What Happened at the IRS, and Is Obama Accountable?

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.

What happened?taxman

An audit released by the Treasury Inspector General for Tax Administration on May 14 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.” Specifically, that criteria was “their names or policy positions instead of indications of potential political campaign intervention.”

A USA Today review of IRS data shows that applications for non-profit status from certain conservative groups sat in limbo for as long as 27 months while applications from similar liberal groups were approved in as few as nine months. As it stands, it looks like none of the targeted conservative groups were denied tax-exempt status.

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IRS officials told lawmakers earlier this week that 471 groups received additional scrutiny. At least three groups were Democratically-learning organizations, and one was denied tax-exempt status as a 501c(4) because of its explicit political involvement.

The TIGTA report continued to say that meaningful processing of targeted applications did not begin for 13 months after receipt. “For the 296 total political campaign intervention applications TIGTA reviewed as of December 17, 2012, 108 had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 were open from 206 to 1,138 calendar days (some for more than three years and crossing two election cycles).”

Why did it happen?

“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.

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At this point, it would be easy to claim explicit and conscious discrimination or conspiracy, but ineptitude seems more likely. The keywords chosen clearly indicate a bias against conservative groups, and particularly against the highly vocal far right that was the fuel of the GOP engine going through the election season. While it’s fair to suspect some degree of foul play, the TIGTA’s finding of ineffective management and what may appropriately be called institutional incompetence seem to be the primary driving forces behind the ordeal.

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.”

As noted, applications for status as a 501c(4) social-welfare organization exploded after Citizens United, setting off red flags and alarm bells at not just the IRS, but within the media.

News organizations, political watch dogs, and curious citizens from all walks called for increased scrutiny into these organizations. American Crossroads spin-off organization Crossroads Grassroots Policy Strategies (or Crossroads GPS) — a Super PAC backed by notorious figures like former White House strategist Karl Rove and Former Republican National Committee Chairman Ed Gillespie — was forced into the media spotlight.

Democratically-leaning factions of the media pointed to Crossroads GPS and other conservative groups as bad actors and called on the IRS to increase scrutiny of the organizations. It is unsurprising that this call to action, surge in applications, and ineffective management could lead to such a mess.

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

IRS IG Report

What happens next / who is accountable?

“After reading the Inspector General’s report issued yesterday, it became clear that the IRS needs new leadership to restore public trust and confidence in the Agency,” reads a May 15 statement issued by Treasury Secretary Jack Le. “As the President noted, this type of misconduct at any agency, but especially the IRS, is inexcusable and unacceptable. And I will not tolerate it.

“Today, in order to begin the process of restoring trust in the IRS, I requested and accepted the resignation of the Acting Commissioner. There is more work to do, and we will get it done by ensuring the IRS implements new safeguards and administers the tax code fairly and without bias.”

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To be sure, the buck does not stop here. Conservative groups are trying to push accountability all the way to the President, who claims he was unaware that anything was going on until last Friday. This Friday, at 9:00 a.m. eastern time, the House of Representatives will hold a hearing on the ordeal.

“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,” said President Obama in a statement on Monday.

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