The IRS scandal: who are the saucer believers?

by Walter Olson on June 27, 2014

Some figures on the left have aggressively sought to dismiss the seriousness of the renewed IRS scandal. Rep. Lloyd Doggett (D-Tex.) captured this mood at one recent Capitol Hill hearing when he suggested that after voicing suspicions that the loss of emails might not be accidental, his GOP colleagues might go on next to quiz the Service’s leadership about the president’s birth certificate and space aliens in Roswell, N.M. It’s not a “serious inquiry,” Rep. Doggett said: “I believe it’s an endless conspiracy theory here.”

And yet many Americans who do not believe in space aliens do question the IRS’s account of what has happened. While we covered the story a year ago as well as more recently, this might make a good time to recapitulate why.

The IRS grants 501 (c)(4) nonprofit status (less favorable than (c)(3) status, which affords charitable tax deductibility to donors) to a wide array of “social welfare” organizations, many, like the ACLU, with a definite ideological valence. In recent years the status has been sought and obtained by groups whose missions are closely related to campaign and electoral politics, most notably Organizing for America, whose role on the national scene is to support President Obama’s messaging. Not surprisingly this has excited controversy about whether the eligibility rules for (c)(4) status are being drawn in the right place. Most advocates however profess to believe that whatever the right set of rules, they should apply alike to both sides in our political life.

By March 2012 the Associated Press was reporting on a flurry of bizarre and seemingly unprecedented IRS demands that some (c)(4) applicants of a right-of-center valence provide extraordinarily burdensome and intrusive documentation of their activities — things like copies of all books and literature distributed to participants, transcripts of leaders’ radio appearances and live speeches, printouts of all Facebook and Twitter output, and so forth, along with donor lists and names of family members. The Service was also delaying groups’ approval for long periods, in fact seemingly indefinitely, without explanation or a firm denial that could be appealed to a court. Defenders of the agency subsequently put out a search for left-of-center groups that might have run into similar treatment, and although they did manage to turn up a few tales of bureaucratic red tape and rigmarole, they were unable to come up with anything remotely comparable.

IRS nonprofit chief Lois Lerner at first denied any targeting, then sought to blame rogue employees at the IRS Cincinnati office for it. But emails soon emerged clearly indicating guidance by high-level IRS managers in Washington. Lerner then declined to testify, asserting her Fifth Amendment privilege against admissions exposing herself to criminal liability.

Through the ensuing scandal, there was little hard proof that Lerner and other IRS insiders had coordinated the targeting with political actors outside the agency — on Capitol Hill, say, or in party organizations, or the White House — although a number of details on the record, such as frequent White House visits by agency insiders and coordination with outside figures on press messaging, made for suggestive circumstantial evidence. To establish that political operatives or officials outside the agency were aware of targeting at the time, or even perhaps instigated or directed it, would be to blow the scandal wide-open, perhaps threatening the careers of well-known public figures. If any email documentation of such coordination is to be found, it would most likely be in the “external” (outside the agency) emails of Lois Lerner and other key players in the IRS targeting effort.

Those are the same emails that have now mysteriously vanished due to a reported crash of Lerner’s computer, a crash that happened ten days after the House Ways & Means Committee wrote her to inquire about (c)(4) tax exemption denials*. Emails of six other key IRS employees are also said to have vanished in a series of coincidental crashes.

This week, as if to confirm that shabby treatment of politically disliked adversaries was not unheard-of at the Lerner-era IRS, the agency agreed to pay $50,000 to the National Organization for Marriage over an episode in which persons unknown leaked its confidential return and donor list to its ideological adversary, the Human Rights Campaign, which proceeded to have it published. And the Ways & Means Committee has just released an email indicating that when an invitation intended for a Congressional opponent wound up by mistake in the hands of Lois Lerner, her immediate reaction was to wonder whether it might be used to generate an IRS investigation embarrassing to him.

After all these revelations, is it really those who distrust the agency’s leadership whose gullibility should be compared to that of flying saucer cultists? Or is are the credulous true believers the ones who insist that the latest jaw-dropping revelations from the Service are sure to have an innocent explanation, though the earlier ones did not? (cross-posted, with minor changes, at Cato at Liberty)

*An earlier version of this post described the letter to Lerner as being about targeting; Glenn Kessler at the Washington Post has disputed whether that is an accurate way to describe the contents of the letter, which concerned a plan to audit conservative (c)(4) donors. Ian Tuttle responds to Kessler here.

{ 28 comments… read them below or add one }

1 tim 06.27.14 at 12:47 am

And what does this have to do with being “overlawyered”?

Its posts like this that show your partisan colors and distract from the purpose of this website. My advice to you is to keep focused. If you want to rant about what you perceive as witch hunt or a fake conspiracy – why do you do it at other outlets?

And … with all due respect … this entire post is largely bullshit.

2 Jesse Spurway 06.27.14 at 8:14 am

I agree with Tim. The implication is that everyone who works for the IRS is so liberal that they would not report such shenanigans if they saw it happening.

3 proofreader 06.27.14 at 8:29 am

As has been pointed out often (by Lawrence O’Donnell, especially), the law state the exemption can only go to organizations “exclusively” devoted to social causes, NOT political. The IRS changed “exclusively” without permission to “primarily’, thus defeating the law’s intent. Every political group applying for the exemption should have been denied, no matter where they stood on the political spectrum. THAT is the real scandal.

4 Walter Olson 06.27.14 at 8:52 am

JS>The implication is that everyone who works for the IRS is so liberal that they would not report such shenanigans if they saw it happening.

Which of the shenanigans would have been observable to everyone who works for the IRS? The excessive documentation demands and delays? Those were carried out by a small number of examiners who may not have been aware of the bigger picture of which files were being pulled for review; at any rate those overreaching demands did get out to reporters’ attention, and for all we know IRS employees were among those who helped alert them.

What else would career staff know about? The things Lerner was taking the Fifth over? My guess is not. When agency leaders tried to prevaricate on a question where many career staff could see they were lying — whether the Cincinnati employees had been acting on their own — the career staff promptly pointed out the lie to the press.

I am not among those who assume that most IRS career staff were aware of or would sympathize with the use of the agency for political purposes. My assumption is more the contrary.

5 Richard Nieporent 06.27.14 at 10:20 am

Wow, it looks like you hit a nerve, Walter. I guess the IRS scandal is beginning to get some traction when you get such howls of indignation from our Leftist friends. I am always amused when a commenter tells a blogger how he should run his blog. I am sure you appreciate such gratuitous and dare I say rude advice. Also, it good to know that such an unbiased source as Lawrence O’Donnell doesn’t see that there is a problem with the IRS. Keep up the good work Walter.

6 Rich Berger 06.27.14 at 12:58 pm

Who knew that the Internal Revenue Code was not a part of the law?

7 Walter Olson 06.27.14 at 1:08 pm

Just wait till tim (welcome first-time commenter, by the way) decides to give his opinion without all due respect.

8 Bumper 06.27.14 at 3:26 pm

Gee, Tim thanks for your post. You’ve saved us from the arduous process of selecting a Dunning-Kruger poster boy of the week.

The tax codes are LAW and Mrs. Lerner broke the LAW and now she needs a LAWyer to keep her and all her liberal friends and associates out of JAIL.

Our host, who by the way probably doesn’t need your advice on how to have a successful website, while he is more often than not aligned with conservative values, is a libertarian at heart and unlike you always willing to look at both sides of an issue before staking out a position.

It sure looks to me that from the little that was discovered before the emails went missing makes for a crime having been committed, and after forty years in IT it is more than coincidence that many hard drives all died at the same time in the same branch, the company hired to archive the emails is replaced and the department of archives acknowledges that the IRS broke the law by not following protocol for these types of incidents. There are probably additional damning facts, but these will suffice to make the point, now a whole bunch of them need LAWyers….

And Jesse, whether or not they would or wouldn’t report it because they are mostly liberals, they didn’t report it, and from what I have seen of the reports from people who amass these sorts of statistics, based on their political contributions most of the people who work for the federal government are liberal.

But you boys have a nice weekend at the D-K meeting…

9 Melvin H. 06.27.14 at 10:10 pm

Tim, what part of “broke the law” did not seem to get into your head before you started typing? On the IRS side, you have multiple obstructions of justice, likely destruction of evidence, outright lying under oath to Congress (multiple times and people), an illegal act of taking the Fifth after testifying about innocence, and that’s just the start. If the IRS is using excuses like taxpayers use, turnabout is fair play and the IRS should feel the wrath and penalties of not only Congress but every single taxpayer, corporation, and group (especially the conservative and now libertarian ones).

Tim, one other piece of advice:
When you get back from your weekend at the D-K meeting, wearing your onesies and drinking hot chocolate, maybe you can set up a website the way you want to run it–only don’t call it “Bizarro-Overlawyered”, that one’s been taken (and taken down?).

10 proofreader 06.28.14 at 8:23 am

“an illegal act of taking the Fifth after testifying about innocence,”

When did claiming rights guaranteed in the Constitution become “illegal”?

11 William Nuesslein 06.28.14 at 9:28 am

One example. Mr. Shulman, the former IRS commisioner, was accused of meeting with white house officials on numerous occasiions, with a suggestion that he was in on the plot to mistreat tea party people.

1) Mr. Shulman was an exxcellent public servant deserving of the benefit of doubt.

2) Why would high level white house officials concern themselves with a Mickey Mouse silliness? Avoiding a world wide depression and righting the American economy would keep any body busy.

3) mr. Shulman’s name was put on access lists as a matter of course. Had he attended all the meetings that he could have, he would have had no time to do his work.

4) the crime is the xpentiture of $16 million just to snoop through one empoyee’s email.

You are a better man than evinced in this obnoxious post.

12 Walter Olson 06.28.14 at 10:03 am

WN>Curious you jump to the conclusion that my reference concerned Mr. Shulman, whose name never even comes up in a recent account raising questions about frequent White House visits by IRS employees whose names have surfaced in the targeting controversy. A rule that agencies headed by “excellent public servants” must be free from misconduct happening one or two levels down would certainly save us from the need for a lot of investigation, both past and future.

As for the notion that high level White House officials would never tolerate underlings’ targeting political enemies for retaliation because they’re too busy coping with economic and foreign policy crises — well, I think it flies in the face of all human experience.

13 William Nuesslein 06.28.14 at 2:16 pm

My example did play out in hearings and was brought up only to illustrate the dept of depravity in this case. It was not in direct response to particulars in Mr. Olson’s post.
Yes, Nixon did have his enemies list. But I doubt if even he would have used 501(c)(4) applications for punishment.

14 gitarcarver 06.28.14 at 9:49 pm

William Nuesslein,

But I doubt if even he would have used 501(c)(4) applications for punishment.

From the Articles of Impeachment of Richard Nixon:

Article 2, Charge 1:

He has, acting personally and through his subordinates and agents, endeavoured to obtain from the Internal Revenue Service, in violation of the constitutional rights of citizens, confidential information contained in income tax returns for purposed not authorized by law, and to cause, in violation of the constitutional rights of citizens, income tax audits or other income tax investigations to be initiated or conducted in a discriminatory manner.

Sorry, but to me that sounds exactly what happened with the IRS and the 501(c)3 applications. Investigations and demands were made far outside of the law.

15 Melvin H. 06.30.14 at 1:54 am

Proofreader, once Lerner started talking about her innocence under oath she lost the ability to take the Fifth; you can’t have it both ways in testifying, whether it’s to a jury or to Congress. Go back to her original testimony before Ways and Means; what did she say first? It sure wasn’t, “On the advice of counsel {or my lawyers}, I will be taking my Fifth Amendment rights against self-incrimination.”, or equivalent.

16 proofreader 06.30.14 at 8:31 am

From what I have gleaned about the Fifth, anyone can claim it in any government hearing. Whether the body allows it to be used is up to those in charge. But it is not “illegal” to claim the right to avoid self-incrimination, even if you believe yourself to be innocent. Any good lawyer will tell his client, whether innocent or not, not to make a statement since anything can be twisted against you by those more learned in the ways of the law.

17 William Nuesslein 06.30.14 at 8:49 am

@Melvin H.

There is in law the concept of proprietorial obligation to prove cases. Thus a not guilty plea is not perjury even when the jury finds a defendant guilty. Ms. Lerner’s comment was simply her plea of innocence. Some of the congressmen were talking about perjury and obstruction of justice with respect to her, so that her taking the fifth was prudent.

Consider the crashed hard drive. Most people would use delete functions to get rid of files. But often those files can be retrieved by experts. Reformatting the disk would do a better job of eliminating files, but I don’t know how to make sectors go bad, although I know that sectors going bad is the kiss of death. Another problem with the crash is that emails have great redundancy. If I email a friend I have a copy of the email in my sent box and he in his in box. If he replies, then the reply has a copy of my email in it in his sent box and I have a copy in my inbox. Put into the calculation the usual multiple targets and cc’s and one gets copies all over the place. This mechanism played out in the Lewinsky matter, where capturing software failed for some emails. My understanding is that many if not most of Ms. Lerner’s emails have been recovered from other disks.

As to Nixon. Getting dirt on one’s opponents is a serious matter; interfering with 501(c)(4) applications is Micky Mouse. The IRS has an obligation to see that 501(c)(4) operations do actual non-political social welfare like soup kitchens. Proselytizing Tea Party principles is not social welfare. Mr. Gorge, the IRS IG, was manipulated to make an incorrect finding. It is Senator Hatch that should be pilloried, not fine public servants like Mr. Shulman and Ms. Lerner.

18 gitarcarver 06.30.14 at 10:51 am

William Nuesslein,

The fact of the matter is that the IRS went far outside of what was necessary to determine whether the activities of the groups were within the 501(c)(4) requirements. They demanded information that had nothing to do with making that determination.

The demands meant that the organizations were spending time and resources on fulfilling the IRS demands rather than their actual stated mission. It meant the the IRS had information which it could illegally distribute to others.

While you want to try and say that there is a difference between what Nixon did and what the IRS did, not only will I disagree with you, the fact of the matter is that both actions as we understand them today are contrary to the law.

<iMr. Gorge, the IRS IG, was manipulated to make an incorrect finding. It is Senator Hatch that should be pilloried, not fine public servants like Mr. Shulman and Ms. Lerner.

That was a good piece of sarcasm. Thanks for the laugh.

19 No Name Guy 06.30.14 at 11:16 am

As to all the hand wringing by the left of center crowd: Recall that “your” guy or gal won’t be in power forever.

Never trust a political friend with a set of powers that you wouldn’t also allow your worst political enemy to have.

If there was lawbreaking going on here, it would behoove the left to insure it’s prosecuted fully so as to deter those from the other side from trying the same when, not if, but when they’re in power.

Then again, such concepts tend to not resonate with political hacks, no matter their leaning.

20 Richard Nieporent 06.30.14 at 11:22 am

Gorge, the IRS IG, was manipulated to make an incorrect finding. It is Senator Hatch that should be pilloried, not fine public servants like Mr. Shulman and Ms. Lerner.

Mr. Nuesslein, that is hilarious. With a sense of humor like this you could be the next Jon Stewart. However, next time don’t forget to include the sarcasm tag. Otherwise people will think that you have totally lost your mind.

21 proofreader 06.30.14 at 4:13 pm

Have any of the commenters actually read the law? As was pointed out by several Democrats during the hearing, the law says the organizations must be “EXCLUSIVELY” dedicated to social and not political activities. The IRS fifty years ago changed that word in their regulations to “PRIMARILY” and has been deciding status based on that incorrect usage since the Eisenhower administration. Under a strict rendering of the law, nNone of the political groups seeking tax-exempt status should have qualified, whether they were Republican, Democrat, Tea Party, Communist, or any other faction.

But Congressman Issa won’t delve into that aspect since it would alienate his supporters and because he wants to continue his witch hunt.

22 Bumper 06.30.14 at 6:36 pm

Well, of course, that explains why Lerner only went after conservative groups. Although I do believe I read somewhere she went after one liberal group, but she later said that was a mistake because she misread their name.

23 proofreader 06.30.14 at 7:38 pm

” that explains why Lerner only went after conservative groups”

You’re watching too many Fox News panel shows. Groups of every stripe were checked and not one – not one – Republican political group was denied an exemption, even though at least one Democrat organization was rejected. It is the duty, the obligation, the job of the IRS to investigate when people claim a reason not to pay taxes. You can’t fault them for doing what they’re being paid to do. Don’t forget that every penny tax-exempt groups save is a penny you have to pay in their stead.

24 Richard Nieporent 06.30.14 at 7:50 pm

@Proofreader,

The issue was not whether the IRS should grant Tea Party affiliated groups 501(c)(4) status. The issue was that they treated Tea Party affiliated groups differently that equivalent leftist political groups that were also seeking 501(c)(4) status. In other words they discriminated against the Tea Party groups on the basis of their politics.

25 Walter Olson 06.30.14 at 7:55 pm

The Saturday edition of TaxProf’s roundup contains some numbers by which we may evaluate proofreader’s claims (scroll partway down to the table). As those of us following the scandal should know, the Service tended to sit on disfavored conservative applications indefinitely rather than issue rejections, which was seen as a grievance by those groups because an actual rejection was something they could have taken to court.

26 Proofreader 07.01.14 at 11:44 am

I have high regard for Walter Olson’s work but once more I have to ask — has anyone actually read the law? See my previous comments. It doesn’t matter how long they sat on requests from POLITICAL organizations seeking exemptions under that statute BECAUSE POLITICAL GROUPS WERE (expected to be) BARRED under that provision. I know that explanation runs counter to your agenda but it is what the law states. Only SOCIAL organizations were supposed to benefit, not avowed political parties.

27 Walter Olson 07.02.14 at 11:57 am

Proofreader keeps repeating the word “political” as if it somehow helps his argument. 501 (c)(4) groups (the ACLU and NAACP are examples) have long been permitted to engage in *some* political advocacy so long as politics does not become their primary activity. (No “political parties” are at issue here.) In recent years the IRS saw fit to grant 501(c)(4) status to groups like President Obama’s Organizing for America and Karl Rove’s Crossroads GPS, deeming them not overly political. During the targeting episode it then proceeded to sit on requests by “Patriot” groups whose main real-world activities consisted of things like reading the U.S. Constitution and discussing what the Founders would have thought about today’s issues, even if their primary focus was far less focused on electoral politics than that of OfA, Crossroads, etc. Now proofreader would have us believe that the book-discussion groups deserve whatever they get (demands for thousands of pages of documentation, the names of family members, etc.) because they cross some sort of new line. This Washington Post primer from last year may help: http://www.washingtonpost.com/blogs/the-fix/wp/2013/05/13/what-is-a-501c4-anyway/

28 proofreader 07.02.14 at 2:44 pm

I am genuinely surprised at your reading of the law. It has been established that sometime during the Eisenhower administration the IRS wrote regulations for investigating these groups and at that time CHANGED UNILATERALLY the wording of the law. The law says EXCLUSIVELY social organizations are eligible but the regulations say PRIMARILY. Obviously political groups that benefit from this stupefying change will ignore that information and downplay or disregard the ramifications. So the real scandal lies in the distant past which those in the present must perpetuate. I rest my case.

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