Changing My Mind: The IRS “Scandal” Isn’t A Scandal Either.

Think about it and you'll realize I'm right.

Okay.  501(c)(4) status — meaning you don't pay taxes and your donor list is secret — was intended for groups engaged primarily in social welfare and whose goals are not primarily political.  That's the law.

You with me so far?

Now, it's the job of the IRS — specifically, the job of the agents in the Cincinnatti office now under scrutiny — to make sure nobody sneaks in and gets 501(c)(4) status who is not entitled to it.  Those "501(c)(4) duties" were centralized in the Cincinnatti office.

Still with me?

Now let's look at the facts, as revealed in this USA Today editorial by Steven Miller, Commissioner of the IRS:

We sought to centralize work in this area in 2010 because our office of Exempt Organizations observed a sharp increase in the number of section 501(c)(3) and 501(c)(4) applications coming from groups potentially engaged in political campaign intervention. Between 2010 and 2012, the number of applications for 501(c)(4) status more than doubled, from 1,591 to 3,398.

Because the law limits and in some cases prohibits political intervention by exempt organizations, the IRS must carefully review applications based on the facts of each case. While centralizing cases for consistency made sense, the way we initially centralized them did not.

There was a shortcut taken in our processes to determine which groups needed additional review. The mistakes we made were due to the absence of a sufficient process for working the increase in cases and a lack of sensitivity to the implications of some of the decisions that were made.

In other words, they were getting slammed with tea party-type groups all applying for tax-free status, and they didn't have the time or resources to investigate them ALL thoroughly.  So they did searches to find out the ones most likely to be political groups.

Is there any problem with that?  Isn't that, actually, a smart way to do their job?

Now, let me give a list of possible search terms that apply to non-profit groups, and you tell me which is most likely to end up, after digging, to be a political group:

"little league"
"community theater"
"church council"
"tea party"
"volunteer fire department"
"neighborhood association" 
"downtown improvement"

So, yes.  A search of organizations with "tea party" in their title makes sense.  In fact, there should be a scandal if they didn't think to look into "tea party" groups.

Should they have also looked into left-leaning groups forming under 501(c)(4) status?  Of course.  But who is to say they didn't?  They just didn't have a handy moniker — like "tea party" — to search on, probably because left-leaning groups don't have the same group-think, pack rat, lemming mentality of right wing groups.

Steven Miller is right.  The IRS didn't think about the implications of the decisions they made.  Which doesn't mean that they did anything wrong — it just means that, on first blush and with proper spin, it can easily be made to look wrong.

Controversy?  Sure.  Scandal?  No.  And certainly not one which threatens to take down the White House… as I am hearing on MSNBC (!) this morning.

  1 comment for “Changing My Mind: The IRS “Scandal” Isn’t A Scandal Either.

  1. sbh
    May 14, 2013 at 6:42 pm

    Shouldn’t the scandal be that so many political groups were applying for a tax-exempt status they didn’t qualify for?

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