Sputtering adjectives — outrageous, appalling, intolerable — can scarcely do justice to the fiasco involving the Internal Revenue Service’s reported targeting of conservative groups. But the current scandal obscures — and, ironically, threatens to prevent action on — another, equally corrosive failure on the part of the IRS when it comes to scrutinizing political groups.
This less-noticed scandal is the mirror image of the one dominating the front page. It’s not that the IRS has been too tough on such groups — it’s that the agency has been too lax. Groups on the right and left have taken advantage of the tax laws to intervene in elections while hiding their donors from public view.
To be clear: There can be no room for politics, or the appearance of politics, in tax administration. For IRS employees to target groups whose names contain certain, loaded words — Tea Party, 9/12, whatever — is unacceptable.
In order to qualify for nonprofit, tax-exempt status under Section 501(c)(4) of the tax code, groups must be “operated exclusively for the promotion of social welfare,” defined as activities “promoting in some way the common good and general welfare of the community.” However, the IRS has long interpreted “exclusively” to mean “primarily” and allowed 501(c)(4) groups to engage in partisan activity as long as it constitutes less than half their operations. The problem exploded after the Supreme Court’s 2010 ruling in Citizens United, when the number and explicit political involvement of such groups mushroomed.
This was a bipartisan outrage, although a lopsided one: Republicans were far more active on the nonprofit front than Democrats. Still, groups backing candidates from both parties abused the system to spend millions on political campaigns without revealing the identities of their donors. Meanwhile, a passive IRS stood idly by as the groups made a mockery of campaign disclosure rules.
Theoretically, the identities of those giving more than $200 to political committees must be made public. The lassitude of the IRS in dealing with these supposed nonprofits, combined with the lassitude of the Federal Election Commission, has created a gusher of so-called dark money.
According to the Center for Responsive Politics, in the 2012 election, nonprofit groups reported spending more than $250 million to support or oppose particular candidates. The amount is way understated, because only certain spending must be reported. The biggest nonprofit spender in the 2012 campaign was Crossroads GPS, founded by Republican strategists Karl Rove and Ed Gillespie. In a Wall Street Journal op-ed in August 2012, Rove was not exactly coy in describing the group’s operations as an adjunct to the Mitt Romney campaign, running more than $50 million in ads “attacking Mr. Obama’s policies or boosting Mr. Romney.” By Election Day, Crossroads had spent $70 million on independent expenditures attacking President Obama and other Democratic candidates, or backing Republicans. An August 2012 report by ProPublica showed how groups that told the IRS they did not plan to intervene in politics then did exactly that.
The current scandal over partisan scrutiny by the IRS now threatens to engulf the underlying one of the agency’s facilitation of bipartisan hidden money. The Senate Permanent Subcommittee on Investigations had planned hearings next month on that issue; Chairman Carl Levin of Michigan and ranking Republican John McCain of Arizona announced on Monday the inquiry would be postponed while the committee broadened its look to include the agency’s targeting practices.
A healthy democracy demands a system in which citizens can trust that their government does not punish political dissenters. It also demands that citizens be able to know what interests are bankrolling their elected officials. The two needs are not inherently at odds, but the idiocy of the IRS risks making them so. That is a sad and dangerous byproduct of this unnecessary mess.