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Wednesday, May 15, 2013

Hackney: The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts

HackneyPhillip Hackney (LSU), The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts:

The TIGTA report on the IRS Teaparty scandal pretty much confirmed my expectations which is that the claim that the IRS "targeted" conservative groups to the exclusion of others is false.  This is the most explosive charge that everyone had been expecting.  Additionally, the IRS did not single out conservative groups alone to send ridiculously long and inappropriate questions -- it did it to everyone caught in the net of political advocacy. Interestingly, the report identifies that 96 of 298 cases were related to conservative tea party, patriot or 9/12 groups.  I don't know what that leaves for the allegiances of the other 68%, but it would have been nice to know. If the other greater than 2/3s amount had liberal or democratic allegiances, we have a much different scandal on our hands -- Obama is targeting liberals, why? -- but TIGTA does not provide this information.

The report is well-written and gives some good recommendations, but it acts like a knee surgeon examining an elderly sick patient.  The doctor tells her that her problem is a bad knee and if he gives her a new knee, she will be like new again.   It's all good and well to tell the IRS to beef up its work on political advocacy, but that ignores the real problem, which is that it gets in over 60,000 paper applications a year that it somehow has to both quickly and with accuracy review with too small of a staff. 

The types of applications the IRS faces are changing continuously leaving little ability for the high level standard setting TIGTA calls for. As soon as it develops one set of standards developed organically from watching the applications coming into the office, a new type of organization arises. Meanwhile the IRS EO office is trying to meet the twin aims to be fast and accurate.  They are impossibilities. To be fast, you must eliminate much in the way of higher level review. To be accurate you must involve higher level review. To do higher level review you need more seasoned knowledgeable attorneys that can make these calls. Such money will not be allocated to this office ever. Better recommendations might be to force the application process to become electronic and to use some social science methods to determine applications that are most likely in need of a review, but the office would need a lot more money for that. 

At the end of the day -- yes to inept management, but that does not acknowledge the ridiculous challenge that office faces -- but, No to Intentional partisan conservative hunting on the part of the IRS.  What happened here is simply endemic of this office.Any organization that applies for exemption presenting a type of organization that the office has the time and inclination to try to focus on at the moment will face similar challenges in timing and ridiculously broad inquiries. This is the agents, who are not lawyers but good people trying to do their job, muddling through the best they can getting slow frustrating legal advice from the folks above them like me when I was there. The report notes that the average time for other types of organizations flagged for review was much less than faced by the political advocacy cases -- very simple explanation -- this is an average and probably a lot of the other types of organizations had methods developed for handling such matters -- the IRS was faced with a wave of social welfare organization applications engaged in political advocacy in a way that the office had not really faced or thought through before (social welfare organizations had even recently been referred to as the trash bin of exempt organizations by the IRS). Any time the IRS faces a new issue, it is very slow and very deliberate in the way it works to handle such applications and they tend to be handled from bottom up rather than top down as we witnessed in this case.  This means they will probably get some calls wrong during the early stage of the development of a wave of new organizations, but quickly like bees in a beehive they will make corrections to more properly handle the situation.

Critically, note that all the worst IRS inquiries to the political advocacy organizations that the public has been most concerned about were ultimately overruled when subjected to actual review at a higher level. The TIGTA report for instance demonstrates that the IRS found that the request for lists of donors was an inappropriate request and they devised a way to ensure that these donor lists were not disclosed and in fact destroyed. This is slower than we might have liked, but it is very common for this office because of the challenges it faces in handling its workload. It often works from bottom to top rather than the other way around because of necessity. 

The biggest problem is the IRS's inept handling of the politics of the whole affair, and its bizarre means of communicating its failures in this instance. This led to the IRS losing control of the message, even to Jon Stewart and The Daily Show, with the public thinking the worst of the IRS. I remain concerned regarding the apparently deficient disclosure to Congress when high level officials were asked apparently direct questions that I would have thought would have led to disclosure of the review of the Tea Party organizations. There may be a good explanation for those failures and hopefully we will hear those when Steve Miller testifies soon.

Nevertheless, other than the disclosure problems, this TIGTA review gives an accurate picture of an organization that I came to know and love when I worked there.  Good people trying to do good work, but set for failure because provided poor clay in the Internal Revenue Code provisions on exempt organizations and too little staff and money to carry out the twin aims of accuracy and speed in molding that poor clay into a consistent good product.

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Comments

Prof. Hackney, I spent over 30 years working with these folks as a DOJ lawyer. Everything you say rings true from my experience. Yes, there is a scandal here. But it's not the one the news media wants to focus on or the Congress wants to hear about. The scandal is the failure to properly leglislate the IRC and to fund the poor devils charged with enforcing it.

Posted by: Publius Novus | May 15, 2013 12:50:28 PM

...don't know what that leaves for the allegiances of the other 68%

I reccomend you read the report. Figure 3 and text accompanying footnote 17 provide that information.

Posted by: Yo Gabba Gabba | May 15, 2013 12:58:18 PM

I wonder why the inspector-general didn't ask for the phone logs of the IRS managers in charge of the nonprofit applications. That would help answer the question of whether there was White House or main Treasury pressure. I ask this because I was recently reading the old IG report on whether Notice 2008-83 was issued to help Wells Fargo. The IG did get phone logs and daily schedules for the Secretary of the Treasury, Mr. Geithner. The IG also asked him what he said in his conversations with Wachovia and Wells Fargo, and Geithner's lawyer said the Notice didn't come up, even though it was worth hundreds of millions to Wells Fargo. The IG had to stop there, but at least some evidence was presented. See

http://www.treasury.gov/about/organizational-structure/ig/Documents/Inquiry%20Regarding%20IRS%20Notice%202008-83.pdf

Posted by: Eric Rasmusen | May 15, 2013 3:20:25 PM

IMPORTANT CORRECTION: My comment of a few minutes ago said "Mr. Geithner" was the Treasury Secretary, and the comment did not flatter the Secretary. I was wrong: the Treasury Secretary in question was Mr. PAULSON, under Bush, since the investigation was about 2008 events.

Posted by: Eric Rasmusen | May 15, 2013 3:24:58 PM

This essay misrepresents the report. The claim that only one-third of the sampled cases were conservative organizations is not correct. 96 of the 298 applications which were referred to the team of specialists had the words ''tea party', 'patriot' or '9/12' in their name. This does not mean that the other organizations were all liberal groups. It simply means they did not have those 'trigger words' in their names. Those other organizations may very well have been referred to the specialists for perfectly legitimate reasons. The scandal comes from the fact that EVERY SINGLE ORGANIZATION with the trigger words were forwarded to the specialists. The selection process should not be based on the name of the organization and this is where the bias is evident. If every single application from an organization with the word 'Louisiana' in the name was pulled for further review, this would be bias, even if they represented a small percentage of the reviewed cases overall.

Posted by: Alabama Slammer | May 15, 2013 7:56:01 PM

sloppy essay and shoddy reasoning. C+.

Posted by: jpe | May 15, 2013 10:28:43 PM

Eric -- I don't misrepresent that only 32% were conservative. I said we do not have that information from the report. See above: "If the other greater than 2/3s amount had liberal or democratic allegiances, we have a much different scandal on our hands -- Obama is targeting liberals, why? -- but TIGTA does not provide this information."

Posted by: Philip Hackney | May 16, 2013 11:23:19 AM

@publius Novus ... Figure 3 does not provide information regarding the "allegiances of the other 68%," nor does footnote 17. Figure 4 classifies that 68% as "Other." Perhaps you should follow your own recommendation.

Posted by: Robert Ricketts | May 16, 2013 1:03:17 PM

Sorry Publius Novus ... previous comment should have been addressed to Yo Gabba Gabba.

Posted by: Robert Ricketts | May 16, 2013 1:04:53 PM

Philip- There is no chance the 68% were liberal groups, that's established in the the report. Did you read it? Did you read it honestly and critically?

Posted by: Yo Gabba Gabba | May 16, 2013 1:29:39 PM

Alabama Slammer: One of the main missions of the IRS is to administer the tax law uniformly. In order to do so, don't you think it makes sense to classify 1023s and assign them to specialized groups of agents? The IRS has done this routinely, without any objections in the past. For example, according to published reports, all Church of Scientology applications in the mid-80s were culled and assigned to a task force of agents. What's the problem with this?

Posted by: Publius Novus | May 16, 2013 2:02:55 PM

Publius Novos,

I don't have any problem with the IRS classifying applications for further review if they do so by one of two methods: 1. totally randomly or 2. based on probable cause.

In this case, all organizations with the trigger words were chosen for further review so it was not random.

There is no evidence the IRS had reason to think organizations with the trigger words were doing anything wrong so there was no probable cause to review all of them unless you simply think those words alone constitute probable cause. I don't know the details of the Scientology applications but wonder if they had a past history of misbehavior which would justify the extra scrutiny?

This simply smacks of profiling conservative groups.

Posted by: Alabama Slammer | May 16, 2013 4:28:12 PM

Robert- "EO function officials later clarified that the expanded criteria [for BOLO]were a compilation of various Determinations Unit specialists’ responses on how they were identifying Tea Party cases." That "expanded criteria" captured the other 68% and "included additional names (Patriots and 9/12 Project) as well as policy positions espoused by organizations in their applications." Those "policy positions" include "government spending, government debt or taxes" or "criticize how the country is being run".

Can you fairly ask whether a liberal group would be flagged by that expanded criteria?

Posted by: Yo Gabba Gabba | May 16, 2013 7:24:40 PM

"Soon thereafter, according to the IRS, a Determinations Unit specialist was asked to search for applications with Tea Party, Patriots or 9/12 in the organizations name as well as other "political sounding" names." The IG report though in FN 16 specifically states that it did not go on to determine if other political sounding names were OK. Again, the report fails us. We don't know what the other "political sounding" names were. It is not true, therefore, that the search criteria described in the report would only result in conservative organizations. And we know from newspaper reports that some liberal groups did receive the same treatment.

Posted by: Philip Hackney | May 16, 2013 10:24:38 PM

IG should have in my opinion discussed and described those other organizations. Under the current meme regarding conservative organizations, it "targeted" those other political sounding named organizations as well.

Posted by: Philip Hackney | May 16, 2013 10:26:48 PM

Alabama Slammer: Exempt org recognition does not involve "probable cause" or criminality or even wrongdoing. Under the Service's execssively liberal interpetation of 501(c)(4) (dating to the late 50s), >50% expenditures on political activities (whatever those are) DISQUALIFIES the org for 501(c)(4) status. That would still permit a "political" org to qualify for 527 status, which is what Congress intended in the first place. Political advocacy groups want 501(c)(4) status because that permits them to hide their donors, while 527 status does not.

Posted by: Publius Novus | May 17, 2013 10:32:11 AM

Where is the complete BOLO list of target criteria?
More specifically what, outside of political ideology and "social dissident terminology" was included? I seriously doubt, a term altogether associated with this administration and indeed federal government in general, the truth will ever be lifted from the bowels of government. Thus far I understand Tea Party, 9/12, Patriot, Constitution, Tax, Spending, Freedom, Federalist would bring about the wrath of Big Brother but again I ask for the complete list of these trigger words. Furthermore, in this age of info overflow, why is it that I even have to ask? It takes the most naive of imbecile to accept that this mindset is confined to a narrow period of IRS history. Our every communication is vetted for "disidence". I was told by a medical professional in 2010 to refrain from making derogatory comments in regard to ObamaCare as she was obligated to report it as such.
This is a two-edged sword bound to destroy...

Posted by: Barry Sanders | May 18, 2013 6:37:29 PM

"but, No to Intentional partisan conservative hunting on the part of the IRS."

Until we see a list of keywords which include terms like "progressive", "people's", or other typical liberal buzzwords, I really don't know how this could possibly be claimed. Nobody sane could think a list of keywords which were associated with conservative causes, but not liberal, wasn't partisan.

Posted by: Brett Bellmore | May 19, 2013 8:09:04 PM

Of course this goes beyond the "cherry picking" done with those obvious candidates, the 501's with triggers in their names. Once that surface criteria was gleefully dealt with we have the forensic whackos delving into the body of evidence found within the groups principles as evidenced by the inane questioning these entities were put through. I'd ask you to wake up, but that would be paramount to asking the skipper to turn the Titanic around...

Posted by: Barry Sanders | May 20, 2013 11:22:32 PM

I just checked with the fox, the hens are OK! Man! That was close!

Posted by: Barry Sanders | May 21, 2013 8:29:56 AM