Is the IRS Corrupt or Just Incompetent?

taxmanThe narrative about what happened at the Internal Revenue Service’s tax-exempt division before and during the 2012 presidential election is still incomplete. Lois Lerner, who heads the division, admitted 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.

Her statement came at the heels of an audit by the Treasury Inspector General for Tax Administration that determined that “early in Calendar Year 2010, the IRS began using inappropriate criteria to identify organizations applying for tax-exempt status to review for indications of significant political campaign intervention.”

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The news lit a powder keg and immediately rocketed the ordeal to the top of President Obama’s political liabilities list. While any threads connecting bad behavior to the President are dubious at best, the scandal has provided a seemingly infinite amount of fodder for the GOP battery.

Broadly speaking, what happened is not at issue any more. At the end of the day, there seems to be no denying that conservative groups were targeted for additional review during the application process for tax-exempt status. Taken by itself, there is little traction here. Groups are often flagged for additional review, and information that has come out since public onset of the ordeal has revealed that liberal and apolitical groups were flagged during the same process.

elections republicans democratsAt issue is why the targeting happened. If, as some conservatives posit, there is corruption and conspiracy within the IRS and White House, then there is, in fact, some history in making going on. If, on the other hand, and as the Inspector General’s report suggests, circumstance and ineffective management fostered a degree of institutional incompetency within the walls of America’s tax authority, then the reality is more mundane. A dysfunctional IRS should come as no surprise.

The narrative put forward by the Inspector General and other reports is one where the federal government trips on its own bureaucracy, and what could have been solved with a modicum of good management instead ballooned into a crisis.

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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.

Acting Commissioner Steven Miller summed up the situation in a testimony before the House Ways and Means Committee by saying, “I think that what happened here was that foolish mistakes were made by people trying to be more efficient in their workload selection.”

ObamaThe workload factor is important, because 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. The IRS was flooded with new applications, and reports indicate that the organization was totally unprepared to deal with the workload.

What’s more, the Citizens United ruling changed the tax code in such a way that tens of thousands of previously approved tax-exempt groups were compelled to reapply. In addition to the new filings, the IRS was flooded with re-applications. The Supreme Court ruling created an analog version of a denial-of-service attack on the small IRS division responsible for processing the paperwork.

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“We’re talking about an office overwhelmed by 60,000 paper applications trying to find efficient means of dealing with that,” Philip Hackney, who was an IRS lawyer in Washington, told the New York Times. “There were times where they came up with shortcuts that were efficient but didn’t take into consideration the public perception.”

One of the most popular vectors of attack regarding the ordeal has to do with President Obama’s knowledge of the situation. Obama was not aware of the situation until May 10, when most of the public was also informed. The admission has raised some red flags about how closely Obama is and should be monitoring the agencies under his command.

The Wall Street Journal reports that the Office of the White House Counsel, headed by Kathryn Ruemmler, was told by Treasury Department attorneys that the audit into the IRS was nearing completion. In that conversation, Ruemmler learned that inappropriate targeting was taking place. The office elected not to tell the President on grounds that informing him would amount to an attempt to intervene in an ongoing independent review. As a result, the President was kept in the dark until the news made headlines across the nation.

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Meanwhile, the ordeal has become a thorn in the side of not just the IRS and the administration, but of Obama’s healthcare initiative as well. Aside from the Department of Health and Human Services, the IRS is the most important government agency responsible for the implementation of the Affordable Care Act; it is charged with checking whether millions of Americans are in compliance the law’s health coverage requirement. It will also track individuals’ private health information in order to distribute tax credits to eligible individuals who purchase coverage under a qualified plan through one of the exchanges. In total, there are 47 different Obamacare provisions that require involvement from the IRS.

In the eyes of many, the IRS scandal has undermined the already tenuous reputation of the agency. Earning back the trust of American citizens will be no easy task.

You can follow Dan on Twitter (@WSCS_Dan)

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