in past years, according to agency planning documents uncovered by the Times.
It appears that a wave of lawsuits against the I.R.S. and intensifying criticism by Congressional Republicans prior to the IG released his report were intended in part to derail those audits, giving political nonprofit organizations a freer hand during the 2014 campaign—to campaign for Republicans.
Some lawmakers are urging the agency to reconsider the applications of much larger groups like Karl Rove’s Crossroads GPS. It appears the group has been primarily focused on campaign ads for or against specific candidates.
Sen. Dick Durbin (D-IL) explained on Fox News Sunday, while the IRS’ use of a partisan list to go after conservative groups is not justified, the law requires 501(c) (4) s to be “engaged in social welfare and not politics and campaigning.” “Crossroads was exhibit A. They were boasting about how much money they were going to raise and beat Democrats with,” Durbin said.
The bottom line is taxpayers are subsidizing groups engaged in political activity. This is wrong and illegal. This is the real IRS scandal that Republicans are not investigating.
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