Yesterday, we printed an article by David Streeter discussing a Tea Party fundraising appeal which characterizes the Internal Revenue Service as “Obama’s Gestapo.” Personally, I deplore political bias by the IRS, regardless of its direction. Nevertheless, making over-the-top comparisons to Nazis desecrates the memory of the Holocaust.
The IRS has not set out to exterminate the right-wing groups. The IRS was not threatening them with the loss to the right to free speech and peaceful assembly. The IRS was trying to determine whether their purpose was mostly political, which would make them ineligible for 501(c)4 Social Welfare Organization status.
Keep in mind that not being a 501(c)4 is not the end of the world. Even if they were judged as “too political” to form a 501(c)4, they could refile as 527 Political Action Committees. Both 501(c)4s and PACs can take unlimited contributions, so there is no difference there. The groups were not claiming to be charitable 501(c)3 groups, so there was no question of the donors getting a tax deduction for the contributions.
Neither 501(c)4s nor PACs pay taxes on the contributions they receive, so there was no question of the Tea Party groups having to pay anything regardless of their answers to these questions from the IRS.
So what is the difference between a Political Action Committee and a 501(c)4?
The basic difference is that while 501(c)4 can keep their donor list secret, PACs (but not “Super PACs”) must disclose them.
In other words, the IRS (a.k.a. “Obama’s Gestapo”) was after disclosure, not blood or money. At worst, the Tea Party groups risked having to divulge the names of their backers. This isn’t a case of persecuted groups being threatened physically or financially. This is a case of shadowy backers trying to influence the political process while keeping out of the light of day.
Focusing the IRS’s attention on a particular political group was indeed wrong, but it was a wrong on the order of an administrative screw-up, not a wrong on the order of war crimes and genocide.
After the jump, more on what went wrong and what should be done about it.
From the information available so far, it seems that the decision to focus on certain groups was made by low-level civil servants at the IRS’s Cincinnati office, not at the direction of their managers.
Scrutiny should have been universal.
At the time, there was a surge in questionable applications for 501(c)4 status. It would have been reasonable to scrutinize all 501(c)4 applications closely. However, budget cutting had already left the office without the necessary staff and resources to cope with the existing load. (This is a case of being “penny-wise and dollar-foolish.” According to a study by Citizens for Tax Justice, a dollar of increased spending on IRS enforcement results in ten dollars in increased federal revenue, due to greater compliance with tax laws.”)
Given political and economic realities, perhaps they should have audited a random sample of the 501(c)4 applications, or they should have proposed non-biased criteria and had them approved via the proper channels. It was tone-deaf and unfair to single out specific groups on partisan criteria.
Unfortunately, that is not what they did. Instead, their scrutiny fell predominantly (but not exclusively) on right-wing groups. In addition to more than 90 Tea Party groups that were examined, at least three liberal groups faced similar scrutiny. According to Bloomberg:
The Internal Revenue Service, under pressure after admitting it targeted anti-tax Tea Party groups for scrutiny in recent years, also had its eye on at least three Democratic-leaning organizations seeking nonprofit status.
One of those groups, Emerge America, saw its tax-exempt status denied, forcing it to disclose its donors and pay some taxes. None of the Republican groups have said their applications were rejected.
Progress Texas, another of the organizations, faced the same lines of questioning as the Tea Party groups from the same IRS office that issued letters to the Republican-friendly applicants. A third group, Clean Elections Texas, which supports public funding of campaigns, also received IRS inquiries.
The IRS non-profit office exercised poor judgment in its targeting, but the mistake does not appear to have been made for political purposes. If the IRS was being used politically by the White House, Mitt Romney would not have been able to keep his tax returns secret, and liberal groups would not have received the same inquiries that Tea Party groups did.
In order to avoid problems like this in the future:
- The IRS budget should be increased so that it can examine fully all 501(c)4 applications.
- The IRS administration needs to be hands-on and aware of what front-line employees are doing, and provide clear guidelines to direct the targeting of audits.
- The FEC, rather than the IRS, should be given jurisdiction over the political activity of non-profit groups.
- 501(c)4s should not be allowed to contribute to Political Action Committees. Doing so effectively turns them into front groups for these PACs allowing donors to camouflage their support for them.
- Campaign finance law should be reformed so that no political contributions can be made anonymously.