National: IRS Has History of Extra Scrutiny of Groups | Wall Street Journal

The Internal Revenue Service unit under fire for its reviews of conservative organizations has a long history of targeting groups with extra scrutiny, including foreclosure-assistance charities, credit-counseling services and New York Jewish charities, interviews with current and former employees show. The scrutiny has included such tactics as listening to telephone calls between groups and their clients, according to one group’s lawyer. In the case of tea-party organizations, IRS officials studied social-media postings to gauge political activity. Sometimes the tactic of extra scrutiny for particular kinds of groups seeking tax exemptions helped manage a flood of entities in areas where abuse was common; other times it snagged innocent parties, subjected applicants to long delays and even made IRS employees feel uncomfortable.

National: Official at Heart of IRS Tea Party Scandal Spiked Audits of Big Dark-Money Donors | Mother Jones

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.

National: I.R.S.’s Lois Lerner, Who Refused to Testify, Is Suspended | New York Times

Lois Lerner, the head of the Internal Revenue Service’s division on tax-exempt organizations, was put on administrative leave Thursday, a day after she invoked the Fifth Amendment and declined to testify before a House committee investigating her division’s targeting of conservative groups. Lawmakers from both parties said Thursday that senior I.R.S. officials had requested Ms. Lerner’s resignation but that she refused, forcing them to put her on leave instead. Whether her suspension will lead to dismissal was unclear, given Civil Service rules that govern federal employment. “The I.R.S. owes it to taxpayers to resolve her situation quickly,” said Senator Charles E. Grassley, Republican of Iowa. “She shouldn’t be in limbo indefinitely on the taxpayers’ dime.”

Editorials: IRS and Scrutiny: Reviewing Review | Ellen Aprill/Roll Call

IRS employees who review applications for exemption have a duty to ask follow-up questions of applicants, including groups affiliated with the tea party. In the current controversy, IRS reviewers wrongly singled out conservative groups for unusually exacting follow-up. In a number of these cases, they also asked inappropriate questions, such as the identity of donors. Some media reports, however, imply that the IRS cannot and should not ask any questions of applicants for exemption, that any inquiry invades privacy and violates the First Amendment. That implication is wrong. An organization that seeks an IRS acknowledgment of its exempt status subjects itself to scrutiny — scrutiny designed to ensure that the group in fact qualifies for the benefit of tax exemption. Twenty-nine categories of organization are exempt from income tax under section 501(c) of the Internal Revenue Code. A few of these categories require an application for recognition of exemption. For example, section 501(c)(3) exempts charities and entitles organizations satisfying its requirements to receive tax-deductible contributions. Most entities seeking to qualify as 501(c)(3) exempt charities must file an application. (Churches and very small organizations are not subject to the application requirement.)

National: I.R.S. Official Invokes 5th Amendment at Hearing | New York Times

The Internal Revenue Service official who first disclosed that the agency had targeted conservative groups for special scrutiny, and in doing so ignited a controversy that has ensnared the White House, denied on Wednesday that she had ever provided false information to Congress. She then invoked her Fifth Amendment right against self-incrimination and declined to testify at a House hearing on the agency’s actions. At the House oversight committee hearing, the chairman, Darrell Issa, seated second from right, talked with an aide. Representative Elijah E. Cummings, Democrat of Maryland, was at left. As the official, Lois Lerner, appeared under subpoena before the House Committee on Oversight and Government Reform, she sternly told her questioners that accusations that she had misled Congress in previous testimony were false.

Editorials: Who's the Right Watchdog for Nonprofits' Political Activity? | Roll Call

An obvious danger of the IRS political targeting scandal is that congressional and federal investigations will produce much heat but little light. As House Ways and Means ranking Democrat Sander M. Levin of Michigan cautioned at that panel’s opening IRS hearing last week, members of Congress “must seek the truth, not political gain.” Even nonprofit sector leaders warn that recent IRS scrutiny, while long overdue, will exacerbate the agency’s many problems instead of fix them. “The thing that we don’t want to happen is for the appropriate anger of lawmakers to result in the wrong outcome,” said Diana Aviv, president of Independent Sector, a coalition of nonprofits and philanthropic community leaders. While “there should be consequences for people who misused their position,” she added, the IRS should not “pull back” from curbing abuses by politically active tax-exempt groups.

Voting Blogs: IRS Enforcement and the Court | More Soft Money Hard Law

One theme in the narrative about the IRS is that it faces a special challenge in enforcing the (c)(4) rules in the wake of Citizens United. A (c)(4) organization, which is typically a corporation, can make independent expenditures, so long as this campaign activity and others do not make up its primary purpose. Two basic reform models have been advanced to protect against the misuse of these nonprofits to make these and other campaign-related expenditures. One is that the Service should generally employ more rigor in rooting out organizations that have exceeded their limit for political activity. Another is that the IRS should change its rules, switching the test from a “primary” social welfare purpose to an “exclusive one” without any campaign activity mixed in, and rid itself of the problem altogether: effectively, the no-tolerance option. In both cases, however, the proposed solutions may have to scale steep walls erected by Supreme Court precedent. These issues have to be taken into account in judging the role that IRS enforcement can play in campaign finance regulation.

National: Conservative group True the Vote sues IRS over being subject to heightened scrutiny | The Wahsington Post

True the Vote, a Houston-based voter watchdog group that arose from a tea party organization, filed suit in federal court Tuesday against the Internal Revenue Service over the agency’s processing of its request for tax-exempt status. The lawsuit, filed by the conservative ActRight Legal Foundation, asked the U.S. District Court for the District of Columbia to grant its request for tax-exempt status and award damages for what it described as unlawful conduct by the IRS. True the Vote, which was founded in June 2010, is affiliated with the King Street Patriots, a tea party group which started in December 2009. Originally called KSP/True the Vote, the group filed in July 2010 for tax-exempt status as a 501(c)(3) charity organization. In August 2011, the group changed its name to True the Vote Inc.; King Street Patriots has separately been seeking the 501(c)(4) status from the IRS. True the Vote has come under fire for intimidating African-American and other minority voters at the polls.

National: A Sleeper Scandal Awakens, Post-Election | New York Times

The allegations had all the makings of a perfect election-year scandal that might threaten President Obama’s chances for a second term and re-energize a listless Tea Party movement: an activist president, running an overbearing government, treating conservative groups unfairly by wielding the federal taxing power to undermine his adversaries. But a year ago, when the current Internal Revenue Service scandal that has swirled around Mr. Obama first emerged, Washington — and, apparently, the White House — shrugged. It was March 2012 and Tea Party groups around the country had been complaining for months of what they called an I.R.S. conspiracy to delay and disrupt their efforts to obtain tax-free status. A few Republicans in Congress expressed concern, sent letters to I.R.S. officials and scheduled a hearing.

National: Confusion and Staff Troubles Rife at I.R.S. Office in Ohio – Unprepared Office Seemed Unclear About the Rules | New York Times

During the summer of 2010, the dozen or so accountants and tax agents of Group 7822 of the Internal Revenue Service office in Cincinnati got a directive from their manager. A growing number of organizations identifying themselves as part of the Tea Party had begun applying for tax exemptions, the manager said, advising the workers to be on the lookout for them and other groups planning to get involved in elections. “I don’t believe there’s any such thing as rogue agents,” said Bonnie Esrig, a former senior manager in the I.R.S. office in Cincinnati. The specialists, hunched over laptops on the office’s fourth floor, rarely discussed politics, one former supervisor said. Low-level employees in what many in the I.R.S. consider a backwater, they processed thousands of applications a year, mostly from charities like private schools or hospitals.

Editorials: IRS scandal is about donors, not tax | Roger Colinvaux/CNN

The outrage over the IRS’s conduct in targeting certain tax-exempt groups is based on a misunderstanding. Obviously, mistakes were made in how the IRS examined the groups, but what should not get lost amid the resulting hue and cry is that this is fundamentally about disclosure of donors, not tax-exempt status. First of all, the IRS is to a certain extent in the “targeting” business. The agency’s job — like it or not — is as an enforcer. It is supposed to go after tax scofflaws. It has to look for clues in tax returns and other materials to find the cheaters and dodgers. In the current scandal, the method of the “targeting” — searching returns for names like “tea party” as indicators of possible misfeasance — was a mistake. But it does not follow that the IRS should not have been looking at these and other groups as a class, without regard to political affiliation.

National: How the IRS seeded the clouds in 2010 for a political deluge three years later | The Washington Post

In early 2010, an Internal Revenue Service team in Cincinnati began noticing a stream of applications from groups with ­political-sounding names, setting in motion a dragnet aimed at ­separating legitimate tax-exempt groups from those working to get candidates elected. The IRS officials decided to single out one type of political group for particular scrutiny. “These cases involve various local organizations in the Tea Party movement,” read one internal IRS e-mail sent at the time. A few hours north in Fremont, Ohio, the owners of a drainage supply shop, Tom and Marion Bower, were wondering why it was taking so long to get a tax exemption for their new tea party group. “I didn’t think any of us thought we’d be targeted,” said Marion Bower, of American Patriots Against Government Excess. “We started the group because we wanted to learn about our country and educate people. Now I’m becoming a little paranoid. If they can do this, what else can they do?”

National: Dan Pfeiffer: Legal questions in IRS scandal ‘irrelevant’ to ‘inexcusable’ actions | Washington Post

White House senior adviser Dan Pfeiffer said Sunday the question of whether any laws were broken in the Internal Revenue Scandal is “irrelevant” to the fact that the agency’s actions were wrong and unjustifiable. “I can’t speak to the law here. The law is irrelevant,” Pfefiffer said on ABC News’s “This Week With George Stephanopoulos.” “The activity was outrageous and inexcusable, and it was stopped and it needs to be fixed to ensure it never happens again.” Stephanopoulos replied: “You don’t really mean the law is irrelevant, do you?” Pfeiffer responded: “What I mean is, whether it’s legal or illegal is not important to the fact that the conduct doesn’t matter. The Department of Justice has said that they’re looking into the legality of this. The president is not going to wait for that. We have to make sure it does not happen again, regardless of how that turns out.”

National: IRS Probe Sheds Light on Nonprofit Election-Year Surge | Bloomberg

Patriot Majority USA, a social welfare nonprofit, told the Internal Revenue Service that its mission is “to encourage a discussion of economic issues.” In exchange for keeping its donors private and paying fewer taxes, it must limit its involvement in politics. Yet last year Patriot Majority, run by Democratic operative Craig Varoga in Washington, spent at least $7.5 million on TV ads attacking Republican candidates on issues such as women’s health screenings and equal pay. With the Nov. 6 election over, the nonprofit shows signs of going dormant with e-mails bouncing back unopened and phone calls unanswered.

National: The IRS tea party scandal: The lesson is better campaign finance disclosure laws | Slate

Let’s not make excuses for the IRS. The agency shouldn’t have subjected conservative groups to special scrutiny. Campaign finance reform groups should have immediately called for hearings when this scandal broke: Imagine the hue and cry if the IRS during the Bush administration had singled out “progressive” groups for special tax scrutiny and sent themunprecedented questions about their contributors and activities. Given the danger going back to President Richard Nixon of using the IRS against political enemies, the agency has to be scrupulously nonpartisan and fair. Congressional investigations and the Department of Justicecriminal investigation announced Tuesday are inevitable and warranted. But the larger picture here shows why the IRS felt itself forced into the role of campaign finance regulator, and why people also are calling for the Securities and Exchange Commissionand state attorneys general to regulate campaign contributions. This is all about the failure of Congress to require the disclosure of donors who bankroll groups designed to influence elections.

National: Exiting IRS Chief Denies Targeting as Republicans Pounce | Bloomberg

Steven Miller, who is being forced out as acting commissioner of the Internal Revenue Service, told House lawmakers today that the IRS has learned from its mistakes while denying that it had targeted nonprofit groups for review because of their political views. Under persistent questioning from House Republicans at the first hearing on the agency’s scrutiny of small-government groups that applied for tax-exempt status, Miller insisted that IRS employees didn’t have partisan motivations. “What happened here is that foolish mistakes were made by people trying to be more efficient,” Miller said at a House Ways and Means Committee hearing that lasted almost four hours.

Editorials: The Real I.R.S. Scandal | New York Times

News that employees at the Internal Revenue Service targeted groups with “Tea Party” or “patriot” in their name for special scrutiny has raised pious alarms among some lawmakers and editorial writers. Yes, the I.R.S. may have been worse than clumsy in considering an avalanche of applications for nonprofit status under the tax code, and that deserves scrutiny whether or not the agency’s employees were spurred by partisan motives. After all, some of these “tea party” groups are most likely not innocent nonprofit organizations devoted to the cultural significance of hot beverages — or to other, more civic, virtues. Rather, they and others are groups that may be illegally spending a majority of their resources on political activity while manipulating the tax code to hide their donors and evade taxes (the unwritten rule being that no more than 49 percent of a group’s resources can be used for political purposes).

National: IRS problem started with vague tax exemption rules | Los Angeles Times

In spring 2010, agents in the Cincinnati office of the Internal Revenue Service, which handles applications for tax-exempt status, faced a surge of filings by new advocacy groups, with little guidance on how to treat them. Their decision to deal with the problem by singling out tea party and other conservative groups for extra scrutiny has now triggered a criminal inquiry, congressional investigations, the departure of two top IRS officials and the naming of a new acting commissioner Thursday. For former IRS staff and tax experts, the case confirms what they view as one of the agency’s long-standing weaknesses: its inability to cope with the growing number of tax-exempt advocacy groups that appear to stretch the law to engage in politics.

Editorials: Behind the I.R.S. Mess: A Campaign-Finance Scandal | Steven Rattner/New York Times

Let’s stipulate that the scandal involving the Internal Revenue Service’s targeting of conservative nonprofit groups portrays government as if drawn in caricature — an almost Keystone Kops-style comedy of errors on the part of low-level staffers, with a vein of possible political bias. Of course, the matter needs to be fully investigated, those responsible need to be held accountable and procedures need to be put in place to ensure that nothing like this can happen again. But let’s also remember what the I.R.S. brouhaha is not. Unlike the abuse of the I.R.S. by President Richard M. Nixon, in this case there’s no evidence that anyone in the White House had any involvement in — nor even any knowledge of — what was going on within the agency’s Tax Exempt and Government Entities Division.

National: ‘Angry’ Obama announces IRS leader’s ouster in scandal | CNN

President Barack Obama vowed Wednesday to hold accountable those at the Internal Revenue Service involved in the targeting of conservative groups applying for federal tax-exempt status, beginning with the resignation of the agency’s acting commissioner who was aware of the practice. In a brief statement delivered to reporters in the East Room of the White House, the president announced that Treasury Secretary Jack Lew had requested — and accepted — the resignation of acting IRS Commissioner Steven T. Miller. The president said the “misconduct” detailed in the IRS Inspector General’s report released Tuesday over the singling out of conservative groups is “inexcusable.”
“Americans have a right to be angry about it, and I’m angry about it,” Obama said.

National: I.R.S. Says Counsel Didn’t Tell Treasury of Tea Party Scrutiny | New York Times

Attorney General Eric H. Holder Jr. on Wednesday warned top officials at the Internal Revenue Service that criminal laws on false statements could come into play in a Justice Department investigation on the agency’s targeting of conservative groups applying for tax-exempt status. Appearing at a hearing of the House Judiciary Committee, Mr. Holder said the investigation would examine whether groups of individuals had their civil rights criminally violated and whether statutes governing I.R.S. conduct were violated. After repeated accusations from senior lawmakers that top I.R.S. officials had lied to them, Mr. Holder also issued a warning: “False-statement violations might have been made, given at least what I know at this point.” Three Congressional committees already have hearings planned to investigate the agency’s activities, and an early focus appears to be on whether I.R.S. officials lied to members of Congress.

National: Acting Chief of I.R.S. Forced Out Over Targeting of Tea Party | New York Times

President Obama announced Wednesday night that the acting commissioner of the Internal Revenue Service had been ousted after disclosures that the agency gave special scrutiny to conservative groups. Attorney General Eric H. Holder Jr., meanwhile, warned top I.R.S. officials that a Justice Department inquiry would examine any false statements to see if they constituted a crime. Speaking in the White House’s formal East Room, Mr. Obama said Treasury Secretary Jacob J. Lew had asked for and accepted the resignation of the acting commissioner, Steven Miller, who as deputy commissioner was aware of the agency’s efforts to demand more information from conservative groups seeking tax-exempt status in early 2012. “Americans have a right to be angry about it, and I’m angry about it,” Mr. Obama said. “It should not matter what political stripe you’re from. The fact of the matter is the I.R.S. has to operate with absolute integrity.”

National: Report on I.R.S. Audits Cites Ineffective Management | New York Times

An inspector general’s report issued Tuesday blamed ineffective Internal Revenue Service management in the failure to stop employees from singling out conservative groups for added scrutiny. Congressional aides, meanwhile, sought to determine whether the Obama administration’s knowledge of the effort extended beyond the I.R.S. House and Senate aides said they were focusing on an Aug. 4, 2011, meeting in which the I.R.S.’s chief counsel appears to have conferred with agency officials to discuss the activities of a team in the Cincinnati field office that had been subjecting applications for tax-exempt status from Tea Party and other conservative groups to a greater degree of review than those from other organizations. Under I.R.S. rules, the agency’s chief counsel, William J. Wilkins, reports to the Treasury Department’s general counsel, and investigators want to determine if Mr. Wilkins took the issue out of the independent I.R.S. to other parts of the Obama administration.

National: IRS Sent Same Letter to Democrats That Fed Tea Party Row: Taxes | Businessweek

The Internal Revenue Service, under pressure after admitting it targeted anti-tax Tea Party groups for scrutiny in recent years, also had its eye on at least three Democratic-leaning organizations seeking nonprofit status. One of those groups, Emerge America, saw its tax-exempt status denied, forcing it to disclose its donors and pay some taxes. None of the Republican groups have said their applications were rejected. Progress Texas, another of the organizations, faced the same lines of questioning as the Tea Party groups from the same IRS office that issued letters to the Republican-friendly applicants. A third group, Clean Elections Texas, which supports public funding of campaigns, also received IRS inquiries.

National: How IRS Review of U.S. Nonprofits Erupted Into Scandal | Bloomberg

What is known so far about the Internal Revenue Service’s examination of political nonprofit groups doesn’t answer one main question — whether the U.S. tax agency’s actions were malicious or just inept. IRS employees, trying to figure out how to sort through a surge in applications for nonprofit status, used shortcut phrases such as “Tea Party” and “patriot” to flag groups for scrutiny, according to an inspector general’s timeline. After IRS officials raised concerns in June 2011, there’s no evidence that the agency started over with a new system. That scrutiny was elevated to a scandal on May 10, when Lois Lerner, the director of the IRS’s Exempt Organizations Division, acknowledged in remarks to a conference of tax lawyers that applications using those phrases had been singled out for extra examination. The filtering done by IRS employees in Cincinnati now imperils the agency’s ability to enforce the laws on politically active nonprofit groups.

National: The IRS Tea Party Scandal, Explained | Mother Jones

On Friday, May 10, a top official with the Internal Revenue Service dropped a bombshell. IRS staffers had singled out conservative organizations with “tea party” or “patriots” in their name that were seeking tax-exempt nonprofit status, subjecting them to extra scrutiny to see if they were abusing the tax law as it relates to political activity. They grilled these conservative groups about their members, their donors, their public statements, and who they employed. And there is no evidence yet that the IRS systemically treated non-conservative groups with the same level of attention. Speaking to a group of tax lawyers, the IRS official, Lois Lerner, who oversees the agency’s exempt organizations division, publicly apologized for the IRS’s actions. Ever since, Democratic and Republican politicians have been falling over themselves to condemn the IRS.

Voting Blogs: Tempest in a Teapot? | Common Blog

The Internal Revenue Service’s apology for subjecting certain Tea Party groups to extra scrutiny merits the widespread attention it is receiving if political bias motivated the audits. The President himself called the emerging scandal “outrageous,” and leaders from both political parties agree. So does Common Cause. More information will soon come to light, because the Treasury Department’s Inspector General is preparing to release a report on its own months-long investigation, which may drop as soon as this week. Meanwhile, IRS officials are steeling themselves for the hot seat, as they should.  Chairman Camp announced late Monday that the Ways & Means Committee in the House will begin hearings into the matter as soon as Friday.  Senators McCain and Levin announced in a joint statement that the Senate’s Permanent Subcommittee on Investigations will postpone its tentatively scheduled June hearing into lax IRS enforcement of partisan nonprofit groups so that it can expand its investigation into the issues raised by the IRS’s apology. Senator Baucus intends to hold hearings in the Finance Committee, too.

National: IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups | ProPublica

The same IRS office that deliberatelytargeted conservative groups applying for tax-exempt status in the run-up to the 2012 election released nine pending confidential applications of conservative groups to ProPublica late last year. The IRS did not respond to requests Monday following up about that release, and whether it had determined how the applications were sent to ProPublica. In response to a request for the applications for 67 different nonprofits last November, the Cincinnati office of the IRS sent ProPublica applications or documentation for 31 groups. Nine of those applications had not yet been approved—meaning they were not supposed to be made public. (We made six of those public, after redacting their financial information, deeming that they were newsworthy.)

National: IRS officials in Washington were involved in targeting of conservative groups | Washington Post

Internal Revenue Service officials in Washington and at least two other offices were involved with investigating conservative groups seeking tax-exempt status, making clear that the effort reached well beyond the branch in Cincinnati that was initially blamed, according to documents obtained by The Washington Post. IRS officials at the agency’s Washington headquarters sent queries to conservative groups asking about their donors and other aspects of their operations, while officials in the El Monte and Laguna Niguel offices in California sent similar questionnaires to tea-party-affiliated groups, the documents show. IRS employees in Cincinnati told conservatives seeking the status of “social welfare” groups that a task force in Washington was overseeing their applications, according to interviews with the activists.

National: Senate Democrats demanded stricter IRS standards for tax-exempt groups | Washington Post

A group of Senate Democrats, led by Charles Schumer (D-N.Y.), complained to the IRS commissioner in 2012 that political groups were improperly claiming tax-exempt status and possibly allowing donors to wrongly claim tax deductions for their contributions. The lawmakers promised legislation if the IRS failed to address the issues with specific measures, namely clarifying how much political activity is acceptable for tax-exempt groups, requiring the organizations to document how much of their work is dedicated to non-political purposes and demanding that they tell donors what percentage of their contributions can be claimed as deductions. “We urge the IRS to take these steps immediately to prevent abuse of the tax code by political groups focused on federal election activities,” the senators said.