Early last month, it was revealed that the Internal Revenue Service (IRS) had used inappropriate criteria to identify organizations applying for tax-exempt status to review for indications of significant political campaign intervention. That criteria used by the IRS singled out conservative groups applying for tax-exempt status for extra scrutiny based, according to the Treasury Department’s Inspector General report, “upon their names or policy positions instead of indications of potential political campaign intervention.” The IRS, in essence, violated their mandate for unbiased investigations and their commitment to neutrality. There is no defending the IRS’s conduct.
Indeed, the general reaction to this revelation has been revulsion and condemnation. Soon after news of the scandal broke, President Obama said that the IRS’s political targeting was “outrageous” and that “there’s no place for it” in our democracy. Leaders from both parties in the House and Senate promised a lengthy investigation. Some Tea Party groups even refused to accept an apology.
The political Right, characteristically, has viewed the IRS scandal – along with other recent revelations of potential administration misconduct – as an early Christmas present. Republicans were quick to reject the notion that a few bad apples in Cincinnati, Ohio took it upon themselves to burden conservatives seeking tax-exempt status. Instead, many prominent Republicans began suggesting that high-ranking officials – perhaps even the White House – orchestrated the political targeting.
For example, House Speaker John Boehner (R-OH) told reporters the following soon after the story broke: “The IRS systematically violated the rights of Americans for almost two years. Treasury Department knew about this last year, and the White House was made aware of it last month, yet no one – no one thought that they should tell the president. Fairly inconceivable to me.”
Similarly, Darrell Issa, the chairman of the House Oversight and Government Reform committee, told Candy Crowley during an interview on CNN’s State of the Union that “As late as last week the administration’s still trying to say there’s a few rogue agents in Cincinnati, when in fact the indication is they were directly being ordered from Washington.” During that interview, Issa went on to criticize White House Press Secretary Jay Carney, calling him a “paid liar.”
What evidence do Republicans have to support this contention? According to a blog post on Speaker Boehner’s website, the “growing evidence that the targeting was ordered from Washington, D.C.” relates to the frequency with which former IRS Commissioner Douglas Shulman visited the White House under the Obama administration. On May 30, Fox News published a story indicating that “The former head of the IRS visited the White House more times than any cabinet member [157 times between 2009 and 2012] . . . raising questions about the nature of those visits – particularly around the time the agency was targeting conservative groups.”
This “evidence,” however, falls apart under even the most minimal scrutiny. As The Atlantic pointed out, according to the White House records, the majority of events Shulman was cleared to attend involved meeting centering around the implementation of the Affordable Care Act. Shulman “was cleared 40 times to meet with Obama’s director of the Office of Health Reform, and a further 80 times for the biweekly health reform deputies meetings and others set up by aids involved with the health-care law implementation efforts.” This does not mean that Shulman actually went to these meetings, only that he was formally cleared for entry to these meetings. Nonetheless, these records explain the majority of the 157 meetings (76 percent, to be exact) Shulman was granted Secret Service clearance to attend, revealing Republicans’ “evidence” of White House involvement as nothing more than political theater.
This is political grandstanding. Plain and simple. It is particularly unfortunate, however, because the IRS controversy is a legitimate scandal with legitimate questions that demand considered answers. To their credit, some Republicans (e.g., Lindsey Graham and John McCain) have contradicted members of their own party and have recognized the dearth of evidence that the White House ordered the IRS to target conservative groups.
Even more important is that it obscures an important point: the IRS needs to crack down on political groups masquerading as social-welfare organizations. The IRS’s conduct was outrageous. But lets be clear. It is the method the IRS used to determine which groups to investigate – singling out keywords like “patriot” and “tea party” – that was outrageous, not the fact that the IRS flagged nonprofit groups for extra scrutiny. In other words, as Lisa Rosenberg of the Sunlight Foundation recognized, “There’s no question the way the IRS apparently went about it was wrong. But the fact that they were doing it is absolutely right.”
IRC 501(c)(4) provides tax exempt status for non-profit organized “operated exclusively for the promotion of social welfare.” According to the IRS, examples of such organizations include, for example: corporations organized for the purpose of rehabilitating and placing unemployed persons over a stated age; an organization that helps individuals solve their financial difficulties; or an organization formed to preserve and beautify public areas.
However, following the Supreme Court’s Citizen United decision in January 2010, the number of groups applying for 501(c)(4) status doubled, and donors flocked to 501(c)(4)’s because these organizations do not have to disclose the source of their contributions. As a result, 501(c)(4) groups pumped more than $300 million of “dark money” into the 2012 presidential election. Interestingly, 84% of political spending by 501(c)(4)’s in 2012 came from conservative-affiliated groups.
As the New York Times noted, the courts have interpreted the IRC to permit a “minimal amount of political spending” and that “the I.R.S has for years maintained that groups meet that rule as long as they are not ‘primarily engaged’ in election work.” But what does “primarily engaged” mean? At which point does an “issue ad” cross the threshold into “campaign ad”?
Perhaps the most important question, however, is this: what societal purpose is being served by giving these groups tax exempt status? These organizations are entitled to voice their opinions, but they should not be permitted to exploit the vagaries of their status for explicitly political ends. And they certainly should not be permitted to do this tax free.
The recent revelations make it abundantly clear that the IRS, with little to no statutory guidance, is uncertain as to where the boundaries lie. But the IRS needs some kind of test that helps them flag problematic applicants. Addressing this scandal, therefore, will require more than an investigation and congressional hearings. It will require campaign reform or simplification. And that, in turn, requires congressional action. Only then can we make sure that this never happens again.