Tuesday, May 14, 2013
New York Times DealBook: Congress’s Role in the IRS Focus on Conservative Groups, by Victor Fleischer (Colorado; moving to San Diego):
Outrage continues to escalate over the revelation that IRS employees focused on conservative groups applying for tax-exempt status. The indignation is understandable: political targeting is an abuse of power, and the idea of using the IRS to go after one’s enemies is a classic dirty trick. Unfortunately, the incident provides a new fuel source for the paranoid style in American politics.
The reality is that this is a story of institutional incompetence. And Congress should share the blame.
The root of the problem is poor institutional design, not a political conspiracy. Current law forces the IRS to enforce a vague set of campaign finance laws that have next to nothing to do with raising revenue. The conservative groups at issue were applying for tax-exempt status as “social welfare” organizations rather than Section 527 tax-exempt political organizations. The chief benefit of becoming a social welfare organization is the ability to keep the names of one’s donors private. These social welfare organizations may engage in issue advocacy, and may do some lobbying, but are not supposed to engage in political campaigning. How much political activity is too much? No one really knows.
The IRS is supposed to enforce the tax code, not administer a byzantine campaign finance system. It is good at gathering and processing enormous amounts of data that help the nation raise revenue. Under current law, however, it has little choice but to exercise discretion in the constitutionally dangerous waters of campaign finance.
As Lloyd Mayer, a law professor at the University of Notre Dame, explained, “because Congress and the Treasury have left both the definition of political activity and, for [social welfare organizations], the amount of permitted political activity uncertain, the I.R.S. is required to make broad inquiries and to use politically sensitive criteria to decide if a given organization qualifies for tax-exempt status.” ...
For further reading, see
- Donald B. Tobin [Ohio State], Campaign Disclosure and Tax-Exempt Entities: A Quick Repair to the Regulatory Plumbing, 10 Election L.J. 427 (2011)
- Ellen P. Aprill [Loyola-L.A.], Why the I.R.S. Should Want to Develop Rules Regarding Charities and Politics, 62 Case Western Res. L. Rev. 643 (2011)
- Brian D. Galle [Boston College], Charities in Politics: A Reappraisal [, 54 Wm. & Mary L. Rev. ___ (2012).