Column: IRS House Hearings
May 22, 2013
The brouhaha over the IRS’s zeal in investigating conservative political organizations’ application for tax exemption under a 501(c)4 clause is one more episode of the IRS stepping into political doo doo. The current focus creates an opportunity to fix a problem.
A long-standing interpretation of the laws by the IRS has opened the door to a dodge of campaign finance laws. Unlike other political organizations, the names of donors to “C4’s” are not required to be disclosed. Requests for the exempt status doubled after the Citizens United Supreme Court decision in 2010 permitting corporations and labor to donate to political organizations. The IRS’ triaging priorities for review given a limited staff and more work could be interpreted as intentionally or inadvertently biased. The Inspector General’s conclusion was the latter.
Conservative groups claim they were singled out with long delays and demands for excessive documentation. No Tea Party or Patriot applicant was denied tax exempt status, though one did lose it. The report conducted by the independent Inspector General and the House hearings reveal no White House involvement. Whether a criminal act was committed is yet to be seen.
Abuse of IRS regulations has happened under the aegis of both parties. In 2004, in the Bush administration, the NAACP complained their applications were singled out by the IRS and approval were delayed for two years. There are other incidents involving tax exempt status and politically motivated audits over the 100 year history of the IRS .
The most constructive outcome of this newest scrutiny of the IRS is to rewrite the tax code to eliminate ambiguities or , better still, simply to deny exempt status to any political organization that spends any money on political ads that intervene in campaigns.. Why should taxpayers have to make up the difference for reduced income to the Treasury by exempting organizations intervening actively in political campaigns, anyway ?
Why is the IRS caught up trying to determine whether a politically oriented applicant is primarily spending resources on political intervention? The law says those getting tax exempt status are organizations that operate “exclusively for the promotion of social welfare”. In 1959, the regulators interpreted the law to mean groups “primarily” engaged in helping the community.
“Primarily” by definition is not the same as “exclusively”. “Primarily” makes the test more vulnerable to some underling’s judgment call. Is the tipping point 50%?, 51% or more?. Whether either term is followed, the IRS’ burden will always be to determine how much of an organization’s activity is used for political campaign advocacy and that can only be learned by asking for evidence.
The devil is also in defining what constitutes forbidden action. Is it that a political organization has paid for advertising urging votes for or against an issue or candidate? Whether that is the situation or not has been a subject of court cases and conflicting laws on the state level, including a recent case in Colorado.
This hearing is an opportunity to fix a problem at the federal level by amending the federal tax laws. The easiest fix, requiring no act of Congress, is for the IRS to follow the statute as written: (C4)’s should spend zero money on campaigning for or running ads exhorting voters to cast ballots for or against a specific ballot issue or a candidate.
The House Committee has provided a public service by exposing the need for reforms regarding (C4)’s. So long as the GOP does not spew turbo charged rhetoric that gives the impression their goal is mostly to damage the President, the public will not dismiss the hearings as just partisan politics .They are in danger. CNN polls as of Friday, May 17, showed President’s approval of 53% broke down heavily by party affiliation.