The IRS Scandal, Conclusion

Washington politics has become a bad opera – tedious, score-settling bad opera where each side reacts like a soccer player who falls to the ground, grabs a body part and moans loudly so the official will call a foul.

On June 16, the New York Times writes that “The Ways and Means chairman, Representative Dave Camp… wrote a letter to President Obama on Monday asking for ‘all communications between Lois Lerner and any persons with the executive office of the president’ for the period between January 2009 and May 2011, when the lost emails were exchanged.

“The I.R.S. initially provided 11,000 of her emails that it deemed directly related to the applications for tax exemption filed by political groups… Since then, the I.R.S. has provided roughly 32,000 more emails directly from Ms. Lerner’s account…. After the agency discovered that its initial search of Ms. Lerner’s emails was incomplete because of the computer crash, it recovered 24,000 of the missing messages from email accounts on the other end of Ms. Lerner’s correspondence, the I.R.S. said.”

That’s a total of 67,000 e-mails. How much time and how many congressional staff members does it take to read through 67,000 e-mails in an effort to find a “smoking gun,” if one exists at all?

Opera.

When IRS Chief John Koskinen explained before the committee that Lerner’s computer and others, had suffered a crash, losing much of the information, “Camp demanded that the I.R.S. hand over the damaged hard drive for forensic examination.”

More opera.

So what are the facts and who can we trust to accurately report them?

The most reliable source for this is the Treasury Inspector General for Tax Administration’s final report issued on May 14, 2014. After months of investigation, the 54-page report found that incompetence caused the scandal, not criminal activity.

The I.G. found that “The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Ineffective management: 1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary information requests to be issued.

On page 6 and 7 of the their report: “The mission of the IRS is to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. According to IRS Policy Statement 1-1, IRS employees accomplish this mission by being impartial and handling tax matters in a manner that will promote public confidence.”

“The criteria,” the I.G. states, “developed by the Determinations Unit gives the appearance that the IRS is not impartial in conducting its mission. The criteria focused narrowly on the names and policy positions of organizations instead of tax-exempt laws and Treasury Regulations. Criteria for selecting applications for the team of specialists should focus on the activities of the organizations and whether they fulfill the requirements of the law. Using the names or policy positions of organizations is not an appropriate basis for identifying applications for review by the team of specialists.”

Further, the report states that “For the 296 total political campaign intervention applications [reviewed in the audit] as of December 17, 2012, 108 had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 were open from 206 to 1,138 calendar days (some for more than three years and crossing two election cycles)…. Many organizations received requests for additional information from the IRS that included unnecessary, burdensome questions (e.g., lists of past and future donors).”

Regarding the question as to whether any outside influence from the White House or other administration official took place, the I.G. states that “the criteria were not influenced by any individual or organization outside the IRS. Instead, the Determinations Unit developed and implemented inappropriate criteria in part due to insufficient oversight provided by management. Specifically, only first-line management approved references to the Tea Party in the BOLO [Be on the Look Out] listing criteria before it was implemented. As a result, inappropriate criteria remained in place for more than 18 months. Determinations Unit employees also did not consider the public perception of using politically sensitive criteria when identifying these cases. Lastly, the criteria developed showed a lack of knowledge in the Determinations Unit of what activities are allowed by I.R.C. § 501(c)(3) and I.R.C. § 501(c)(4) organizations.”

The I.G. concludes that a lapse in critical judgment took place. “Determinations Unit employees stated that they considered the Tea Party criterion as a shorthand term for all potential political cases. Whether the inappropriate criterion was shorthand for all potential political cases or not, developing and using criteria that focuses on organization names and policy positions instead of the activities permitted under the Treasury Regulations does not promote public confidence that tax-exempt laws are being adhered to impartially. In addition, the applications for those organizations that were identified for processing by the team of specialists experienced significant delays and requests for unnecessary information that is detailed later in this report.”

Among the I.G.’s recommendations:

“Develop procedures to better document the reason(s) applications are chosen for review by the team of specialists (e.g., evidence of specific political campaign intervention in the application file or specific reasons the EO [exempt organizations function may have for choosing to review the application further based on past experience).

“Develop training or workshops to be held before each election cycle including, but not limited to, the proper ways to identify applications that require review of political campaign intervention activities.”

On May 15, 2013, Acting Commissioner Steven Miller resigned. Less than a month later, Joseph Grant, commissioner of the Tax Exempt and Government Entities Division retired. Lois Lerner, the head of the Tax-Exempt Division retired on September 23, 2013.

While Lerner should be held accountable part of that accountability needs to come in the form of testimony as to exactly what she knew and when. Further, additional oversight by the House Oversight Committee should be maintained regarding the implementation of the recommendations by the I.G.’s office.

While I disagree with the Citizens United decision, the law, any law, must be implemented in a way that can only bring about more trust and confidence that the review process of all tax-exempt organizations is transparent and impartial.

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