Tuesday, May 14, 2013

IRS Scandal: Some Answers

Caption: The IRS building on Constitution Avenue in Washington, DC. Evildoers or overworked public servants?

Image credit: U.S. Treasury/Wikimedia

More information has come to light concerning how the Internal Revenue Service (IRS) dealt with the rising tide of supposed "social welfare" organizations that were actually political front groups applying for 501(c)4 tax-exempt status. The first bit is from Dave Levinthal of Public Integrity:

Amid withering accusations the Internal Revenue Service targeted tea party and other conservative groups with enhanced scrutiny, the agency faces another problem: it’s drowning in paperwork.

The IRS’ Exempt Organizations Division, which finds itself at the scandal’s epicenter, processed significantly more tax exemption applications in fiscal year 2012 by so-called 501(c)(4) “social welfare” organizations — 2,774 — than it has since at least the late 1990s, according to an analysis of IRS records by the Center for Public Integrity.

Compare that to 1,777 applications in 2011 and 1,741 in 2010, federal records show. Not since 2002, when officials processed 2,402 applications, have so many been received.

Meanwhile, Exempt Organizations Division staffing slid from 910 employees during fiscal year 2009 to 876 during fiscal year 2012, agency personnel documents indicate.

IRS nonprofit division overloaded, understaffed

Levinthal goes on to add:

During the 2012 election cycle, however, numerous 501(c)(4) organizations — most of them conservative, a few left-leaning and all endowed with new spending powers thanks to the Supreme Court’s 2010 Citizens United v. Federal Election Commission decision — together spent tens of millions of dollars overtly advocating for or against political candidates.

IRS nonprofit division overloaded, understaffed

When the vast majority of organizations that are misusing this tax-exempt status are of one political persuasion, it stands to reason that most of the organizations investigated will also be of that persuasion.

Chris Hayes provides some historical perspective about how this scandal came about. As he put it, there are two scandals really, the scandal involving the IRS targeting groups who used particular key words, like "Tea Party" in their applications, and the scandal that brought that one on - the flood of applications by clearly political groups for 501(c)4 status:

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As Hayes mentions, this scandal arose because the IRS has been put in the position of having to arbitrarily decide what constitutes an organization that is "primarily political". It has done it in a way that is, at best, somewhat ham-fisted, in that keywords belonging to one particular ideology were identified as flags for further investigation. Was any thought given to what might be similar keywords coming from libertarian, liberal, socialist, or green organizations? That's a question we should be asking as this is investigated. Even though most of the organizations applying were conservative, that's no reason to assume they'd be the only ones abusing the system. As Hayes also mentions, at least one such organization is a progressive one.

To me, the picture that is emerging here is of a government agency that was snowed under by a sudden and poorly-defined workload, which it then made mis-steps in addressing. That doesn't mean it's not the only possible explanation, of course. It's the one that rings truest with me, though, particularly since I spent much of my career working for one government agency or another.

We should also bear in mind that one of the reasons we're hearing about all this is that these organizations are trying to create more wiggle room so their applications won't be scrutinized so carefully. This is a rather obvious point, but one that we should keep in mind when listening to the expressions of outrage from various and sundry politicians and political operatives like Karl Rove. Still, there is a clear possibility for abuse here, and no one in his right mind could simply assume that such abuse is not happening here.

UPDATE: Thanks to a question by a reader, I tracked down the source of that assertion about most of the 501(c)4 applicants being from conservative groups. It's a paragraph about three-quarters of the way down at that link.

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