The real IRS scandal: the ease with which political organizations have been abusing the 501(c)(4) tax exempt status


Posted by AzBlueMeanie:

The latest "scandal" is that the IRS applied extra scrutiny to applications for 501(c)(4) tax exempt status from so-called Tea Party organizations.

Geez, an anti-government, anti-tax organization (the "Tea" is an acronym for Taxed Enough Already) applies for tax exempt status from the IRS — the agency responsible for the collection of taxes — I can't imagine why that would attract any extra scrutiny (sarcasm). By the way, the tax exempt status in effect is a tax subsidy from taxpayers, so not only are these Tea Party organizations anti-tax, but they want you to pay for their political activities. Deadbeats!

I have yet to see any reporting that this 501(c)(4) status was denied to any organization, only that they had to provide additional information about their organizations' political activities.

Of course, the conservative media entertainment complex cult has portrayed this as a case of conservatives being persecuted for their beliefs, playing the victimhood card that is the stock and trade of the conservative movement. They all see themselves as martyrs who are being persecuted by the "librul" media and the big, bad "guvmint." The corporate "lamestream" media is taking its cue from the conservative media entertainment complex cult and playing along with this persecution/victimhood meme.

Again, I have yet to see any reporting that this 501(c)(4) status was denied to
any organization, only that they had to provide additional information
about their organizations' political activities.

The real "scandal" here, the scandal the media has largely ignored for several years and is still not reporting, is the ease with which political organizations have been abusing the 501(c)(4) tax exempt status, and the lack of any IRS legal enforcement to prevent such abuses.

It took a tax expert to lay out this scandal succinctly. Lawrence O'Donnell, who at one time was staff director of the Senate Finance Committee and oversaw the tax-writing of that committee, explained it all in a segment of The Last Word on Monday night. Rough transcript Monday, May 13:

O`DONNELL: If the IRS personnel intentionally targeted conservative groups,that would be bad. But what if IRS personnel were correctly examining political organizations` applications for tax-exempt status? That is not scandalous because that`s the IRS` job, they must do it. They cannot just grant tax-exempt status to anyone that asks for it. And the IRS has a specific guideline for granting that tax-exempt status.

Section 501(c)(4) of the Internal Revenue Code, which defines social
welfare organizations for tax-exempt purposes defines them this way, "Civic
leagues or organizations not organized for profit but operated exclusively
for the promotion of social welfare."

Then the IRS code does a magic trick and changes the meaning of the
word exclusively. "To be operated exclusively to promote social welfare,
an organization must operate primarily to further the common good and
general welfare of the people of the community."

Do you see that? The IRS changes the meaning of the word
"exclusively" to the word "primarily", exclusively means exclusive. That`s
all you can do. You can`t do anything else.

The law`s intent is that tax-exempt status be granted to civic leagues
or organizations, not organized for profit, but operated exclusively for
the promotion of social welfare. It was in 1959 that the IRS on its own
added the notion that exclusively really just means primarily.

So, for 54 years the IRS has gotten away with the crime of changing
the word "exclusively" to "primarily". The IRS changed the law
. The IRS
took a hard, clear word like "exclusively", a word with legal meaning, and
changed it to the soft word "primarily" that means nothing. Left it open
to IRS agents then to determine if your organization was primarily
concerned with the promotion of social welfare.

And then in 2010, there`s suddenly a flood of organizations applying
for tax exempt status, saying that they are primarily for the promotion of
social welfare, and their titles include the words Tea Party.

What planet do you have to be from to know that Tea Party
organizations are not operated exclusively for promotion of social welfare
as the words of the law require? And what planet do you have to be from to
know that Tea Party organizations are not even, quote, primarily to further
the common good and general welfare, which is the IRS scandalous
interpretation of the words "exclusively for the promotion of social

Tea Party organizations are primarily, and many of them exclusively,
for the promotion of Republican political candidates
. Tea Party
organizations are primarily devoted to attacking congressional legislation,
such as the Affordable Care Act and attacking Democratic Party candidates,
including the Democratic Party`s candidate for president of the United
States. Tea Party organizations are purely political organizations, under
no reasonable reading of the law governing 501(c)(4) organizations would
Tea Party organizations be granted tax exempt status, and yet they were!

And that is not the scandal that Washington sees. The scandal that
Washington sees is that Tea Party and other phrases were used by the IRS to
search out at some point the kind of applications that required more
questions from IRS agents. That was before the IRS decided to use more
neutral terms to search this out.

This is what the IRS does all the time with every tax return it
. The IRS knows that they can`t possibly audit every tax document
they receive, so they use red flags to pull tax returns out of the pile for
more scrutiny.

* * *

They try to develop indicators of where the cheating might be in tax filings.

And there`s a very different likelihood in how much cheating there
might be in, say, a Little League Baseball organization applying for tax-exempt status and a political organization applying for tax-exempt status.
And if in 2010 there was a flood of Tea Party applications for tax exempt
status and many, many fewer applications for tax-exempt status from liberal
political groups, then it only makes mathematical sense that more questions
would be directed at the Tea Party applications

So what we have here in this horrifying scandal are IRS agents doing
their jobs, doing exactly what they`re supposed to do
. Now, what we are
not yet sure of is how balanced their approach was to that, how politically
balanced, whether they showed proportionally the same sort of concern to
liberal political groups applying for tax exempt status.

But the real scandal is what the IRS did in 1959 when it changed the
meaning of the English language
, and the IRS decided tax exempt-status
could be granted, even if an organization was not exclusively for the
promotion of social welfare, but simply primarily for the promotion of
social welfare. And that change from "exclusively" to "primarily" allowed
political organizations to buy political advertising in support of
candidates or as an attack on other candidates and do so under a tax-exempt
provision in the law that was never, never intended for them to hide
behind. And that is truly scandalous

Discussion starts around the 2:25 mark.

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O'Donnell's guest was Ezra Klein, who adds to this discussion. "Ezra Klein, this is one of those Washington scandals where there`s a scandal here, but I don`t think it`s what they`re talking about."

KLEIN: This is the scandal at the IRS. And I think it gets at what
you were talking about in the beginning here. The intuition people have in
Washington now is that what would have been right is for the IRS to let
every single one of these Tea Party groups go right through, and without
any kind of a look, nobody reviews your application. That`s exactly the
opposite of the truth

It`s not just they shouldn`t be unusually strict towards Tea Party
groups against other political groups. But Crossroads GPS should never
have been permitted as a
501(c)(4). Organizing for America, the Obama administration associated
group should never have been permitted be a 501(c)(4). Priorities USA, they`re a 501(c)(4).

There has been a disgusting, appalling explosion in these anonymous
The reason is because they have incredibly privileged status and
because the IRS was terrified going back a couple years now of getting into
a fight like this one, where somebody accused them of being politicized.
So what they did was they offered no truly clear guidance to people. They
did nothing about them.

And now, the cruel irony of this scandal is they`re going to get that
much more afraid, back off that much more, these things will be more
underrated to undermine our democracy

Lawrence O'Donnell makes this critical point:

O`DONNELL: And, by the way, the word "attack" for the IRS has always
traditionally meant audit
. That`s what Nixon did in the Watergate scandal,
people tried to compare it to that. Of course, there`s no — Nixon, the
president of the United States was saying let`s use the IRS to audit my
enemies, to grab their tax returns and challenge them about what`s on it.

This is way before you ever get to any issue of audit. This is just
you`re applying for very special status and we would like to ask you some

Keep this point in mind when you see right-wing polemicists like the Patrician Prevaricator, George Will, write shrill hyperbolic nonsense like this: In IRS scandal, echoes of Watergate. This is pure GOPropaganda, and George Will fantasizing.

KLEIN: Because we are afraid what it can become if the IRS is
politicized. Yes, this is a special designation you don`t need to operate,
you needed to get a special subsidy, and it should be clear, when an
organization is tax-exempt, what that means effectively is that your tax
dollars and my tax dollars are subsidizing it. We are paying for the
groups like Organizing for America and the Tea Party groups and all these
other groups snuck in under this designation, that they should not have
because they`re not under any stretch of the imagination none political

We are paying them to operate. That`s why there`s a higher level of
. And it`s why this scrutiny should have been applied equally
across the board left and right. But it should have been applied to reject
these groups, to not allow them to sneak in, get our taxpayer dollars

O`DONNELL: And Washington reaction is funny to me, because they just
hear IRS, political, unfair, and attack, and most of the commentators on
television about this, who many of them are much more careful about other
subjects, they just need those words. Once they hear those words —
outrageous, outrageous, outrageous.

* * *

KLEIN: And this gets to the underlying issue here, too, which is that
there`s something dangerous for the democracy happening. There`s something
the IRS is supposed to be stopping.


KLEIN: There is something. We are upset about the thing they`re
doing, we should be upset about the thing they are not doing
, just as they
can attack democracy, they also have a role defending it. And one of the
roles is to not let these groups sneak in, where they are both taxpayer
subsidized and completely anonymous. That is not these (ph) political

O`DONNELL: Ezra Klein, thank you for bringing sense to this thing.

KLEIN: Thank you.

Ezra Klein in his comments was referring to a post he wrote, The
IRS was wrong to target the tea party. They should’ve gone after
all 501(c)4s.
You should read his entire post to better understand the real scandal, and not be distracted by the faux outrage of the day from the conservative media entertainment complex cult.

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AZ BlueMeanie
The Blue Meanie is an Arizona citizen who wishes, for professional reasons, to remain anonymous when blogging about politics. Armed with a deep knowledge of the law, politics and public policy, as well as pen filled with all the colors stolen from Pepperland, the Blue Meanie’s mission is to pursue and prosecute the hypocrites, liars, and fools of politics and the media – which, in practical terms, is nearly all of them. Don’t even try to unmask him or he’ll seal you in a music-proof bubble and rendition you to Pepperland for a good face-stomping. Read blog posts by the infamous and prolific AZ Blue Meanie here.