Pomeranz on IRS Fiasco

John Pomeranz of Harmon, Curran sent the following message to the Election Law Listserv, which I am reprinting here with John’s permission:

I was in the room listening this morning as IRS Exempt Organizations Director Lois Lerner made her statement apologizing for the actions of IRS officials who, in the course of reviewing applications for 501(c)(4) status, subjected organizations with the words “tea party” or “patriot” in their names to special, unfair IRS scrutiny.  In her apology, Ms. Lerner stated that it was wrong of the IRS to target groups on that basis, and she furthermore acknowledged that some IRS requests for information from applicant organizations were overbroad (e.g. requesting the names of contributors) and that some applications took too long to process.

In the wake of this news (and a tawdry history of use of the IRS against political opponents in the past), it is inevitable and reasonable for people to wonder whether what happened was the result of political bias against conservative groups.  The IRS has denied any such political bias, asserting instead that what happened was a poorly implemented effort by frontline IRS staff to better review the flood of applications from advocacy-oriented 501(c)(4)s created in the wake of the Citizens United decision.  Predictably, the degree to which people believe the IRS seems to track closely with the listener’s political ideology, with conservatives more certain that bias was at work and liberals believing that this was “just a mistake” by the IRS.  (I have my own uninformed guesses, but, pending further investigation, I acknowledge that either could turn out to be correct.)

There should be absolutely no disagreement, however, that what happened with these organizations was wrong.  Very wrong.  Whether as a result of political bias (either of frontline staff or those above them) or an incredibly poor operational decision, the organizations that the IRS targeted were treated unjustly and suffered real injury.  More generally, this has been another huge blow to public confidence in IRS enforcement of the laws governing tax-exempt organizations (especially those involved in advocacy activities).  There should be an independent, objective investigation of exactly what occurred, how it occurred, and how to prevent it (or anything like it) from occurring again.  I expect that part of that process will involve holding people responsible for their mistakes or misconduct.

Looking beyond the immediate scandal, I believe that part of the reason it was possible for the IRS to treat these groups this way was the failure of Congress, the Treasury Department, and the IRS to adequately define what and how much political activity is permitted for tax-exempt organizations.  For years, many practitioners, academics, and advocates have called for replacing the vague IRS “facts and circumstances” test for what constitutes electoral activity with something that provides real guidance to organizations and regulators.  A decade ago, a group of members of the ABA Tax Section Exempt Organizations Committee (the same organization Ms. Lerner was addressing today when she made her statement) called for greater clarity regarding 501(c)(4) political activities.  Congress, Treasury, and the IRS (no matter the political party in the White House) have failed to act, and their inaction has led to the ambiguity in the 501(c)(4) determination process that gave IRS staff the power to harm these groups.

Unfortunately, I fear that this scandal will make it harder to address these underlying problems that made it possible for this situation to occur.  It appears that this is going to become a partisan political football.  If that happens, conservative political partisans will seek to prolong the public outrage and make the case that the entire problem is the result of Democratic dirty tricks.  Meanwhile, liberal partisans will advise against any cooperation with Republicans on fundamental reform efforts for fear that acknowledging that there really are problems that need to be solved will lend credence to political opponents’ claims.

Regardless of the political calculus, the underlying causes of the IRS failures that have been disclosed today must be addressed (even as we take steps to fix the immediate problem and hold accountable those who were responsible).  The first step toward that will be for liberals to acknowledge that conservatives are justified in being outraged at these actions by the IRS.  My hope is that this will occur and that conservatives might then be willing to forego at least some of the opportunity to exploit this for immediate political gain and choose instead to work on addressing the underlying policy problems that have again been exposed.  Please allow me my perhaps naïve optimism for now.

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