You’d have to search long and hard to find a member of Congress not outraged that politics and partisanship crept into the work of the IRS, leading to the wrongful targeting of tea partiers and other conservative groups seeking tax-exempt status. “The American people have a right to expect that the IRS will exercise its authority in a neutral, non-biased way,” Sen. Orrin Hatch (R-Utah) said on Tuesday. “Sadly, there appears to have been more than a hint of political bias” by the IRS staffers vetting nonprofit applications. Hatch’s Republican colleagues in the House and Senate could hardly contain their anger. “Do either of you feel any responsibility or remorse for treating the American people this way?” Sen. Chuck Grassley (R-Iowa) asked the former IRS chiefs Douglas Shulman and Steven Miller on Tuesday. Yet lawmakers have no qualms with using politics to bend the IRS to its will. In 2011, under pressure from House and Senate Republicans, Miller, then the IRS’ deputy commissioner, spiked audits investigating whether five big donors to 501(c)(4) groups—the type of nonprofit that can get involved in campaigns and elections but can’t make politics its “primary activity”—avoided paying taxes on their donations. Miller’s decision erased any worry that wealthy donors might have had about giving millions to nonprofits during the 2012 campaign season.
For some tax lawyers, it was a surprising move that raised red flags. “They were stopped mid-audit, which is an extraordinary move,” says Marcus Owens, a tax lawyer who ran the IRS division that oversees politically active nonprofits for 10 years. “I’ve been practicing tax law for close to 40 years, and I’ve never seen that. To have Miller reach out and stop those audits, that’s something that really deserves an inquiry.”
The identities of the donors and nonprofits being scrutinized were never revealed. Owens says he suspects most, if not all, of the five had contributed to Republican groups because GOP lawmakers were the ones raising a ruckus on Capitol Hill. Greg Colvin, a San Francisco-based attorney who represented one of the donors, declined to give any details about his client and the donation under review.
The tax matter at issue was whether these donors had sidestepped the gift tax. Created in 1924, the gift tax acts as a safeguard of sorts, backstopping both the estate tax and the income tax. Before its creation, people could donate all their money before they died to avoid the estate tax or give away their assets to relatives in lower income tax brackets. The gift tax does not apply to donations to traditional charities (the Red Cross), trade groups (the US Chamber of Commerce), or political nonprofits formed under the 527 section of the tax code (Swift Boat Veterans for Truth and America Coming Together). In the 1980s, the IRS said that the gift tax did cover contributions to 501(c)(4)s, yet for decades the agency never bothered donors about the gift tax on their donations to such nonprofits.
Full Article: Official at Heart of IRS Tea Party Scandal Spiked Audits of Big Dark-Money Donors | Mother Jones.
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