Politics

05.10.13

IRS Wrong To Target ‘Patriots’–But Also To Let Non-Profits Play Politics

Politically selective enforcement by a local branch is a scandal, writes John Avlon, but the bigger story is the systemic abuse of tax-exempt status by nonprofit groups in the wake of the Citizens United decision. 

Forget slow-news Friday. The IRS admission today that it singled out for scrutiny political action committees with the words “Tea Party” and “Patriot” in their names rocketed around the Internet, fueling conservatives’ feeling of persecution. 

The actions were apparently taken in isolation by workers at a local Cincinnati, Ohio, branch and announced with a public apology by Lois Lerner, head of the IRS division that oversees tax-exempt groups. 

This imposition of political impulses into IRS inquiries is completely out of line —and given the Nixon administration’s record of using audits for political purposes, the feeling of persecution has some roots in reality.  But the inevitable rhetorical rush to the ramparts—that this was part of a concerted effort by the Obama administration to investigate its political enemies—is not rooted in fact, to date. Beyond the fact that the White House and the IRS now keep each other at arm’s length because of past abuses, the larger slumber scandal at the IRS is actually a reluctance to aggressively investigate the systemic abuse of tax-exempt status by nonprofit groups in the wake of the Citizens United decision. 

As The Daily Beast and the Center for Responsive Politics reported in our “SuperPAC Economy” series over the summer of 2012, the use and abuse of 501(c)(4) status by nakedly partisan political organizations over the past two election cycles in particular has flooded the system with money and very little oversight, especially given the pathetic partisan deadlock of the Federal Elections Commission. As we wrote at the time:

“The IRS tax-exempt division [is] in a position to enforce certain rules of the campaign finance system—for instance, the regulation that says C4s can only spend 50 percent of their budget on direct political activity. But is the IRS capable of doing this effectively? The agency’s tax-exempt division has about 900 employees—of those, only about 400 to 500 conduct audits. Last year, they conducted about 2,500 audits, but the number of C4 organizations audited is much lower. Depending on the year, the IRS generally audits 100 of the 97,000 C4s annually, meaning there is a roughly 0.1 percent chance that any organization will be audited.”

The bottom line: The IRS tax exempt division needs to do its job more effectively, and police supposedly nonprofit groups that are fundamentally political. They must do this without partisan bias, but with a stringent sense of enforcing and further defining the law.

The bottom line: The IRS tax exempt division needs to do its job more effectively, and police supposedly nonprofit groups that are fundamentally political.

Instead, the IRS has declined to add increased oversight of tax-exempt 501(c)(4) political organizations to its policy priorities going forward—prompting an outcry from Democracy 21 and Campaign Legal Center who accused the IRS, with some justification, of an “indefensible abdication of responsibility.”

The abuse of workers in the Ohio branch to target Tea Party organizations is completely inappropriate.  But given the gold rush/slush fund mentality of the money flowing through our elections now, this reality check is worth factoring in: In 2010, total spending by tax-exempt “non-disclosing” groups was $127 million—and $113.8 million of that was conservative.  In the presidential election year of 2012, the total spent by nondisclosing groups rose to $308.5 million, with $263 million coming from conservative groups. (Thanks are due here, as always, to the CRP and OpenSecrets.org for tracking the data on the money flow that threatens to distort our democracy.)

The IRS actions out of their Ohio branch are indefensible. But there’s a reason that the number of applications for 501(c)(4) status doubled between 2010 and 2012—and it isn’t that we became twice as charitable.

The larger, systemic scandal is the reluctance of the IRS to weigh in more aggressively and enforce the weak laws that allow massive profiteering and manipulation of our political process by partisan political groups masquerading as nonpartisan, nonprofit entities devoted only to the public welfare—and collecting the tax benefits that come with this pose.