Special Report: IRS Scandal Shakes Washington

This week, the US Internal Revenue Service acknowledged and apologized for behavior that had long been rumored. The IRS improperly targeted for extra scrutiny conservative groups seeking tax-exempt status.

The IRS did not ultimately deny tax-exempt status to a single group receiving extra scrutiny. Some say this proves that the actions of the IRS were baseless.

The scandal has now shaken the nation’s capital:

President Barack Obama directed Jack Lew, Secretary of the Treasury, to request the resignation of Steven Miller, Acting IRS Commissioner.

Miller resigned and Lew accepted the resignation.

The Justice Department has initiated a criminal investigation.

Exercising its oversight responsibility, Congress has begun its own probe of the IRS scandal.

Obama addressed the nation on television saying, “It’s inexcusable and Americans are right to be angry about it and I am angry about it. I will not tolerate this kind of behavior in any agency, but particularly the IRS given the power that it has and the reach that it has in all of our lives.” He promised reforms.

When wrongdoing by the government is uncovered, it is rightfully news. But, this latest government scandal cuts deeper.

It’s easy for some to ignore or minimize the IRS scandal. The fact that certain conservative groups were targeted and had their tax-exempt applications delayed will not upset some.

However, whenever any tax-exempt organization or prospective tax-exempt organization is unfairly dealt with by the government, it is an attack on the entire sector. Beyond that, it is an attack on democracy itself.

No matter one’s political orientation, we must all stand united against this attack on our nation’s core values. We must demand that our government officials fully investigate this scandal, determine if other agencies are guilty of similar misbehavior, and enact appropriate reforms.

As I watched the IRS scandal unfold, I heard the Leonard Cohen song “Democracy” playing in my head:

I’m sentimental if you know what I mean

I love the country but I can’t stand the scene

And I’m neither left or right

I’m just staying home tonight

Getting lost in that hopeless little screen

But I’m stubborn as those garbage bags

That time cannot decay

I’m junk but I’m still holding up

This little wild bouquet

Democracy is coming to the U.S.A.”

For the complete lyrics to “Democracy,” click here. To hear the legendary Cohen perform the song, click here.

That’s what Michael Rosen says… What do you say?

UPDATE (May 21, 2013): The Washington Post has documented the lies told by Lois G. Lerner, the IRS’s Director of Exempt Organizations Division. The Post also reports that Lerner is expected to plead the Fifth during her appearance before Congress tomorrow. So, let’s see. Lerner has lied. Now, Lerner is refusing to cooperate with Congress as it exercises its Constitutional oversight responsibilities. Why is she still drawing a government, taxpayer-funded paycheck?

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Posted on May 15, 2013 at 11:26 pm in Current Events, Ethics, General Nonprofit, Special Report | RSS feed | Reply | Trackback URL

Tags: Barack Obama, civil society, Congress, crisis, democracy, ethics, Internal Revenue Service, IRS, IRS Scandal, Jack Lew, Leonard Cohen, nonprofit, right thing, scandal, special report, Steven Miller, tax-exempt

8 Comments to “Special Report: IRS Scandal Shakes Washington”

Mary Cahalane
May 16, 2013 at 9:07 am

Here’s the thing: the IRS themselves messed with the intent of the law years ago – changing what was meant to be a designation for those exclusively doing social good to “primarily”… and then further defined primarily as 49.9%… which leaves a hole big enough for loads of abuse.

So probably, the root of the issue isn’t that conservative groups were looked at hard. It’s that ALL of these 501c4s weren’t looked at hard. This was also a case where cuts in government spending left fewer people to do the same work – and they came up with stupid shortcuts, using keywords.

Nonprofits and Citizens United-spawned political groups should not be confused. The “4” designation allows these groups to keep their donors anonymous. This is very, very bad for our democracy. And it’s bad for nonprofits – those of us really helping people.

Some info here: http://www.newyorker.com/online/blogs/comment/2013/05/irs-scandal-tea-party-oversight.html

And a bit of debate here: http://www.nytimes.com/roomfordebate/2013/05/15/does-the-irs-scandal-prove-that-501c4s-should-be-eliminated

Reply
- Michael J. Rosen, CFRE
  May 16, 2013 at 4:03 pm
  
  Mary, thank you for commenting and sharing the links. While it would be interesting for us all to understand the root cause of the discriminatory practice by the IRS, the fact still remains that the IRS discriminated against conservative groups and, in the process, blocked some from lawfully participating in the electoral process.
  
  You and I disagree with how the IRS has managed the 501(c)4 designation. However, that does not mean the IRS should be given a pass when it discriminates. The issue is not “stupid shortcuts.” The issue is premeditated, discriminatory practice to block certain groups from participating in the electoral process while allowing others to do so hassle-free. If the IRS wants to scrutinize 501(c)4s and prospective such organizations, it should do so uniformly and fairly. Sadly, that’s not what happened here.
  
  I also need to point out that your assertion that budget cuts might have been at the root of the problem is completely inaccurate. During the period when the IRS admits targeting conservatives, the US Federal budget was NOT cut.
  
  Moving forward, there will still be no budget cuts unless Congress takes further action. Sequestration simply slows the rate of budget growth over the next decade. It does NOT actually reduce the budget.
  
  I agree with you that the Citizens United decision and the changes in 501(c)4 regulations are bad for our democracy. However, that does not mean that the IRS actions are not also dangerous. When a government agency with the enormous power of the IRS discriminates, it should send a shiver down everyone’s spine.
  
  Reply
  - Mary Cahalane
    May 16, 2013 at 4:09 pm
    
    I agree about that. And discrimination should not have happened to several churches who spoke out against the war in Iraq during the Bush administration. Unfortunately, it’s not new. But it shouldn’t happen, regardless.
  - Michael J. Rosen, CFRE
    May 16, 2013 at 4:18 pm
    
    Mary, I would never suggest that only the current administration has sinned. It is precisely because every administration, and the bureaucracy itself, will abuse power if left unchecked that we must demand such checks on power. It does little good to react to the Obama Administration’s misdeeds by saying, “Oh well, the Bush Administration did bad stuff, too.” That’s why I was very happy to read your closing sentence: “But it shouldn’t happen, regardless.” Thank you for caring about this important issue.
Brian Lacy
May 16, 2013 at 9:56 am

Michael you missed that the President’s step-brother got a record fast approval – one month – of his nonprofit that had been running illegally for two years and that that approval was back dated two years to stop prosecution of the President’s family member.

Reply
- Michael J. Rosen, CFRE
  May 16, 2013 at 4:12 pm
  
  .Brian, thank you for sharing this information. Readers who want to learn more can do a web search or read this article at The Huffington Post.
  
  Reply
civilrightsactivist
May 19, 2013 at 12:31 pm

I reblogged this on Joanne Tosti-Vasey Blogging for Equality and commented:

I just read this blog by Michael J. Rosen about the extra scrutiny of conservative groups seeking tax-exempt status. I decided to repost his blog with three sets of comments. My comments give thought to three different sets of questions:

1. What else besides what we’ve heard about might have helped lead to this “scandal?”

2. Is it really a “scandal?” Do we know?

3. Is this issue likely to go away soon?

What else might be behind this scandal?

Besides a lack of training and oversight that we’ve heard about, I think another part of this whole problem is the backlog of applications in the nonprofit division of the IRS. I talked to them the other day about a nonprofit I work with that is attempting to get its 501(c)4 status reinstated due to the 990-N issue. The agent I talked to said that they are getting over 5,000 applications every month and are working on them on a first come, first serve basis.

The IRS website says that with the small staff they have, there is an even greater backlog on applications than what the agent told me. Here’s that IRS statement:

“All [nonprofit] applications are sent to the IRS Determinations Office in Cincinnati. This office receives approximately 70,000 applications for tax-exempt status of all kinds each year [that averages out to 5,833 new applicants each month]. This includes applications from section 501(c)(3) and section 501(c)(4) organizations. This office, which includes fewer than 200 people working directly on applications, is primarily responsible for working determination applications.”

The agent helped me to figure out the current status of this VERY SMALL nonprofit that I’m working with (if it brings in $400/year for this group, it’s doing well). He told me that the records show that all of the paperwork at our end is basically complete, but the application won’t be reviewed until the office gets to the applications marked as “complete” as of September 2012 (when he says my group officially completed the paperwork). And, directing me to another section of the website, he pointed out that the office is currently working on applications from early May 2012 – i.e., over a 1 year delay in processing!

The aforementioned web page also goes into more detail, from the official IRS viewpoint, of what happened with the Tea Party organizations. It says that approximately 70 Tea Party groups were put into the in-depth “centralized” review; that out of a total of, currently, about 470 organizations being given similar treatment.

Is it really a “scandal”? Do we know?

A scandal is defined as “a circumstance or action that offends propriety or established moral conceptions or disgraces those associated with it.” A political scandal is “an instance of government wrongdoing” that offends or disgraces those directly associated with that wrongdoing.
In this case, so far, it doesn’t appear to be a scandal that rises to the level of The White House. According to The Washington Post, based on increasing evidence, the IRS issue is very bad press for the Obama Administration. According to their report:

“If we believe the agency inspector general’s report, a group of employees in a division called the “Determinations Unit…” started giving Tea Party groups extra scrutiny, were told by agency leadership to knock it off, started doing it again, and then were reined in a second time and told that any further changes to the screening criteria needed to be approved at the highest levels of the agency. The White House fired the acting director of the agency [this week] on the theory that somebody had to be fired and he was about the only guy they had the power to fire. They’re also instructing the IRS to implement each and every one of the IG’s recommendations to make sure this never happens again.”

And from all the evidence obtained so far, there is no evidence of any connection between the “Determinations Unit” and the Obama Administration. So unless there is a smoking gun hidden somewhere, there is no political scandal within The White House. Time will tell.

Is this issue likely to go away anytime soon?

No, I personally doubt that the issue will “go away” anytime soon.

Three reasons: 1) partisan politics to continue attacking Obama’s executive branch, 2) long history of spying and intrusiveness, and 3) free-speech issues.

The first issue is purely partisan. Issues that Republicans think will make President Obama look bad are brought up again and again even when the public, to some extent (but not the base) has moved on. Has the Benghazi issue died? How many times will the Republican-dominated House vote to revoke Obamacare before they give up?

The second issue is spying and intrusiveness that, for the first time in a long time, concerns both sides of the aisle. There has been a long history of the feds, usually the FBI, targeting non-profits. Think of the Friends (Quakers) peace-related work for example or the Communist-baiting of the 1950s. Usually it’s the more progressive, left-leaning groups that are targeted. These groups have a long memory and I think may, in this case, support the concerns raised in this nonprofit scrutiny case. And since there were progressive groups in this list of targeted nonprofits, both sides have some ammunition to push back against the actions of the IRS.

The third is a First Amendment issue. Combine these IRS actions with the free press concerns over the Justice Department’s review of press reporters’ phone logs; both sides have screamed NO about. What you have here are two different departments of the executive branch allegedly intruding on the First Amendment: one department—the IRS—may be attacking an individual’s free speech rights and another department may be attacking freedom of the press. Both protections are contained within the First Amendment of the US Constitution.

So no, based on all three routes of concern, I don’t think this issue will go away anytime soon.

Reply
- Michael J. Rosen, CFRE
  May 19, 2013 at 6:07 pm
  
  Joanne, thank you for joining the discussion. I’m honored to know that my post inspired your own, and I appreciate you sharing my post with your readers.
  
  I’d like to take a few moments to react briefly to your questions:
  
  What else might be behind this scandal?
  
  Among other things, the investigation needs to determine the root of the problem. Just as a good doctor will address the cause of a health problem and not just the symptoms, the government must fix the root problems and not just deal with the problem in a superficial way.
  
  Returning to my medical metaphor, I have to point out that the number one rule for physicians is “Do no harm.” As the government seeks to address the IRS problem, we need to make sure that they do not cause more problems in the process.
  
  Now, I want to turn to the IRS suggestion that the problem was caused, in part, by under-staffing (read as: “under funding”). I’m disgusted that the IRS would use this situation to advocate for even more staffing/funding. If the agency cannot effectively manage its current staff, how will it effectively manage an even larger staff? Yet, in classic Washington fashion, the bureaucracy thinks the solution to virtually every problem is more money and bigger government. Guess what? If the IRS did not waste so much time targeting conservative groups, it would have had more time to process applications in a timely manner.
  
  Is it really a “scandal”? Do we know?
  
  When the President of the United States accuses a government agency of “inexcusable” behavior, you know it’s a scandal. Does the scandal reach all the way to The White House? At this point, it appears it does not. However, the investigation is at a very early stage. We simply do not yet know how high this will go.
  
  Is this issue likely to go away anytime soon?
  
  I agree with you. The issue will not be going away anytime soon. The Justice Department is investigating appropriately. Congress is exercising its oversight responsibility. The IRS must be held to account. Our democracy depends on it.
  
  Reply

Michael Rosen Says…

Michael J. Rosen

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