A ‘Foolish Mistake’ Has Never Cost the IRS More

“I think what happened here is that foolish mistakes were made by people trying to be more efficient.”

Steven Miller, acting director of the Internal Revenue Service, told the House Ways and Means Committee on Friday morning that the targeting of conservative groups for additional review was not based on ideology. Miller — whose resignation was accepted by Treasury Secretary Jack Lew earlier this week — echoed the finding of an audit by the Treasury Inspector General for Tax Administration, and suggested that the ordeal was the result of institutional incompetence, not political conspiracy.

Last week, Lois Lerner, who leads the Exempt Organizations Division at the IRS, issued an apology admitting that the agency had engaged in “inappropriate” targeting of conservative 501c(4) groups during the 2012 election. According to Lerner, lower-level IRS employees pursued additional review of groups containing keywords like “tea party” or “patriot” that were suspected of violating the conditions necessary to qualify for tax-exempt status.

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Friday’s hearing was the first in a series of that will seek to get to the bottom (or top) of the issue. At the behest of justly outraged Republicans and Democrats alike, attorney General Eric Holder announced on Wednesday that a criminal investigation would be launched. The investigation has put a wall between the White House and the answer-seeking public — as Press Secretary Jay Carney put it: “we need the independent inspector general’s report to be released before we can make judgments.”

For his part, President Barack Obama, who claims he had no knowledge of the ordeal before it made headlines last Friday, said on Monday that “if, in fact, IRS personnel engaged in the kind of practices that have been reported on and were intentionally targeting conservative groups, then that is outrageous, and there is no place for it, and they have to be held fully accountable.”

As it stands, Miller revealed during the hearing that a few unnamed IRS personnel have been disciplined in connection with the ordeal, but Miller is the only high-level authority to face the ax so far. However, Representative Sander Levin (D-MI) has called for the resignation of Lerner because she did not inform lawmakers about the problem sooner.

In what is perhaps an unsurprising turn of events, what actually happened (although inexcusable) is becoming less and less important relative to how it was handled. Specifically, how those involved failed to either a) notice the ordeal, or b) reveal the situation to lawmakers in a timely way. The second is where a case for conspiracy crops up, but the TIGTA report suggests that the first — i.e. ineffective management — is where the problem actually was.

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“Ineffective management: 1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary information requests to be issued,” reported the TIGTA in the May 14 report.

Ineffective management can go a long way in explaining a lot of problems, and is certainly at play here, but is not a conclusive diagnosis. In the wake of the 2010 Citizens United V. Federal Election Commission Supreme Court Decision, the number of applications for 501c(4) organizations increased 183 percent, which undoubtedly raised a few eyebrows at the IRS.

In this case, it looks like the IRS was challenging whether or not these groups were actually “primarily engaged in the promotion of social welfare,” as the verbiage of the Internal Revenue Code dictates they must be in order to qualify for tax-exempt status. IRS employees were no doubt on high alert for gamesmanship, particularly heading into the presidential election.

As Robert Maguire, an outside spending researcher at the Center for Responsive Politics, told The Daily Beast, IRS staffers “just willy-nilly went about trying to create their own system and it has blown up in their face.”

For your additional viewing pleasure, here’s the May 14 report from the Treasury Inspector General for Tax Administration.

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IRS IG Report

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