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“Targeting Conservative And Liberal Groups Alike”: The So-Called IRS Scandal Ends With a Whimper

With Edward Snowdon on his whirlwind tour of countries unfriendly to the United States and the Supreme Court handing down a bunch of important decisions, this is a good week for stories to get lost in the back pages. So you may not have noticed that late yesterday, the IRS scandal, supposedly Worse Than Watergate™, came to a sputtering halt with the release of new documents in the investigation. The whole scandal, you’ll recall, is about how conservative groups applying for 501(c)(4) status were given extra scrutiny, while other kinds of groups just slid by. Well, it turns out, not so much:

The instructions that Internal Revenue Service officials used to look for applicants seeking tax-exempt status with “Tea Party” and “Patriots” in their titles also included groups whose names included the words “Progressive” and “Occupy,” according to I.R.S. documents released Monday.

The documents appeared to back up contentions by I.R.S. officials and some Democrats that the agency did not intend to single out conservative groups for special scrutiny. Instead, the documents say, officials were trying to use “key word” shortcuts to find overtly political organizations — both liberal and conservative — that were after tax favors by saying they were social welfare organizations.

But the practice appeared to go much farther than that. One such “be on the lookout” list included medical marijuana groups, organizations that were promoting President Obama’s health care law, and applications that dealt “with disputed territories in the Middle East.”

Taken together, the documents seem to change the terms of a scandal that exploded over accusations that the I.R.S. had tried to stifle a nascent conservative political movement. Instead, the dispute now revolves around questionable sorting tactics used by I.R.S. application screeners.

Questionable sorting tactics! Not quite the scandal of the century. So why did the Inspector General’s report that started this whole thing characterize it only as the singling out of conservative groups, ignoring the fact that liberal groups got treated unfairly too, and with the same means, the BOLO (“be on the lookout” memo) that instructed agents to give special scrutiny to certain kinds of groups? Steve Benen points out that the Inspector General (IG) was responding to a request from Darrell Issa to investigate the treatment of conservative groups, so that’s the likely reason his inquiry was restricted in that way. So Issa first asked the IG for a restricted investigation, then he released excerpts of interviews with IRS officials cherry-picked to make things look worse than they actually were, and now this.

But this “scandal” was already dying. Despite the most fervent wishes of conservatives, there hasn’t been any actual evidence showing that orders to crush the Tea Party came right from the White House. So in the last few weeks they’ve been reduced to arguing that there was a conspiracy of winks and nods, whereby everybody just knew what to do, even if nobody actually told anybody what to do. President Obama gave a speech criticizing “dark money,” and IRS agents swung into action! Or maybe there was a real conspiracy, but we just haven’t found it yet despite all the looking (“Some person or persons made the decision to target, harass, delay and abuse,” wrote Peggy Noonan. “Some person or persons communicated the decision. Some persons executed them.”). You can sustain that for a while, but eventually, you have to produce something real. You can’t just speculate forever.

And frankly, I’m not sure there’s anything wrong with these BOLO lists per se. If you have a situation where a bunch of similar groups are being created all at the same time and they all appear to be political groups masquerading as social welfare organizations, it’s perfectly reasonable to group them together and have the same agents develop an understanding of what they do and whether they deserve tax-exempt status. The problem isn’t that they got put into a pile, it’s what happens afterward. And what’s been really appalling from what we’ve learned is that the IRS agents seemed to have only the barest understanding of what the law was and how they were supposed to apply it. Maybe once this is all over, we can get around to fixing that.

 

By: Paul Waldman, Contributing Editor, The American Prospect, June 25, 2013

June 26, 2013 Posted by | Internal Revenue Service, Republicans | , , , , , , , | 1 Comment

“Special Hide The Money Designations”: The IRS Should Outlaw All Social Welfare Political Fronts

If you’re covered in political stink, it might be prudent to avoid yelling “dirty politics” at others.

Lately, a mess of right-wing Tea Party groups have been wailing nonstop that they have been targeted, harassed and denied their civic rights by partisan, out-of-control, Obamanistic IRS thugs (no adjective too extreme when assailing Obama or the IRS). The groups certainly are right that it’s abhorrent for a powerful agency to run a repressive witch-hunt against any group of citizens just because of their political views. After all, liberals have frequently felt the lash of such official repression by assorted McCarthyite-Nixonite-Cheneyite forces over the years, and it must be condemned, no matter who the victims.

In this case, however, the right-wing groups were not targeted by government snoops and political operatives, but tagged by their own applications to be designated by the IRS as 501(c)(4) “social welfare” groups. This privileged status would allow them to take unlimited bags of corporate cash without ever revealing to voters the names of the corporations putting up the money. The caveat is that 501(c)(4)s are supposed to do actual social welfare work and cannot be attached to any candidate or party, nor can politics be their primary purpose.

Forget what the rule says, though. Such notorious political players as Karl Rove and the Koch brothers have cynically set up their own pretend-welfare groups, openly using them as fronts to run secret-money election campaigns. Suddenly, hundreds of wannabe outfits were demanding that they be given the special hide-the-money designation, too, brazenly lying about their overt political purpose. Some even asserted that they were engaged in no political activity, when their own websites bragged that they were.

It was these groups’ stupidity and audacity that prompted the IRS inquiries, and their current hissy fit about the agency is really just a PR effort to let them continue their “social welfare” fraud.

I think of a “social welfare charity” as being an altruistic enterprise, like The Little Sisters of the Poor — not the avaricious Little Koch Brothers of the Plutocracy.

Yet the brothers have created their very own 501(c)(4) charity, which they used last year as a political front group for funneling $39 million into campaigns against Democrats. Interesting, since, the law bans these tax-exempt entities from spending more than 49 percent of their funding on political efforts to promote their “issues.”

Yet, there they are — hordes of political (c)(4)s, mostly right-wing, operating primarily as political pipelines for secretly gushing corporate money into raw, partisan campaigns. Their hocus-pocus lawyers and congressional consiglieres have badgered the IRS into handing them the (c)(4) get-out-of-jail-free card, then defied the agency to stop them as they dump millions of corrupt dollars into our elections.

For example, American Action Network, a “charity” created by Wall Street lobbyists, has spent two-thirds of its revenue on elections, including putting up $745,000 from secret donors to elect Sen. Ron Johnson of Wisconsin. How ironic, then, that Johnson is now one of the Tea Party mad dogs howling at IRS officials.

It’s scandalous, Johnson shrieks, that some Tea Party groups have not been given (c)(4) status, because IRS agents have had the temerity to question whether the groups actually are charitable enterprises — or just rank political outfits fraudulently posing as charities.

While Tea Party groups should not be singled out for IRS scrutiny, neither should they be allowed to cheat in elections by shamefully masquerading as Little Sisters of the Poor. That’s the real IRS scandal.

 

By: Jim Hightower, The National Memo, June 5, 2013

June 7, 2013 Posted by | Internal Revenue Service, Tea Party | , , , , , , , | Leave a comment

“Arrested Governance”: Do Everything You Can To Sabotage Government To Keep It From Operating Effectively

The Internal Revenue Service was closed today, as employees were furloughed due to sequestration’s budget cuts. Conservatives found this to be an occasion for side-splitting humor; Sarah Palin, for example, tweeted, “The IRS is closed today, feel free to use your phones.” Get it, because the IRS was tapping … um … well, never mind. In any case, today is a reminder that this scandal could be an opportunity for reform that clarifies the law on political and non-political groups, leads to a greater professionalization of the agency, and makes future misconduct less likely. Or it could wind up being just the opposite.

As Kevin Drum reminded us yesterday, one of the low moments of the Gingrich years in Congress was a series of hearings meant to expose IRS wrongdoing, in which horror stories of the agency’s abuse of taxpayers were told to lawmakers eager to hear them. In response, the IRS’s authority was curtailed and its budget slashed. The predictable consequence was less enforcement of tax laws (warming Republicans’ hearts, no doubt), but also an agency that had to do more with less.

If anyone was forced to do more with less, it was the office in Cincinnati, where a small number of poorly trained employees had to process thousands of new applications from groups seeking tax-exempt status after 2010. That isn’t to say there was no wrongdoing, but if you want an agency that does its job well and upholds the highest standards of professionalism, cutting its resources is not the way to get it.

But that could well happen again, and Republicans would be only too happy about it. It would be of a piece with the way they approach so much of what passes for their attempts at governing: Do everything you can to sabotage government and keep it from operating effectively, and then when it falls short, shout “See?!? We told you government can’t do anything right!”

 

By: Paul Waldman, Contributing Editor, The American Prospect, May 24, 2013

May 27, 2013 Posted by | Internal Revenue Service, Republicans | , , , , , , , | Leave a comment

“The (c) Stands For Cha-Ching”: The IRS Went After Small Fish, But Let The Big Ones Get Away

“Please provide copies of all your current web pages, including your blog posts. Please provide copies of all your newsletters, bulletins, flyers or any other media or literature you have disseminated to your members or others. Please provide copies of stories and articles that have been published about you.”

That’s the Internal Revenue Service calling.

Or, more precisely, sending questionnaires. They went out to scores of Tea Party groups that were seeking tax-exempt status as “social welfare” organizations.

The organizations were targeted for special scrutiny because they had the words “Tea Party” or “Patriot” in their titles. Some questionnaires even requested the names of all donors and the amounts of each contribution.

It was a political abuse of power aimed, ironically, at groups who are pretending not to be political just to get a juicy tax break.

IRS supervisors were wrong to single out local Tea Parties when there’s a host of flagrant, big-time violators controlled by supporters of both major political parties.

The gimmick of choice is Section 501(c)(4) of the revenue code. Groups receiving that golden designation are allowed to collect unlimited contributions without paying taxes.

They’re not banned from political involvement, but by law they’re supposed to be “primarily engaged” in activities promoting “social welfare” and “the common good” — not partisan politics.

It’s a total farce.

Karl Rove’s Crossroads GPS spent untold millions of dollars on behalf of Republican candidates while attacking Democrats during the last election cycle. On the other side, Priorities USA spent a fortune helping Democratic candidates while trashing Republicans.

Both rabidly partisan organizations enjoy tax-exempt status under Section 501(c)(4). They claim to run strictly “issue” advertisements that aren’t really political, which is a hoot.

What’s not so hilarious is that the IRS sidestepped these heavyweight scammers to go after small-time outfits such as the Liberty Township Tea Party in Ohio.

Initially, the tax agency suggested that the crackdown was an isolated operation by agents in its Cincinnati office. However, in recent days it was revealed that a few IRS officials in Washington were aware of the targeting campaign in early 2010, and that similar inquiries of conservative groups had been conducted in other states.

A Treasury inspector general’s report issued last week criticized IRS managers who didn’t stop employees from focusing on conservative groups that were seeking 501(c)(4) designations.

President Obama said the actions described in the report “are intolerable and inexcusable.” He didn’t use the word “stupid,” but it applies.

There’s no sign that the president knew about the IRS targeting campaign, which began a few years ago while the agency was led by Douglas Shulman, an appointee of President George W. Bush.

Owing his job to a Republican, Shulman seems an unlikely instigator of an IRS campaign against conservative groups. No evidence has surfaced that he was aware of it.

After Shulman completed his term last November, IRS Deputy Commissioner Steven Miller became acting commissioner. Six months earlier, Miller had been briefed about some cases involving increased scrutiny of Tea Party-affiliated groups.

However, in letters to Congress, Miller, who’s been with the tax agency almost 25 years, didn’t mention the existence of the Tea Party cases. He resigned on Wednesday at Obama’s request.

The FBI and Justice Department are rightly investigating to see whether the IRS broke any laws by zeroing in on the tax-exempt applications of conservative groups.

Congress will hold long hearings, brimming with outrage.

No such pious fervor exists for investigating and exposing the fraudulent status of large groups like Crossroads GPS and Priorities USA, which collectively take in hundreds of millions of dollars.

They’re not “social welfare” organizations worthy of a tax exemption. They’re wealthy partisan advocacy machines with purely political missions — to promote their candidates, and to influence voters.

They are prized by both parties as safe and bottomless repositories for huge campaign donations, which is why you don’t see congressional leaders declaring war on the 501(c)(4) charade.

The c stands for “cha-ching.”

 

By: Carl Hiaasen, The National Memo, May 22, 2013

May 26, 2013 Posted by | Internal Revenue Service | , , , , , , , , | Leave a comment

“Lost In The IRS Scandal”: The Need To Know Facts About The Big Picture And Big Donors Of Dark Money

In the furious fallout from the revelation that the IRS flagged applications from conservative non-profits for extra review because of their political activity, some points about the big picture – and big donors — have fallen through the cracks.

Consider this our Top 6 list of need-to-know facts on social welfare non-profits, also known as “dark money” groups because they don’t have to disclose their donors. The groups poured more than $256 million into the 2012 federal elections.

1. Social welfare non-profits are supposed to have social welfare, and not politics, as their “primary” purpose.

A century ago, Congress created a tax exemption for social welfare non-profits. The statute defining the groups says they are supposed to be “operated exclusively for the promotion of social welfare.” But in 1959, the regulators interpreted the “exclusively” part of the statute to mean groups had to be “primarily” engaged in enhancing social welfare. This later opened the door to political spending.

So what does “primarily” mean?  It’s not clear. The IRS has said it uses a “facts and circumstances” test to say whether a group mostly works to benefit the community or not. In short: If a group walks and talks like a social welfare non-profit, then it’s a social welfare non-profit.

This deliberate vagueness has led some groups to say that “primarily” simply means they must spend 51 percent of their money on a social welfare idea — say, on something as vague as “education,” which could also include issue ads criticizing certain politicians. And then, the reasoning goes, a group can spend as much as 49 percent of its expenditures on ads directly advocating the election or defeat of a candidate for office.

Nowhere in tax regulations or rulings does it mention 49 percent, though. Some non-profit lawyers have argued that the IRS should set hard limits for social welfare non-profits — setting out, for instance, that they cannot spend more than 20 percent of their money on election ads or even limiting spending to a fixed amount, like no more than $250,000.

So far, the IRS has avoided clarifying any limits.

2. Donors to social welfare non-profits are anonymous for a reason.

Unlike donors who give directly to politicians or even to Super PACs, donors who give to social welfare non-profits can stay secret. In large part, this is because of an attempt by Alabama to force the NAACP, then a social welfare non-profit, to disclose its donors in the 1950s. In 1958, the Supreme Court sided with the NAACP, saying that public identification of its members put them at risk of reprisal and threats.

The ACLU, which is itself a social welfare non-profit, has long made similar arguments. So has Karl Rove, the GOP strategist and brains behind Crossroads GPS, which has spent more money on elections than any other social welfare non-profit. In early April 2012, Rove invoked the NAACP in defending his organization against attempts to reveal donors.

The Federal Election Commission could in theory push for some disclosure from social welfare non-profits — for their election ads, at least. But the FEC has been paralyzed by a 3-3 partisan split, and its interpretations of older court decisions have given non-profits wiggle room to avoid saying who donated money, as long as a donation wasn’t specifically made for a political ad.

New rulings indicate that higher courts, including the Supreme Court, favor disclosure for political ads, and states are also stepping into the fray. During the 2012 elections, courts in two states – Montana and Idaho – ruled that two non-profits engaged in state campaigns needed to disclose donors.

But sometimes, when non-profits funnel donations, the answers raise more questions. It’s the Russian nesting doll phenomenon. Last election, for instance, California’s election agency pushed for an Arizona social welfare non-profit to disclose donors for $11 million spent on two California ballot initiatives. The answer? Another social welfare non-profit, which in turn got the money from a trade association, which also doesn’t have to reveal its donors.

3. The Supreme Court’s Citizens United decision meant that corporations could pay for political ads, anonymously, using social welfare non-profits.

In January 2010, the Supreme Court ruled that corporations and unions could spend money directly on election ads. A later court decision made possible SuperPACs, the political committees that can raise and spend unlimited amounts of money from donors, as long as they don’t coordinate with candidates and as long as they report their donors and spending.

Initially, campaign finance watchdogs believed corporations would give directly to SuperPACs. And in some cases, that happened. But not as much as anyone thought, and maybe for a reason: Disclosure isn’t necessarily good for business. Target famously faced a consumer and shareholder backlash after it gave money in 2010 to a group backing a Minnesota candidate who opposed gay rights.

Many watchdogs now believe that large public corporations are giving money to support candidates through social welfare non-profits and trade associations, partly to avoid disclosure. Although the tax-exempt groups were allowed to spend money on election ads before Citizens United, their spending skyrocketed in 2010 and again in 2012.

A New York Times article based on rare cases in which donors have been disclosed, sometimes accidentally, explored the issue of corporations giving to these groups last year. Insurance giant Aetna, for example, accidentally revealed it gave $3 million in 2011 to the American Action Network, a social welfare group founded by former Sen. Norm Coleman, a Republican, that runs election ads.

Groups that favor more disclosure have so far failed to force action by the FEC, the IRS, or Congress, although some corporations have voluntarily reported their political spending. Advocates have now turned to the Securities and Exchange Commission, which is studying a proposal to require public companies to disclose political contributions.

The idea is already facing strong opposition from House Republicans.

4. Social welfare non-profits do not actually have to apply to the IRS for recognition as tax-exempt organizations.

With all the furor over applications being flagged from conservative groups — particularly groups with “Tea Party,” “Patriot” or “9/12″ in their names — it’s worth remembering that a social welfare non-profit doesn’t even have to apply to the IRS in the first place.

Unlike charities, which are supposed to apply for recognition, social welfare non-profits can simply incorporate and start raising and spending money, without ever applying to the IRS.

The agency’s non-profit wing is mainly concerned about ferreting out bad charities, which are the biggest chunk of non-profits and the biggest source of potential revenue. After all, the IRS’s main job is to collect revenue. Charities allow donors to deduct donations, while social welfare non-profits don’t.

Most major social welfare non-profits do apply, because being recognized is seen as insurance against later determination by the IRS that the group should have registered as a political committee and may face back taxes and disclosure of donors. A recognition letter is also essential to raise money from certain donors — like, say, corporations.

But some of the new groups haven’t applied.

The first time the IRS hears about these social welfare non-profits is often when they file their first annual tax return, not due until sometimes more than a year after they’ve formed.

In many cases, the first time the IRS hears about these groups is a full year after an election.

5. Most of the money spent on elections by social welfare non-profits supports Republicans.

Of the more than $256 million spent by social welfare non-profits on ads in the 2012 elections, at least 80 percent came from conservative groups, according to FEC figures tallied by the Center for Responsive Politics.

None came from the Tea Party groups with applications flagged by the IRS. Instead, a few big conservative groups were largely responsible.

Crossroads GPS, which this week said it believes it is among the conservative groups “targeted” by the IRS, spent more than $70 million in federal races in 2012. Americans for Prosperity, the social welfare non-profit launched by the conservative billionaire brothers Charles and David Koch, spent more than $36 million. American Future Fund spent more than $25 million. Americans for Tax Reform spent almost $16 million. American Action Network spent almost $12 million.

Besides Crossroads GPS, each of those groups has applied to the IRS and been recognized as tax-exempt. (You can look at their applications here.)

All of those groups spent more than the largest liberal social welfare non-profit, the League of Conservation Voters, which spent about $11 million on 2012 federal races. The next biggest group, Patriot Majority USA, spent more than $7 million. Planned Parenthood spent $6.5 million. VoteVets.org spent more than $3 million.

None of those figures include the tens of millions of dollars spent by groups on certain ads that run months before an election that are not reported to the FEC.

6. Some social welfare groups promised in their applications, under penalty of perjury, that they wouldn’t get involved in elections. Then they did just that.

Much of the attention when it comes to Tea Party nonprofits has focused on their applications and how the IRS determines whether a group qualifies for social welfare status.

As part of our reporting on dark money in 2012, ProPublica looked at more than 100 applications for IRS recognition. One thing we noted again and again: Groups sometimes tell the IRS that they are not going to spend money on elections, receive IRS recognition, and then turn around and spend money on elections

The application to be recognized as a social welfare non-profit, known as a 1024 Form, explicitly asks a group whether it has spent or plans to spend “any money attempting to influence the selection, nomination, election, or appointment of any person to any Federal, state, or local public office or to an office in a political organization.”

The American Future Fund, a conservative non-profit that would go on to spend millions of dollars on campaign ads, checked “No”in answer to that question in 2008. The very same day the group submitted its application, it uploaded this ad to its YouTube account: http://youtu.be/2oEz3lzgDsI

Even before mailing its application to the IRS saying it would not spend money on elections in 2010, the Alliance for America’s Future was running TV ads supporting Republican candidates for governor in Nevada and Florida. It also had given $133,000 to two political committees directed by Mary Cheney, the daughter of the former vice president.

Another example of this is the Government Integrity Fund, a conservative non-profit that ran ads in last year’s U.S. Senate race in Ohio. Its application was approved after it told the IRS that it would not spend money on politics. The group went on to do just that.

 

By: Kim Barker and Justin Elliott, ProPublica; Published in The National Memo, May 22, 2013

May 23, 2013 Posted by | Internal Revenue Service | , , , , , , , , | Leave a comment

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