TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, March 29, 2017

The IRS Scandal, Day 1420: A Hidden Cause

Cause of ActionCause of Action, Sensitive Case Reports: A Hidden Cause of the IRS Targeting Scandal:

Executive Summary:
Beginning in February 2010, the Internal Revenue Service (“IRS’) singled out certain non-profit organizations for extra scrutiny when they applied for tax-exempt status. Numerous subsequent congressional investigations and media reports demonstrated that the targeting involved invasive questioning and years-long delays, and focused disproportionately on right-leaning groups, especially those with “Tea Party” in their name. These reports, however, have almost entirely overlooked a hidden cause of the targeting scandal,which remains in effect today. As a result, American taxpayers are at risk for similar treatment in the future.

Contrary to the conventional storyline, there exists an institutional policy that was the first impetus in prompting IRS employees to target groups based on their political viewpoints. That policy is embodied in an internal IRS rule—which is still on the books—that singles out applications from any group interested in issues that might garner attention from either the media or Congress. In such cases, the merits of the application are ignored as IRS employees develop “Senstive Case Reports” for consideration by those above them in the IRS hierarchy. The result is a process that interferes with the unbiased review of applications for tax-exempt status designed to apply to all eligible organziations, regardless of their political viewpoints or affiliations.

Seven years after the targeting scandal began, the rule that enabled this inexcusable behavior still exists. Until that rule is removed from the internal manual used by all IRS employees, targeting of politcal opponents will remain a very real threat. Fortunately, removing the offending provisions is a simple process that can be started at any time and completed without the need for new legislation or formal notice-and-comment rule-making.

Findings:

  • Targeting was—and is—IRS policy, not a violation of it.
  • The employees who initiated the targeting cited an internal “Sensitive Case Report” process that singled out applications that might attract media or congressional attention.
  • Sensitive Case procedures remain in effect today.
  • The IRS has the authority to change its internal policy at any moment, which means it can remove the problematic rules at its discretion. Doing so would eliminate the agency procedure that enabled the targeting scandal. To date, the agency has not made the required changes to its rules.

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Comments

How do these "Sensitive Case Reports" not violate equal treatment under the law? Why should the IRS be allowed to worry about potential PR when evaluating an application? So much for neutrality.

Posted by: ruralcounsel | Mar 29, 2017 4:07:31 AM

It's a bit worse than a violation of equal protection. There's Surpreme Court precendence from the early 1980s I think covering viewpoint discrimination by the government, e.g. such treatment is a violation of the 1st Amendment.

Nobody on the other side seems to have addressed that issue in 4+ years,, not Publius Nadler here, nor Congressional Democrats who sandbagged the oversight committee investigation. Had it been the ACLU and left-wing think tanks targeted by the IRS under the Bush administration, the silence would never have been this deafening...

Posted by: MM | Mar 29, 2017 7:45:20 AM

How does the Satanic club not meet these criteria?

Posted by: El scorcho | Mar 29, 2017 8:36:15 AM

Honestly...it is beyond my understanding how Attorney General Sessions can let this criminality go. There needs to be a special investigation. Nixon only tried to politicize the IRS and it was a count on his bill of impeachment. The Democrats accomplished it and it seems to be no big deal.

Posted by: VoteOutIncumbents | Mar 29, 2017 8:47:01 AM