Was the IRS scandal a surprise?

by Walter Olson on May 15, 2013

For all with eyes to see (except maybe some folks at The New Yorker) the IRS scandal has been hiding in plain sight for more than a year, I argue in a new Cato post. For example, this site briefly covered the Service’s ridiculously broad documentary demands on Tea Party groups — for things like transcripts of speeches and radio shows and the contents of Facebook and Twitter postings– in March and May of last year.

The Treasury Inspector General’s report on the affair, released yesterday, is here. (Coverage roundup: Paul Caron, TaxProf.) It makes clear that many groups were singled out because of their controversial political stances and then subjected to both objectively unreasonable document demands (e.g., for thousands of pages of documentation) and objectively unreasonable delays (e.g., for two years) in resolving their applications. (The Service seldom if ever actually denied applications from the singled-out groups, perhaps because its actions would then have come under more rigorous court review). Meanwhile, other groups with controversial views of a different political valence were waved through. It is not a question of whether applications for tax exemption should somehow be “approved without question,” as some have contended, but whether they should come under review that is even-handed and with no more delay and regulatory burden than is inherent to the process. At Time, Michael Scherer collects past examples that suggest IRS retaliation against political adversaries is something of a tradition in America. (Similarly: Cato video podcast).

P.S. Defending itself against the Inspector General’s report, the IRS says the applicants flagged for special scrutiny “included organizations of all political views.” It points to three such left-leaning groups — out of 471 in all singled out for extra screening. [Bloomberg via Newser] Much more: Gregory Korte, USA Today (“As applications from conservative groups sat in limbo, groups with liberal-sounding names had their applications approved … the liberal groups applied for the same tax status and were engaged in the same kinds of activities as the conservative groups.”) Meanwhile, L.A. Times columnist Michael Hiltzik is unafraid of going way out on a limb to defend what the Service did: if you don’t want to be harassed for your dissidence, it seems, you shouldn’t have sought (c)(4) status in the first place.

Yet more: Reuters has illuminating coverage of how the Service tried to break one of the year’s biggest stories on a Friday afternoon via a friendly question before a room full of tax lawyers. (“They made a bet that this would be the quietest way to roll it out,” [Eric Dezenhall] said of the IRS strategy. “It didn’t work.”) “Did Citizens United Critics Push the Agency To Misbehave?” asks my Cato colleague John Samples, while Tim Lynch adduces “Some Empirical Evidence of IRS Political Manipulation”. The BBC has a lexicon of political scandal euphemisms (“tired and emotional,” “hiking the Appalachian Trail,” etc.)

{ 9 comments }

1 C Hill 05.15.13 at 5:26 pm

What I don’t understand is why they decided to “roll it out” at all. With this going on so long, why now?

What have I missed? Why ‘tell on yourself’ now, when the media has been pretty much uninterested in this? Why confess and apologize unless you’re trying to beat someone else to the punch, or unless you’re trying to divert attention from something worse?

2 Walter Olson 05.15.13 at 8:50 pm

Because the Treasury inspector general’s report — highly critical of the agency, and confirming the essentials of what critics had been charging about differential treatment — was due to come out this week. It was sure to touch off a furor on Capitol Hill, at least.

3 C Hill 05.16.13 at 9:54 am

Thank you.

4 BarNord 05.16.13 at 11:12 am

As has been pointed out by at least one commentator, the real scandal is that the IRS blatantly disregards the actual law, which says these organizations must be EXCLUSIVELY for the public good and not political, and substituted the word “primarily” for “exclusively.,” thus making a mockery of the process.

5 Walter Olson 05.16.13 at 12:00 pm

On the notion that the “real scandal” is not the IRS’s differential handling of applicants based on their politics, see the cluster of links that leads off my post this morning. Note that groups on both sides of the spectrum like the ACLU, NRA, and Sierra Club, whose role in American life is mostly to promote a set of controversial ideological positions, have long benefited from c4 status, so long as they do not employ entities in that class primarily for electioneering. Neither side on the political scene seems to be comfortable with interpretations of the law that could lead to mass revocations for such groups, and I can’t say I’m surprised at that.

6 BarNord 05.17.13 at 9:52 am

Whether those organization receive and enjoy that special status is exactly the point. The original law (and still extant) law uses the word “exclusively” in regard to the extent of the group’s social welfare work. It specifically precludes any political work, yet this is what the IRS now allows since they changed the meaning of the word “exclusively” to mean “primarily.” Not one dictionary in the world says they mean the same thing.

7 BarNord 05.18.13 at 9:49 am

Congress passed a law which required the IRS to determine whether a particular group is eligible for tax -free status. One rule in that law is that the group cannot engage in politics. Some organizations with political-sounding names, like “tea party”, ask for special treatment but are outraged that their policies are questioned, even though the law requires such an investigation before granting special status.

8 Walter Olson 05.18.13 at 10:15 am

>BarNord: I think it’s time for you to move on to some other line of defense, since the IRS and White House conceded some days ago that the rules were not applied evenhandedly and that groups of particular political coloration were singled out for “BOLO” (Be On the Look Out) flagging. You might also want to read up on the difference between (c)4 groups (which can be entirely devoted to changing law and government policy and can also engage in some electioneering provided it is not a primary mission) and (c)3 groups (which are supposed to keep further away from electoral politics and legislative advocacy). This scandal is over the way the IRS, which had previously approved (c)4 status for giant groups deeply involved in Obama daily political messaging such as the Center for American Progress and Organizing for Action, put whole categories of local Constitution-reading clubs on a slow boat to China approval-wise. They’ve *admitted* they used differential screening that unfairly disadvantaged the latter. Why won’t you admit it?

9 Melvin H. 05.18.13 at 5:19 pm

BarNord: It’s not the “special status” that is the problem, it is the time delays before approval or denial of a tea party/conservative group’s application (two to three years in many cases, or the application is still pending for that long), plus the “extra” questions sent along by the IRS that–quite honestly–are none of the IRS’ business.

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