What did the IRS do wrong?

Posted by AzBlueMeanie:

MSNBC's Lawrence O'Donnell continues his lonely crusade to convince the corporate mainstream media that the so-called IRS "scandal" is really no scandal at all, they were just doing their job as required by law.

In this segment of The Last Word on Tuesday night, O'Donnell had as his guests  Marcus Owens, former head of the IRS
exempt organization division, and Julian Epstein, former counsel for the House Judiciary Committee. Transcript from Tuesday, May 28:

O`DONNELL: In the spotlight tonight, what did the IRS do wrong?

* * *

O`DONNELL: Joining me now are Marcus Owens, former head of the IRS

exempt organization division, and Julian Epstein, Democratic strategist,

former counsel for the House Judiciary Committee.

Mr. Owens, you have the job where all this action took place for

years, unperturbed, no investigations of anything. You have read the

inspector general`s report about what happened in your old what do you read

in the inspector general`s report? What do you think the IRS did wrong

here?

MARCUS OWENS, FMR. IRS DIRECTOR TAX DIVISION: Well, actually I

couldn`t find anything that suggested the IRS had acted inappropriately.

Acted perhaps ineffectively in a couple of places, but not inappropriately.

O`DONNELL: Well, I have to tell you, if you were on any other program

in America, you would have just shocked the audience. But I have been

saying that over a week now. I haven`t seen what they did wrong. They are

supposed to evaluate how much political activity a 501(c)(4) wants to

engage in. According to regulations of the IRS, it is specifically their

job to do that.

But do you think in the inspector general`s report that he kind of

just accepted this notion that there was something wrong with this basic

screening process that they have to engage in?

OWENS: Well, that is one of the fundamental concerns I have with the

report. It really doesn`t describe the process that has to take place with

the processing of applications for exemption. This whole idea of

targeting, that`s a pejorative term. In reality what happens is the IRS

opens the morning mail. And in the mail there will be a pile of

applications for exemption. Those applications have to be sorted. And the

most complex applications assigned to personnel with the most experience.

That`s simply the way complex legal work is handled. And that`s what

happened. And it was the sorting mechanism with the use of nomenclature,

rather than some other less flamboyant, I guess, or incendiary terminology,

was seized upon by the inspector general as somehow evidence of bad acts,

when in fact it was simply an effort to sort applications, those more

likely to trigger the need for careful evaluation of this concept of

political activity, which is a very difficult concept to wrestle with, as

the inspector general did suggest.

O`DONNELL: Julian Epstein, the inspector general reported this,

but lost in most of the coverage of it is that most of the applications

that were screened through the process did not have conservative sounding

titles in the applications or conservative sounding terminology in the

applications.

JULIAN EPSTEIN, FMR. HOUSE JUDICIARY COMMITTEE COUNSEL: That`s right.

And even some Democratic groups had their applications denied and some had

their 501(c)(4) status revoked. And the New York Times did a very

interesting survey today, a random survey of the 100 or so conservative

groups that were selected for further screening. What it found — and this

was a random survey — was that a disproportionate number of them seemed to

be involved in what could have been an impermissible level of political and

election activity. . . 

IRS_501c3_Applic_zpsebc36ae5
See: Inspector General's Report pdf.

And if that`s the case and they did not, in fact, qualify under the

statute for tax exempt status, then I think this whole so-called scandal,

the complexion of it will change. And it will change quickly for two

reasons. First of all, if they, in fact, under the law did not qualify for

this tax subsidy and this cloak of secrecy which they get with 501(c)(4)

then it`s going to be very difficult for the Republicans to argue that

these groups shouldn`t have had more scrutiny and that shouldn`t have had

some degree of profiling, if in fact they showed a pattern — a

disproportionate pattern of engaging in political activity.

That`s point one. Point two is that you have heard John Boehner and

other Republicans call for a special prosecutor and suggest that criminal

laws might have been broken. Well, I am not aware of any really strong

case that can be made that criminal laws were broken. But in the New York

Times report this morning, it also speaks about some of the groups — one

group in particular that claimed to the IRS that it would not be involved

in any political or election activity, when in fact it was running ads for

a political candidate.

And if there`s one thing that can get you into trouble under the

criminal laws, it is lying to the IRS, false statements, 18 USC 1001. And

I would advise my Republican friends that before they start talking about

criminal violations and special prosecutors, they may want to be certain

that their friends on the political right that were making these

applications for this tax subsidy — and that`s what it is. It`s a tax

subsidy. They may want to be 100 percent certain that none of them were

making misrepresentations to the IRS for that tax subsidy.

Because once you get a special counsel in place, that special counsel

can look at anybody, including people that were making false

representations to, again, get this tax subsidy and this cloak of secrecy

that they were not entitled to under the law.

O`DONNELL: Marcus Owens, the inspector general`s report lists seven

categories of requests that IRS made to some of these applicants for

information. . . Do you have problems with those questions?

* * *

OWENS: Well, actually no. Some of the categories are extremely

vague. It`s hard to tell what the actual underlying questions were. But,

for example, the question about donors, about sources of the organization`s

revenue has actually been found to be a relevant area of inquiry by the

U.S. Tax Court in the context of processing application for exemption. It

demonstrates or can demonstrate a link to particular political parties,

which would suggest political campaign activity as a purpose of the

501(c)(4). It can also suggest a possible private benefit, if the source

of the revenue perhaps is a commercial enterprise that`s being promoted by

the 501(c)(4).

It could very well be a relevant question.

EPSTEIN: Marcus makes a very good point. There`s nothing in the

statute and there`s nothing in the rules, Lawrence, that forbids the IRS

from asking these kinds of questions. And again, if it turns out, as we

take a closer investigation, that many or most of these groups were engaged

in political activity and didn`t qualify, the Republicans` case is going to

be out the window.

* * *

I think it`s going to be a tough case for them to prosecute, if, in

fact, the New York Times reporting is borne out.

O`DONNELL: Every one of these organizations was engaged in some kind

of political activity. The question the IRS was wrestling with was exactly

how much. Marcus Owens and Julian Epstein, thank you both.

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