IRS: What Were They Thinking?

Published: June 7, 2013

By Jim Lichtman
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Just when you think things couldn’t get any stranger… they do!

Yesterday, the House Committee on Oversight and Reform heard testimony from Faris Fink, commissioner of the tax-collection agency’s small business and self-employed division. Fink was not there to testify about the wrongful targeting of conservative groups applying for 501(c)(4) tax exempt status. Mr. Fink was there to explain about a $4.1 million conference held in Anaheim, California in 2010.

According to a newly released Inspector General audit (here we go, again), the agency spent $50,187 on videos, including a Star Trek parody. $35,800 was spent on three planning trips, and $135,350 went to 15 outside speakers – one of which painted six portraits of famous people to help reinforce the idea that creativity is important in problem solving. Whether that creativity was used in the Cincinnati office’s scheme to target conservative groups, we will probably never know.

However, in looking at the Inspector General’s reports on both issues, it’s no wonder Chairman Darrell Issa and everyone else on the Oversight Committee was outraged.

When asked to account for such lavish spending on a single conference, Fink responded, “We would not hold this same type of meeting today.”

This, from a 32-year veteran of the IRS.

Sadly, this is yet another example of The Peter Principle – from the 1969 best-selling book that concludes that “employees tend to rise to their level of incompetence.”

” ‘What were you thinking?’ [Issa asked Fink] who stayed in a luxury suite and starred as Spock in a ‘slick Star Trek’ video about a planet with ineffective auditing practices, Fink called the spoof ‘an attempt, in a well-intentioned way, to use humor to open the conference,’ The Washington Post reported, (June 6).

” ‘The fact of the matter is that they’re embarrassing…’ For helping organize the conference, Fink and five other managers took home a total of $6,000 in bonuses.”

In addition, the committee is looking into an e-mail that shows that “two top managers, placed on administrative leave this week, took $1,162 in free food from an outside event planner, and took pains to hide the gift.”

What were they thinking!

” ‘The beer and wine will be paid by a credit card given to you at the end of the function by Mr. Donald Toda or Fred Schindler,’ [Jill] Mirich [an Anaheim hotel employee] wrote on Aug. 21, 2010. ‘Do not post to room it can’t be shown as room charge.’ The last sentence is underlined for emphasis.

“Acting IRS Commissioner Danny Werfel said Schindler… and Toda… violated government ethics rules by accepting the food and other items. He said he is moving to fire them. …

“Fink was grilled repeatedly by Republicans to explain how he could have signed off on the conference without objecting to a cost first estimated at $4.3 million.

” ‘Did you believe you were entitled to this?” Rep. Jason Chaffetz (R-Utah) asked. Fink replied that the conference itself was not wrong, since up to a third of the managers being trained were new.

“Chaffetz began to yell. ‘You have a public trust, and you’re paid by the American taxpayers to be responsible. And you’re saying it was a pretty good conference?’ ”

Democratic Representative Gerald Connolly: “It shows to me a culture of both arrogance and tin ear as to how might this look . . . on the front page of the morning paper.”

Werfel sat before the committee last Monday and impressed upon them his personal commitment for decisive change. “Werfel, appointed by President Obama to clean house, told lawmakers that to regain taxpayers’ trust he must show that the IRS is impartial, cuts costs and does not make any personal tax information public.

” ‘Each of these questions is solvable,’ Werfel said. ‘I understand the enormity of the moment.’ ”

I will be interested in following Werfel’s progress on this.

Returning to the IRS’s treatment of ‘tea party’ related groups, there is, in fact, a serious flaw in the tax code involving 501(c)(4) groups. While the IRS clearly acted wrongly in targeting conservative groups based on narrow and clearly political criteria, more scrutiny is called for on any group applying for such tax exempt status. All this was brought to light in two New York Times articles in 2010.

As reporter Mike McIntire made clear in his story (Sept. 23, 2010), “An examination of Americans for Job Security — based on a review of its recent activities, as well as on interviews and previously unreleased documents from the Alaska case — provides a rare look inside the opaque world of these ascendant advocacy organizations. Its deep ties to a Republican consulting operation raise questions about whether, under cover of its tax-exempt mission ‘to promote a strong, job-creating economy,’ the group is largely a funnel for anonymous donations.

” ‘A lot of nonprofits game the system, but A.J.S. is unusual in that they so blatantly try to influence elections and evade disclosure,’ said Taylor Lincoln, a research director at the watchdog group Public Citizen, which has filed complaints against the group in recent years. ‘By any common-sense, reasonable interpretation of what they do, they are in violation of the rules.’ ”

Let’s hope that newly installed Acting Commissioner Werfel takes a closer look at firming up the legal requirements as well as scrutinizing ALL groups applying for such tax exempt status.

After, of course, he sends out a few pink slips.


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