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Sunday, May 8, 2016

The IRS Scandal, Day 1095

IRS Logo 2Linda Beale (Wayne State), IRS Scrutiny of 501(c)(3)s:

As most everybody is aware by now, the IRS has been under considerable strain for a number of years from budget and staff reductions that have left it underfunded, understaffed, and under pressure.  This is part of the right's effort to "shrink the government to a bathtub and drown it."  If the main organization for helping Americans understand their tax obligations is understaffed, it is likely that many people will become irritated with the agency and blame it (and taxes) for all their problems.  If the main organization for enforcing the U.S. tax laws fairly has too few people to audit the most likely scoflaws and too little money to prepare guidance and rulings to make it harder for scofflaws to scoff at the law, then many people will become irritated with the agency and blame it (and taxes) for their problems while many other people (especially the privileged rich) will continue to scoff at the law by overstating their basis when they sell capital assets, hiding assets in tax havens, and just hiring lots of expensive tax attorneys and accountants to come up with schemes for wiggling through the loopholes in the Code to avoid more taxes.

And of course, if the main organization for ensuring that tax-exempt organizations are not abusing their tax exempt status by using "dark money" to allow the domestic elite and foreign powers to influence and control federal elections and legislation, then odds are the rich and elite and foreign powers will wield more and more influence and control over who gets elected and what kind of legislation they pass.  Odds are we will see even more of the kinds of absurd legislation disenfranchising the poor and minorities by making it harder to vote, harder to get a State-issued I.D. card, harder to wait in line for hours at the polls (if you will be fired for not reporting to work), etc.

None of this is any surprise.

None of it is good government.

All of it is supported by the current radicalized uber-right-wing Republican Party hacks that are running many state governments and hold the majority right now in the U.S. Senate and House of Representatives.

As the New York Times editorial board noted, "[c]laiming a 'social welfare' tax exemption has become a tool for powerful political operatives like Karl Rove, the Republican campaign guru.  His Crossroads GPS group, which has 501(c) status, has spent $330 million on ads and candidates since it was created in 2010."  See Editorial,  Dark Money and an I.R.S. Blindfold, New York Times (Apr. 28, 2016).  And of course, with all the ranting about it being a problem to pick a group with "Tea Party" or "Progressive" in their name for closer scrutiny (when any common sense analysis will tell you that such a group is quite likely to be engaged in forbidden lobbying activities), "the IRS has grown ever more gun-shy about enforcement."

So the latest bill wreaking havoc on democracy, put forward by Republican Peter Roskam in the House of Representatives, would eliminate the current law that requires those who donate more than $5000 to a nonprofit to be disclosed to the IRS (though redacted for public versions of organizations' tax forms)..  See, e.g., Richard Rubin, House Republicans Seek to Block IRS Collection of Non-profit Donor Data, Morningstar, Apr. 28, 2016. That means a foreign corporation or a foreign sovereign power could contribute enormous sums to shape the legislative and regulatory regimes in our country, and there would be NO WAY TO POLICE THE PROBLEM. 

Further, it is hard to understand why any donor to a tax-exempt organization should be entitled to anonymity.  The organization is able to avoid paying any taxes on the funds received, and--especially under the current malevolent eye from Congress towards the IRS--the IRS is hamstrung in enforcing the law against political campaigning with 501(c)(3) funds.  What we should do instead of allow complete anonymity and the power plays that encourages is the opposite:  the name of every donor who gives anything more than some de minimis threshold amount to any tax-exempt organization should be publicly available, and the amount given should be publicly available.  After all, if money is "speech", "speech" is supposed to be heard.  Remember the old saying about the tree that fell in the forest and whether there would even be any sound if there were no eardrum available to hear it.  That's certainly the case with speech.  If giving money is a form of speech, than the gift and giver shouldn't be hidden under a bushel but should be broadcast far and wide for anyone who wants to know.

https://taxprof.typepad.com/taxprof_blog/2016/05/the-irs-scandal-day-1095.html

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Comments

Prof. Beale's technical articles and presentations are uniformly thoughtful and insightful. This thing, however, shows her to be completely tone deaf to the political mood of America -- and to be part of the elitist progressive side of the political spectrum that has encouraged the Trump candidacy.

Posted by: TexEcon | May 9, 2016 7:35:03 AM

Very good article.

Posted by: sw | May 9, 2016 6:35:57 AM

Another partisan hand-wringing piece about the troubles the IRS has brought upon itself for being manipulated for partisan purposes. No surprises here. Keep up denying the fundamental issues. Se where that gets you.
"Further, it is hard to understand why any donor to a tax-exempt organization should be entitled to anonymity. " Tell that to the donors who've been threatened. That statement alone shows this author doesn't understand the primary problem.

Posted by: ruralcounsel | May 9, 2016 4:57:03 AM

"If the main organization for helping Americans understand their tax obligations is understaffed, it is likely that many people will become irritated with the agency"

Well, the Democrats that run the IRS decided to do that rather than make cuts to bonuses or administrative staff. They want the pu lic to suffer rather than deal with their corruption of the IRS.

"if the main organization for ensuring that tax-exempt organizations are not abusing their tax exempt status by using "dark money" to allow the domestic elite and foreign powers to influence and control federal elections and legislation, then odds are the rich and elite and foreign powers will wield more and more influence and control "

Democrats are the overwhelming beneficiaries of organizations spending money to influence politics and they fund tens of thousands of nonprofit activist groups that engage in politics. This author has zero problems with Democrats spending hundreds and hundreds of billions of dollars on politics. She just wants to prevent non-Democrats from participating.

Posted by: Wodun | May 8, 2016 12:22:20 PM

The author appears to be unaware of contentions of partisan action by the IRS on non-legislated changes to immigration law and Obamacare, not to mention delay and misdirection which has frustrated both Congress and the courts investigation the exempt organization scandal. If the author is aware of these issues and has decided to hide them from readers, then she may be properly qualified to work in the management of today's IRS.

Defunding the IRS is a blunt and destructive instrument, but it is the only tool available to a Congress. I discount the possibility of impeachment because party loyalty trumps the facts in that process.

Posted by: AMTbuff | May 8, 2016 8:50:08 AM

IRS form 1095 is your proof to IRS that you have health care coverage.

Posted by: Bob | May 8, 2016 8:04:16 AM