Category: Civil Liberties

1. 501(c)4 status is a crock. Such orgs were originally designed to be exclusively about "social welfare".  The IRS interpreted the requirements such that it became vague about what level of partisan political activity would disqualify a group, thus requiring a lot of questions be asked and a lot of judgment calls made.  This sort of thing inevitably leads to accusations (accurate or not) about favoritism, about gaming the system, about violations, etc. And it did indeed lead to a lot of tax-exempt groups (Left and Right, but mostly, it seems, Right) spending like houses-afire at election time in quite clearly partisan fashion.

So start as a premise of mine that the basic mechanism here is broken and that this is what we should be discussing.

2. There does not appear to have been a massive conspiracy by the IRS leadership. It bears repeating that the IRS commissioner at the time was a Bush appointee.  It also appears that once this stuff came to light for higher management, it was quashed.

3. Recall that the period in which this happened saw a massive upsurge in 501(c)4 applications. This was during the big Tea Party craze, and a majority of the applications coming in were from TP/Patriot-styled groups.  Given a directive to be more diligent in reviews of such applications, so as to block inappropriately political groups trying to sneak in, the IRS team in Cincinnati queried within the applications for terms like "Tea Party" in the name to identify applicants that should be further screened.  

On the one hand, that makes sense, because that described a lot of the political groups applying (as opposed to more clearly "social welfare" groups). On the other hand it is, at the least, stupidly naive not to have considered the ramifications of what that would sound like. 

There's no indication that this was done with any particular partisan animus (the screening was not done strictly on right-wing political applications, for one thing, and there's no sign I've seen that the IRS is infested with rabid liberals), but it definitely doesn't not pass the "beyond reproach" standard we expect from a government agency.

4. As much as the selection criteria for review has come under fire, so, too, have the questions that were asked (see http://goo.gl/o8k8j). Note that these questions were also, it appears, asked of Left-wing groups that were scrutinized (i.e., they were non-partisan in application, though more Right-wing groups were asked them because, well, more Right-wing groups were applying), but they are also, again, inappropriately intrusive.  

One might ask what sort of questions one should ask to determine if a group qualifies under 501(c)4 ("Are you going to participate in excessive or inappropriate political activities?  No?  Okay, approved").  As far as I've seen reported, no groups that applied were actually denied the tax-exempt status (though presumably some groups may have withdrawn their application). These questions might have done the job, maybe, but that questions so intrusive have to be asked points to how goofy the whole 501(c)4 thing is.

5. This whole "scandal" has legs for three reasons I can think of: (a) the whole "IRS is persecuting us!" meme plays directly into the hands of the Tea Party, who were most affected by this simply due to numbers, (b) the whole "Evil Corrupt Democratic Government Scandal" thing plays directly into the hands of the GOP leadership, who are looking desperately for something to talk about that doesn't make them look anti-woman, anti-gay, anti-Hispanic, anti-poor, etc., and (c) people on the Left aren't terribly happy about this behavior, either (having squawked about IRS targeting of liberal groups during the Bush administration), and so are letting (a) and (b) have their way.  General dislike of the IRS by the general public doesn't hurt, either.

So what should be done?  Confirm that what we know above about the selection criteria and so forth were simply a matter of misjudgment vs. partisanship; if not then significant hand-slaps need to be replaced by something greater.

But, more importantly, we need to reexamine the whole 501(c)4 setup. Indeed, the concept of tax exemption in general needs to be reexamined, if only because the fuzzy lines (as implemented but also philosophically) between "social welfare" and "education" and partisan politics make these kinds of blow-ups a regular result, which probably does more harm to everyone than its worth.