The rabbit hole is getting ever deeper for the embattled IRS. Last Friday, Lois Lerner of the IRS tax-exempt-organizations division, issued an apology for the targeting of conservative groups in the screening process for 501c(4) tax-exempt status. She also claimed then that only low-level employees in a Cincinnati office had been guilty of singling out groups containing the words “tea party” or “patriot.” However, a report reviewed by both The Wall Street Journal and Reuters has indicated that the questions of who initiated the practice and how the conservative groups were targeted are more complicated than previously thought.
The report revealed that high level IRS officials knew about the targeting nearly one year before then-IRS commissioner Douglas Shulman informed Congress. Moreover, the criteria by which these groups were singled out continually evolved over the course of the 2012 election cycle. By January 2012, groups were being selected from “political action type organizations involved in limiting/expanding government, educating on the Constitution and Bill of Rights, social economic reform/movement,” according to the Treasury Department report. Even the phrase “making America a better place to live” began getting applications for 501c(4) status reviewed.
Many groups covet this status not only for its lack of tax obligations, but also because they typically do not have to disclose donors. This status requires the primary activity of the group to be the betterment of social welfare, and although political activity is allowed, no one is quite sure how this ratio is calculated. The screenings then began as an attempt to investigate the activities of groups and be sure that their functions were in line with the mantra of social welfare. However, the increased questioning of potential groups exclusively targeted conservatives.
Members of Congress are concerned, as Rep. Darrell Issa (R., Calif.) told NBC Sunday that “there has to be accountability for the people who did it. And, quite frankly…there’s got to be accountability for people who were telling lies about it being done.” Issa’s concern was shared by at least one member across the aisle, as Sen. Dianne Feinstein (D., Calif.) said, “Somebody made the decision that they would give extra scrutiny to this particular group. And I think we have to understand why.”
The number of applications for 501c groups increased to 3,400 from 1,200 over the course of 2010 to 2012, prompting campaign finance activists to demand action from the IRS as the Supreme Court’s “Citizens United” ruling allowed for cash to pour into the groups. This prompted Lerner’s letter to Rep. Issa on April 26, which stated: “There are instances where donor information may be needed…such as when the application presents possible issues of…private benefit.” As Congress investigates further, the IRS finds itself a distraction to the Obama administration and mired in its own embarrassment.