TaxProf Blog

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

Wednesday, October 25, 2017

The IRS Scandal, Day 1630: The Real Scandal Is The IRS's Budget

IRS Logo 2Philip Hackney (LSU), The IRS Targeting Scandal Was Fake, but IRS Budget Woes Are a Real Problem:

Conservatives have been seething since 2013 over what they say was an unfair and imbalanced effort by the IRS to scrutinize right-leaning organizations more closely than other groups seeking nonprofit status.

As a new report from the Treasury Department’s inspector general for tax administration shows, the IRS did flag some conservative groups out of concern that they might be problematic. But it also paid the same kind of extra attention to liberal organizations with words like “occupy” and “progressive” in their names between 2004 and 2013.

So it’s now official. There was extra scrutiny but there was no liberal bias among the federal employees who determine whether new organizations that want to operate as nonprofits are legitimate – and therefore eligible for the tax-exempt status that goes with that designation.

As a former IRS lawyer who now researches nonprofit regulation, I am relieved to see the claim that the government exclusively targeted conservative organizations officially debunked. I believe this new report ought to usher in a serious discussion about a very real problem: The IRS is too cash-strapped to conduct its oversight of nonprofits of all kinds. ...

The Government Accountability Office, a nonpartisan congressional agency, recognized in 2014 that the tax agency’s budget and staff were too small to handle its nonprofit oversight responsibilities. The situation has only deteriorated since then.

The overall IRS budget fell by about 18 percent in inflation-adjusted terms from 2010 to 2017, from US$14 billion to roughly $11.5 billion. Today, the agency employs fewer people than it did in 2010. The number of its employees dedicated to auditing and vetting the nonprofit sector fell about 5 percent from 2010 to 2013, the GAO found.

This long-term trend, which began two decades ago, has eroded oversight. The number of aspiring nonprofits gaining tax-exempt status rose over the past decade as rejections fell. The number of denials plummeted from 1,607 in 2007 to merely 37 in 2016.

Hackney

http://taxprof.typepad.com/taxprof_blog/2017/10/the-irs-scandal-day-1630-the-real-scandal-is-the-irss-budget.html

IRS News, IRS Scandal, Tax | Permalink

Comments

Would it be worthwhile to reexamine the official definitions of 'charitable' and 'non-profit' and 'tax-exempt'? If they're being formed at tens of thousands of them per year, maybe - just maybe - the definitions are being strained...?

Posted by: Steve S | Oct 25, 2017 8:18:23 AM

Mr. Hackney's chart conveniently omits all those groups that applied for tax-exempt status but whose applications were neither approved nor denied. May were left in limbo because they were unwilling or unable to comply with the IRS's unreasonable paperwork requests. Most of those were conservative groups.

Posted by: ThomasA | Oct 25, 2017 8:24:01 AM

The "Sequester", which was President Obama's idea, one of his few good ones, but one he tried to blame others for, is not a "Scandal."

It was the right thing to do across the board. The fact that the IRS got caught in it was a coincidental benefit, since they were wasting millions of taxpayer dollars on crap like this while they're budget was declining:

https://www.cbsnews.com/news/taxpayer-money-finances-irs-star-trek-parody/

https://www.washingtonpost.com/politics/irs-faces-new-scrutiny-for-excessive-spending-on-conferences/2013/06/01/e1469324-cab2-11e2-9245-773c0123c027_story.html

This is just more evidence of the need for simplified federal tax reform. The IRS should only be in the business of collecting tax revenue.

Posted by: MM | Oct 25, 2017 8:36:59 AM

Really? Lois Lerner tried a modified limited hangout because it was all imaginary? Then took the 5th because it was all imaginary? Then played hide-the-ball with their own inspector general and with Congressional committees because there was nothing to see there?

Posted by: Art Deco | Oct 25, 2017 12:23:07 PM

MM, I wish this blog had a "like button."

Posted by: Dale Spradling | Oct 26, 2017 7:47:14 AM

Art Deco and ThomasA, I "like" your comments. Yesterday's DOJ admission of wrongdoing, in a settlement with 400 conservative groups, is presumably also imaginary.

Posted by: Michael Wexler | Oct 26, 2017 11:27:16 AM

It is a little disappointing to see how quickly certain factions jump on the flawed exoneration as a means to sweep the past under the rug. One has to wonder what their motivation is. And why the DOJ is paying out settlements, if there was nothing improper done.

Posted by: ruralcounsel | Oct 27, 2017 4:41:21 AM

So, if this is correct, why did the DOJ settle the case for between $1 and $10 million?

Posted by: bflat879 | Oct 27, 2017 11:18:19 AM

The comment about the bipartisan scrutiny now being officially debunked reminds me of the science is settled statement.

Posted by: EricD | Nov 1, 2017 8:31:12 AM

@EricD,

Great comment. Why don't you go test the theory of gravity for us, if you disbelieve science so much?

Posted by: Unemployed Northeastern | Nov 1, 2017 12:52:23 PM