TaxProf Blog

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

Saturday, May 19, 2018

The IRS Scandal, Day 1834: Why Are We Still Arguing Over The Facts?

IRS Logo 2Forbes:  Why Are We Still Arguing Over The Facts Of The IRS Scandal?, by David Herzig (Valparaiso):

There has been a politically charged debate in academic circles for a while now about events that happened in 2013 regarding IRS investigations into groups purportedly because of the use of the term "Tea Party" in their name.

Paul L. Caron on the TaxProf Blog has been running a mostly continuous post (up to around day 1830) about "The IRS Scandal." The blog series is controversial in academic circles because it frames the issue of alleged IRS targeting of a typology of groups as a definite scandal.  As Professor Philip Hackney wrote, "This so-called scandal over what conservatives saw as the persecution of right-leaning nonprofits erupted at a meeting of Washington tax lawyers in May of 2013."  To be sure, it would be true if there was a direct use of the IRS to harm opposition groups.  For example, it was a clear scandal when Nixon used the IRS to target his political enemies. Yet, as we saw over the weekend, the facts associated with this particular allegation are not so certain and open to debate even after many Congressional, internal IRS, and other investigations.

This weekend an interesting feud between Bradley A. Smith (and others) and David Cay Johnston (and others) percolated over the facts associated with Professor Smith's Wall Street Journal Op-ed. In a series of posts on the TaxProf Blog, Mr. Johnston, Professor Smith, and others, continued to debate and litigate the underlying facts related to the IRS investigations.

Professor Smith and others are of the belief that there was a clear scandal and targeting of right leaning groups.  Mr. Johnston, is of the belief that the issue is less opaque.  After all, the IRS did not just use right leaning terms to identify groups for targeting.  What is clear from the series of posts is that even armed with a series of documents, either side in the debate can find clarity in their position and fault in the opposition.

How one interprets the facts, seems to be based on the lens of one's glasses. But, missing in a dispute over the facts, is what they mean. Rather that continue the downward spiral of arguing over the facts of what happened, here I want to offer a more productive use of the spot-light. We should be focused on two important points.

https://taxprof.typepad.com/taxprof_blog/2018/05/the-irs-scandal-day-1834-why-are-we-still-arguing-over-the-facts.html

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Comments

The key problem with Prof. Herzig's perspective is that it perpetuates the misunderstanding that the IRS scandal focused exclusively on 501(c)(4) organizations and, therefore, going forward, the resolution may be found in regulating the political activity of 501(c)(4) organizations. In fact, I'm not sure I understand what Prof. Herzig means by "501(c)(4) political action committee regime."

My own belief is that the problem is twofold. First, the IRS has been unable to define 501(c)(4) political activity regulations in a way that doesn't engender strong opposition from all points on the political spectrum. Secondly, regulating 501(c)(4) political activity causes another move in the "Whack-a-Mole" game of moving funds between related tax-exempt entities; e.g., 501(c)(3), 501(c)(4), 501(c)(5), 501(c)(6), 527, etc. that we have already seen in practice. See: https://nonprofitquarterly.org/2016/08/18/prairie-playground-for-special-interests-to-test-campaign-finance-initiative/ and https://nonprofitquarterly.org/2016/03/30/anti-payday-lenders-group-targets-dnc-chair-rep-wasserman-schultz-using-public-charity/

Further complicating the regulatory landscape is the presence of recent U.S. Supreme Court decisions like Citizens United and McCutcheon. The present Court is more likely to see restrictions on political speech in First Amendment terms, placing a higher burden on those seeking to limit political expression and political spending. It's an especially daunting task to write 501(c)(4) restrictions, much less the tax-exempt organization restrictions that would include but not be limited to 501(c)(4)s, knowing that the regulations will face certain headwinds from SCOTUS.

Posted by: Michael L. Wyland | May 20, 2018 10:58:03 AM

Facts include not only facts about what the IRS did in its targeting, but the fact that the IRS destroyed hard drives and withheld evidence when it was under subpoena. How can anyone get all the facts to judge a case when the accused willfully destroys government documents to protect agency individuals acting outside of the law? Don't leave that out of the discussion. -- IRS permanently destroyed up to 24,000 Lerner emails after subpoena

Posted by: Woody | May 21, 2018 9:24:15 AM

Because it occurred in the Forbes column but not in the TaxProfBlog excerpt, I forgot to address the conservative vs. liberal name-based targeting issue. Both Prof. Herzig and Mr. Johnston neglect to note the presence of multiple BOLOs used during the targeting era. As I noted in my Day 1829 post, each successive BOLO (five in total, I believe) was more all-encompassing than the one before. However, the fact remains that, from the beginning in February, 2010, the identified applications were collectively referred to internally by the IRS as "Tea Party cases." As I also noted, TIGTA further dissolved the myth of evenhanded targeting in his 2013 supplemental audit report. The 2017 TIGTA audit report that some rely on to illustrate evenhanded targeting encompasses a period several years before the Tea Party cases were identified and its own press release notes limitations in its usefulness in squaring its data with other TIGTA reports.

Posted by: Michael L. Wyland | May 21, 2018 1:59:01 PM

Why have we not seen Lerner's deposition? And what about her sending files to FBI and DOJ to try to get Tea Party applicants prosecuted. 6103 violation?

Posted by: Smitty | May 21, 2018 5:31:55 PM

As I reviewed the details, liberal and progressive groups were singled out during the Bush years, and far fewer in number than the conservative groups during the Obama years.

I guess that makes viewpoint discrimination by the IRS o.k.? Good grief...

Posted by: MM | May 21, 2018 7:57:23 PM