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IRS Scandal a Carbuncle – on a Cancer-Wracked Body


 The IRS, always friendless, now is a pariah. Republicans can’t stop condemning it. Democrats can’t stop agreeing.

Targeting Tea Party groups for scrutiny, even if through incompetence, not intention, turned the IRS into a nasty carbuncle on the governing body.

Carbuncles are never good. Strength-sapping, painful, ugly, they’re to be avoided. Here’s the thing, though: while every politician in Washington is cursing the carbuncle, hardly one has complained of the cancer killing the patient. Allowing unlimited, unaccounted-for corporate spending in elections is a malignancy threatening the life of the republic. Permitting Tea Party, left-wing, libertarian, middle-of-the-road – whatever – groups to define themselves as untaxed social welfare organizations that may accept unlimited, untaxed, secret corporate gifts and sponsor political ads is a sarcoma on democracy.

Nobody wants the IRS singling out applicants based on politics. The American people do, however, want someone, if not the IRS, someone else, somewhere to do something about the perversion of election finance. The IRS is hardly a good candidate for that job. The Securities and Exchange Commission (SEC) could help. A constitutional amendment would be better.

The IRS has some regulatory power. In the Tea Party case, the IRS was examining applications for “social welfare” or 501(c)(4) status, which is commonly used to circumvent campaign finance laws.

The tax code defines 501(c)(4) groups like this: “civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.” These are different from charity organizations, called 501(c)(3), such as food banks and homeless shelters. And they are different from political outfits, which have their very own place – Section 527 – in the tax code.

Over the past decade, an increasing number of political groups sought “social welfare” status instead. That’s because of a 2001 law requiring political outfits to disclose their donors. “Social welfare” organizations don’t have to do that. Politicized “social welfare” groups sprouted even faster after the U.S. Supreme Court decided in the Citizens United case in 2010 that corporations are people free to spend unlimited cash in elections.

“Social welfare” groups provided corporations with the ability to spend untold millions on candidates while keeping that a secret from customers and shareholders.

But here’s the problem: the tax code requires these groups to work “exclusively” to promote social welfare. Regulations permit some political activity but forbid these groups from functioning primarily for politics.

Despite that, many of these groups, from the right-wing Crossroads GPS to the lefty Priorities USA, clearly operate primarily for politics. They spent hundreds of millions in the last Presidential election. Watchdog groups have filed a dozen complaints in the past two years objecting to this apparent violation. The IRS never responded.

Not much enforcement there.

The IRS made a little effort in 2011, but backed off when GOP leaders complained.

Gifts to charities are tax exempt, but those to “social welfare” groups are not. Well, they’re not supposed to be. The IRS sent letters to a group of big donors two years ago informing them that gifts to “social welfare” groups may be subject to tax. Immediately, Republican senators Orrin G. Hatch and Jon Kyl accused the IRS of partisanship. After which the IRS “folded like wet cardboard,” said Sheila Krumholz and Robert Weinberger of the Center for Responsive Politics in a New York Times article.

No enforcement there.

Another government entity that could help cure the dark money disease is the SEC.

No enforcement there either, though.