TaxProf Blog

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

Wednesday, May 16, 2018

The IRS Scandal, Day 1831: Johnston Says Wyland Ignores Inconvenient Facts In The IRS 'Scandal'

IRS Logo 2TaxProf Blog op-ed:  Michael Wyland Ignores Inconvenient Facts In The IRS 'Scandal', by David Cay Johnston

I’m glad that Michael Wyland weighed in, though he begins with diversionary nonsense by asserting that I forgot that others would critique my critique. Then Wyland falsely asserts that I “persist in denying a scandal ever happened” when I explicitly state there was a scandal and, as a Tax Notes columnist back then, was the first person to call on Lois Lerner to resign.

Wyland also faults me for not addressing C3 application scrutiny. Professor Bradley Smith didn’t write about C3s, only C4s.

Let’s stick to the issue — did the Obama Administration target conservatives, exclusively or nearly so, in reviewing gratuitous C4 applications, blocking their engagement in the 2012 elections? Or is this scandal’s nature quite different?

Taxes are the core of our democracy and the very reason (along with the power to regulate commerce) that we live in the Second American Republic under our Constitution. I hope more people weigh in because our democracy will benefit from a full airing of the tax law enforcement issue at hand. My purpose is to show verifiable facts that reveal as false the meme that Rep. Daryl Issa, Smith and now Wyland perpetuate.

False memes damage our democracy. Facts matter.

Demolishing a key aspect of this meme is easy — the blocking part. No one needs IRS approval to open shop as a C4. Only after-the-fact filings are required. That means no one was blocked or could have been. When Smith and others state otherwise they are ill-informed or deceitful. Smith should know the law given his occupation.

There is, also, a larger issue about politics and money and what role Congress should define for the IRS, our federal tax police.

Those issues will be addressed in my next book, tentatively titled The Prosperity Tax, which proposes an entirely new and simplified tax system aligned with the 21st Century economy. My plan would shrink the IRS, use a privatized but licensed system to make cheating extremely difficult (and very painful), level the tax playing field and encourage much more savings and investment more wisely deployed. And is wipes away all the tax code filigree.

For now, let’s stick to the issue at hand.

The damaging, false and partisan meme that the Obama Administration targeted conservatives started with Issa, who requested, and got, a one-sided TIGTA audit. If this meme were factual I’d be all over the story. But it’s not, as the very sources Wyland relies on show.

Wyland’s link to his own article on that initial TIGTA report contains not a skeptical word, making clear that he was among those taken in by the one-sided TIGTA report and Issa’s announcement. (So, too, was Obama, who should never have said a word about this independent agency.) Wyland’s commentary shows that he has not fully adjusted his focus since as facts emerged.

Wyland makes no attempt to square the TIGTA audit reports on which he relies with TIGTA’s findings that the C4 applications in question were indeed appropriate for additional scrutiny. That’s a glaring omission, but you would not know that unless you have studied the documents, which few have. The most important facts are usually right in the open, but you have to notice them. (See Poe, Edgar; The Purloined Letter)

TIGTA states that that low-level IRS employees — acting on their own — started the C4 scrutiny process.

TIGTA says these low-level tax law enforcement agents chose for scrutiny an application with the words “America A Better Place to Live.” That could describe a group anywhere on the political spectrum. While not dispositive, this indicates that rather than being infected with partisan bias against conservatives, these low-level IRS people were trying their best to figure out which applicants intended to operate lawlessly. Lacking guidance in what we all agree is an area where nuance matters and the 1959 regulation does precisely follow the C4 statute they did their best.

Nothing in the TIGTA reports supports the idea of Obama administration interference at the IRS in any area and specifically in selecting C4 applications for scrutiny. If Wyland can show otherwise he should provide us with chapter and verse. If not, Wyland should acknowledge that fact and, I hope, re-examine his understanding. Ditto Smith.

Wyland, like Smith and Issa, ignores this inconvenient fact: the tax police sergeant who issued the initial scrutiny directives volunteered in testimony that he is a “conservative Republican.”

Here I refer readers back to my building inspector analogy of honest public servants doing his best to get it right, citing the 1937 Frank Lloyd Wright Racine structural columns stress tests and the 1959 Simon Rodia Watts Towers stress tests.

Law enforcers faced with applications indicating problems should request more information. That they asked for much too much and that their initial reactions were flawed or wrong, as also happened in the Wright and Rodia engineering cases, does not change the fact that more inquiry is the appropriate response while the wrong approach would be denial or looking the other way.

To believe what Smith and Wyland wrote, one has to believe this tax police sergeant is a self-hating conservative Republican who targeted fellow conservatives because the Obama administration somehow issued a secret order that he so fully incorporated this into his soul that he was not even aware of the order since he testified that it was his own idea. As my daughter Amy says, that’s happy-go-magic nonsense.

I’m troubled by Wyland’s line that “the overwhelming majority of the applications flagged were indeed from conservative-sounding organizations, and that the small minority of applications that were also flagged during that time appeared to be included in the group accidentally for reasons not related to their presumed political ideology or assumed activities.”

Notice “... also flagged during that time appeared ... not related…accidently...”

No reader of that line would know that “Occupy” and “progressive” were deliberately included in Be On the Look Out (BOLO), which expanded as new C4 applications landed and junior staff asked their sergeant what to do. Nor would they know from what Wyland wrote that only two groups had the C4 status revoked, both liberal. That’s another inconvenient fact that undercuts the Issa-initiated meme.

Central to perpetuating the false meme is the implicit assumption that because most groups chosen for scrutiny were conservative there must have been targeting of conservatives. All of here have studied logic, making this assertion astonishing.

Assume 100 applications, 99 from conservative groups and one from Occupy, all of which got scrutiny because they described plans to engage in what appears to be prohibited activity for C4s. To then write that the IRS scrutinized only one liberal organizations while scrutinizing 99 conservative groups is accurate, but utterly false.

In my lectures around the world on how to commit journalism and how to make numbers meaningful, I use such examples to make sure young writers learn that facts in general and numbers in particular need context. Without context you can be 100 percent accurate and yet spread a lie. The facts in context show that the Issa meme is a lie, plain and simple.

The IRS did not choose who applied, the organizations did. The mix of applications needs to be analyzed in this context, not using raw numbers. The TIGTA reports, after the initial one-sided and made-as-requested report, vitiate the only or overwhelmingly-conservatives-targeted meme.

As I have written before, did conservative groups get bad advice on filling out C4 applications? Why did they apply at all since applications are gratuitous? How to explain the patterns that low-level IRS people detected, but did not understand?

There’s plenty to criticize about the Obama administration (and I’ve written plenty on that) without fabricating false memes. Those whose opinions are contradicted by facts, especially facts from the sources they rely on, deserve criticism because democracy flourishes when we have robust and honest debate, but withers when facts are not accorded respect.

http://taxprof.typepad.com/taxprof_blog/2018/05/the-irs-scandal-day-1831-johnston-says-wyland-ignores-inconvenient-facts-in-the-irs-scandal.html

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Comments

That Paul continues to label this an "IRS scandal" is itself scandalous. It would better be called a right-wing anti-tax enforcement scandal. Regrettably, the right-wing attack led by Issa and his ilk, abetted by the widely read TaxProf Blog's "scandal" headlines, successfully intimidated the IRS and its enforcement arms into a general approach of non-enforcement via non-scrutiny.

Posted by: Linda Beale | May 16, 2018 9:20:10 AM

"Taxes are the core of our democracy."

No, taxes are the share of the pie the public sector takes under penalty of law from the private sector. And the tax code does not treat Americans equally.

This is sloganeering masquerading as thoughtfulness.

Posted by: MM | May 16, 2018 7:06:18 PM

Linda: I guess the IRS was forced to apologize for targeting specific conservative groups, huh?

Maybe somebody can intimidate the IRS into collecting back taxes owed by its own employees?

Posted by: MM | May 17, 2018 6:19:25 PM