The I.R.S Was Right, Obama Caves Again

It’s happening again. Another imaginary crisis, and instead of fighting back, the President   agrees with his enemies and starts making concessions.  He should be defending the I.R.S.  employees who have been doing  their jobs under difficult circumstances.  As a careful reading of the Inspector General's Report shows, there is no scandal.  Well, let’s put it this way:  there are scandals at the I.R.S., but this isn’t one of them.  Look instead to the under-regulation of huge political organizations such as Karl Rove’s Crossroads.


The Build-Up

As the 2012 elections approached, there was a marked increase in the number of organizations applying to the I.R.S. for status as Social Welfare Organizations known as 501(c)(4)s . Such groups may participate in electoral politics as long as it is not their primary purpose, and they do not need to disclose their contributors.  If this increase in Social Welfare Organizations was simply an indication that the world was becoming a kinder place, then one would expect to see a similar rise in the number of public charities, a huge category that includes not-for-profit senior centers, schools, hospitals and most social change organizations known as 501(c)(3)s,  There was no comparable increase, as the chart to the right shows[1]. One might reasonably suspect, given the proximity of the election, that political organizations with no primary social welfare function were trying to gain 501(c)(4) status in order to hide the identity of their contributors. 

What the I.R.S. Looked for “Inappropriately”

The I.R.S. has been charged with using “inappropriate criteria” for determining which applications should be given extra scrutiny as “political cases.” Here is the list of “inappropriate” criteria from the Inspector General’s Report (p. 6)

Figure 3: Criteria for Potential Political Cases (June 2011)

  1. “Tea Party,” “Patriots” or “9/12 Project” is referenced in the case file.
  2. Issues include government spending, government debt or taxes.
  3. Education of the public by advocacy/lobbying to “make America a better place to live”
  4. Statement in the case file criticizes how the country is being run

Source: EO function briefing dated June 2011

Clearly, only the first I.R.S. category applies to specific right wing organizations; the rest of the criteria could apply just as well to centrist or progressive groups. 

As the graph below shows, only 33 percent of the applications singled out for further processing had the name Tea Party, 9/12[1] or Patriot in their names.  But what about those named groups:  was it unfair to single out the Tea Party for additional scrutiny?  No, not at all. The I.R.S. was right to have done so. Consider this. What does the word “party” mean? It can indicate an individual person, it can be an event at which tea is served, or it can be a political party. None of these meets the criteria of being a Social Welfare Organization. The I.R.S. staff was therefore called upon to determine whether Tea Party means political party, or whether these groups are something else that might let them qualify for 501(c)(4) status.


Significantly, Roll Call, [2] the on-line publication that covers Congress, reports that over 104 groups with “Tea Party”, “Patriot,” or “9/12” in their titles have registered themselves with the I.R.S. in the category known as 527 that includes political parties, political committees, candidate committees, and PACS. One can easily understand why, when some groups with these names register as electoral organizations, the I.R.S. might question why other groups with the same names are calling themselves Social Welfare Organizations. Roll Call suggests that some of these groups may have tried to register twice or may have set up separate accounts in each category, a possibility that certainly would warrant further checking.

The Inspector General Actually Agrees With the I.R.S. Staff

“We reviewed all 298 applications that had been identified as potential political cases as of May 31, 2012. In the majority of cases, we agreed that the applications submitted included indications of significant political campaign intervention. However, we did not identify any indications of significant political campaign intervention for 91 (31 percent) of the 296 applications.”[3]

 That statement was followed by these two footnotes:

Seventeen (19 percent) of the 91 applications involved Tea Party, Patriots, or 9/12 organizations.

It should also be noted that, in some cases, specialists obtained additional information after the application was received that indicated the organizations were involved in political campaign intervention which was not available in the initial application documentation we reviewed.

So, I.R.S. staff got it right two-thirds of the time in deciding which applications needed a closer look by a higher body at the I.R.S. Now the Republicans want them arrested and the President is acting as if something awful has happened.   

What Is Really Going On Here?

Of course this is just speculation, but perhaps the Obama administration is happy to have so much attention focused on the treatment of a handful of little local groups. It keeps everyone from noticing the failure of the I.R.S. to regulate the huge 501(c)(4) organizations that spend hundreds of millions on political campaign advertising.  Some of these are right wing, such as Karl Rove’s Crossroads GPS, but others, such as Priorities USA, were founded by former Obama aides to suppo[i]rt his campaign.  Did these groups really spend more on social welfare activities than on campaign ads?  If there is a scandal, it is probably here. (For an excellent discussion of this, see Uneven I.R.S. Scrutiny. NY Times 5/14/2012.) These groups exist because of the Citizens United decision and the notion that corporations are people with constitutional rights to influence elections. Obama should take advantage of the I.R.S. flap to attack the role of corporate money in politics.

[1] Chart based on data from the Inspector General’s Report Pg. 3

[2] 9/12 organizations were inspired by Glenn Beck of Fox News in 2009. They have something to do with 9 principles and 12 values.

[3] May 17, 2013

[4] Inspector General’s Report at p. 10


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