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Wednesday, May 15, 2013

The IRS Scandal, Day 6

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Prior TaxProf Blog coverage:

http://taxprof.typepad.com/taxprof_blog/2013/05/the-irs.html

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Comments

Should we also be casting a skeptical eye on the practice of "fiscal sponsorship"? The "Occupy" organizations received functional tax-exemption by paying the Alliance For Global Justice 7% of their receipts, in exchange for access to AFGJ's tax-exempt status.

Posted by: ameryx | May 15, 2013 8:25:55 AM

Comparison to Nixon? Please, this isn't even close. If Obama ordered special review of tea party groups, then we would have a Nixon-like scandal. There's absolutely no evidence of that level of corruption.

Posted by: HTA | May 15, 2013 9:59:37 AM

HTA: one might have said the same thing about Henry II and Thomas Becket, eh?

Give it time: Obama's media defensive wall is just beginning to fall apart.

Posted by: ColoComment | May 15, 2013 10:22:04 AM

It may not involve the President, but that isn't very comforting. The alternative is that the civil service is so anti-conservative that it will act illegally against them regardless of who is President. (This does include the strong possibility that they are acting this way from an unconscious belief that conservatives groups, but not liberal groups, are corrupt and evil and need careful examination. That possibility doesn't add to my comfort level either)

A tax question, though: It seems to me as if the main problem is the probing and harassment, not the delay. Am I right that these groups are not applying for donations to them to be tax-deductible, but simply for exemption from income tax for what must be a tiny amount of interest income from their assets? And that they can apply for refund of taxes they paid during the approval process?

Another legal question: teh IG report says that many (33, if I remember rightly) of the organizations are entitled by statute to sue the IRS for declaratory judgements because the delay has been so long for them. Does anyone know if they can recover damages too? I ask these things bcause teh audience of this blog is tax-knowledgeable, and it woudl be nice if one of you wrote some op-eds explaining the legal details, an op-ed the simple folk of the media could pick up on.

Posted by: Eric Rasmusen | May 15, 2013 10:50:01 AM

I'll take the bet. This was a decision made by some mid-level IRS employee.

Posted by: HTA | May 15, 2013 10:50:52 AM

Prophetic piece from the WSJ of May 18, 2009 --

Tax Audits Are No Laughing Matter
A president shouldn't even joke about abusing IRS power.
By Glenn Reynolds

Barack Obama owes his presidency in no small part to the power of rhetoric. It's too bad he doesn't appreciate the damage that loose talk can do to America's tax system.... At his Arizona State University commencement speech...Mr. Obama noted that ASU had refused to grant him an honorary degree.... "President [Michael] Crowe and the Board of Regents will soon learn all about being audited by the IRS."

.... Should the IRS come to be seen as just a bunch of enforcers for whoever is in political power, the result would be an enormous loss of legitimacy for the tax system.

Paul Caron, a professor at the University of Cincinnati who writes the TaxProf blog, noted in response to Mr. Obama's remarks that the law calls for the termination of IRS employees who make audit threats for illegitimate reasons. He suggested that Mr. Obama's "joke" might be grounds for firing if he were an IRS employee. ....

Mr. Obama has been accused of not appreciating the importance of financial capital to the proper functioning of the economy. But ill-chosen remarks like his ASU audit threat suggest that he also doesn't appreciate the role of moral capital. ....

Posted by: Woody | May 15, 2013 10:54:29 AM

A good example of probably getting tax law details wrong: "IRS official Lerner speedily approved exemption for Obama brother’s ‘charity’"
http://dailycaller.com/2013/05/14/irs-official-lerner-approved-exemption-for-obama-brothers-charity/#ixzz2TNCRuURN

The President's brother runs a highly dubious 501-c-3 nonprofit that was granted its status within a month of application. That is indeed bad-- the speed, and probably the status itself. What I think is not unusual, tho the article's writer thinks it is, is that the tax-deductibility of the donations was retroactive. But I could be wrong.

Posted by: Eric Rasmusen | May 15, 2013 10:56:05 AM

It's nice that we have this advance warning NOT to reveal any health information to the IRS.

Whether you have health insurance or not, DO NOT TELL the IRS!

If there's some question on the 1040 asking whether you have insurance, just leave it blank.

No way can they catch 100 million taxpayers refusing to incriminate themselves.

Posted by: Vermillion | May 15, 2013 11:27:29 AM

General comment: I may be late to the party, but who's the new guy doing the blog?

Posted by: Swohawk | May 15, 2013 12:02:16 PM

This is from a few months ago, but is on-topic: IRS faces class action lawsuit over theft of 60 million medical records

Posted by: PapayaSF | May 15, 2013 12:04:17 PM

Woody, I think both sides need to have a better sense of humor.

Remember when Reagan was doing a microphone test and joked that he had signed legislation to outlaw Russia forever and the bombing begins in five minutes? Was that a secret signal to mid-level Air Force officers to attack Russia? Of course not. Yet the media feigned outrage because they despised Reagan.

Sometimes a joke is just a joke. I'd like to see more, not less humor, even if some of it is poorly chosen.

Posted by: AMT buff | May 15, 2013 12:23:59 PM

AMT, "many a truth are said in jest."

Posted by: Woody | May 15, 2013 3:02:40 PM

A commentor said: "Remember when Reagan was doing a microphone test and joked that he had signed legislation to outlaw Russia forever and the bombing begins in five minutes? Was that a secret signal to mid-level Air Force officers to attack Russia? Of course not. Yet the media feigned outrage because they despised Reagan.

Sometimes a joke is just a joke. I'd like to see more, not less humor, even if some of it is poorly chosen"

But: "Mr. Obama noted that ASU had refused to grant him an honorary degree.... "President [Michael] Crowe and the Board of Regents will soon learn all about being audited by the IRS.""

I don't think the Russians felt the ghost of a fear after that remark that Reagan might blow up the world. He was joking about what people thought about him already, making fun of people who thought Reagan was too militaristic.

With Obama, on the other hand, the information conveyed wasn't how silly it was for people to accuse him of being willing to break the law to get back at people who slighted him. He didn't have a reputation for that, at least then. Rather, the information conveyed was that the possibility of using his vast powers to revenge trivial slights was at the front of his mind--- and perhaps that he was using this occasion to let people know that he knew about those powers. It would be like if Bush had joked about doing an illegal wiretap of a journalist who criticized him, or any president joking that a corporation he didn't like might find its EPA permits being approved rather slowly.

Posted by: Eric Rasmusen | May 15, 2013 3:03:22 PM

"Comparison to Nixon? Please, this isn't even close. If Obama ordered special review of tea party groups, then we would have a Nixon-like scandal. There's absolutely no evidence of that level of corruption."
Perhaps you should say there is no evidence YET. Watergate was only a 3rd rate burglary until we heard the tapes. Its pretty early in this investigation, to early for calls for impeachment, but also too early to rule it out.

Posted by: richard40 | May 16, 2013 6:12:54 PM