IRS Scandal: Low-Level Cincinnati Workers Say They Simply Followed Bosses' Orders

IRS Rationale for Tea Party Scandal Is Debunked by Data

Applications for tax exemption from advocacy nonprofits had not yet spiked when the Internal Revenue Service began using what it admits was inappropriate scrutiny of conservative groups in 2010.

In fact, applications were declining, data show.

Top IRS officials have been saying that a “significant increase” in applications from advocacy groups seeking tax-exempt status spurred its Cincinnati office in 2010 to filter those requests by using such politically loaded phrases as “Tea Party,” “patriots,” and “9/12.”

Both Steven Miller, the agency’s acting commissioner until he stepped down Wednesday, and Lois Lerner, director of the agency’s exempt-organization division, have said over the past week that IRS officials started the scrutiny after observing a surge in applications for status as 501(c)(4) “social welfare” groups. Both officials cited an increase from about 1,500 applications in 2010 and to nearly 3,500 in 2012. President Obama ask Mr. Miller to resign on Wednesday.

The scrutiny began, however, in March 2010, before an uptick could have been observed, according to data contained in the audit released Tuesday from the Treasury Department’s inspector general for tax administration.

The number of 501(c)(4) applications for all of 2010 was actually less than in 2009.

'Inappropriate Criteria’“It doesn’t bear out the statement that there was a surge in 2010,” said Bruce Hopkins, a tax attorney specializing in nonprofits. “That’s inconsistent with what Lois said last week.”

The audit says the IRS began to use “inappropriate criteria” to single out applications in March 2010. By April 2010, a “sensitive case report” was issued on “Tea Party cases,” indicating that managers in Cincinnati were aware of the sensitive nature of the reviews.

According to the audit, 1,735 groups applied for 501(c)(4) exemption for the federal fiscal year that ended September 30, 2010—six months after the IRS began its scrutiny. That was down slightly from 1,751 the prior year.

The number grew to 2,265 during the fiscal year that ended September 30, 2011, and to 3,357 in 2012. By then the criteria the IRS was using to flag groups had changed three times to include searches for groups with names that contained “Bill of Rights,” “educating on the constitution,” and “limiting/expanding government.”

Mr. Miller wrote in USA Today on Monday that the IRS began to centralize those applications in 2010 because the division that supervises tax-exempt organizations observed a sharp increase in the number of applications from groups “potentially engaged in political campaign intervention” that were seeking either 501(c)(4) status or designation as a 501(c)(3) charity. He then cites the increase between 2010 and 2012.

The audit shows that 501(c)(3) applications also declined in both 2010 and 2011 from the previous years.

Official Response

Ms. Lerner offered the same explanation for why the applications were being heavily scrutinized when she publicly apologized for the procedures during an American Bar Association conference last week in Washington.

“Between 2010 and 2012, we started seeing a very big uptick in the number of 501(c)(4) applications we were receiving,” she said. “It more than doubled.”

IRS officials did not return requests for comment about the discrepancy in how they accounted for their actions. Since her comments, both Democrats and Republicans have condemned the procedures. The House Ways and Means Committee is scheduled to question Mr. Miller at a hearing on Friday, and the Justice Department is conducting an investigation of the agency for any possible criminal actions related to these cases.

In the IRS’s official response to the inspector general’s audit findings also cites that surge when explaining why agents needed to centralize these applications.

The letter, written by Joseph Grant, acting commissioner for tax-exempt and government entities at the IRS, said the agency’s review was also motivated by “numerous referrals from the public, media, watchdog groups, and members of Congress alleging that specific section-501(c)(4) organizations were engaged in political campaign activity to an impermissible extent.”

Paul Streckfus, publisher of EO Tax Journal and a former IRS employee who reviewed tax-exemption applications, said he believes that pressure from those referrals caused the IRS to start using the criteria that have gotten it in trouble.

“It wasn’t so much the number of applications but the complexity,” Mr. Streckfus said.

Typical applications from advocacy groups submitted before 2010 had never involved such a massive grass-roots political network like the Tea Party, which advocates for smaller government, he says.

“The initial problem wasn’t that there was so many but that there wasn’t any guidance on how to deal with these cases,” he said.

Seeking Neutrality

David French, senior counsel for the American Center for Law and Justice, which represents 27 Tea Party groups that were singled out, said the IRS is clearly on record as citing the increase as a reason for its scrutiny.

“In fact, the number of 501(c)(4) applications dropped between 2009 and 2010, when the IRS began its unconstitutional targeting. That’s plain from the IG report,” Mr. French said. “Even if applications did increase—as they eventually did—the solution is to create viewpoint neutral, constitutionally appropriate criteria for evaluation, not to implement ideological screening.”

Says Mr. Streckfus: IRS officials “have a lot to answer for.”

http://philanthropy.com/article/IRS-Rationale-for-Tea-Party/139277/

Reports: IRS Spared Liberal Groups as Tea Party Languished, More Conservative Orgs Targeted Than First Thought

Remember what we were told when this explosive story first broke less than a week ago?  The IRS official in charge of tax exemptions for organizations saidthe improper methods employed within her division were executed by "low level workers" in Cincinnati who weren't motivated by "political bias," and impacted roughly 75 organizations?  Wrong, wrong and wrong:  

"Low Level" - Officials within the highest echelons of the agency were aware of the inappropriate targeting, including the last two commissioners -- at least one of whom appears to havemisled Congress on this very question.  Now Politico reports that Lerner herselfsent at least one of the probing letters to an Ohio-based conservative group.  

The director of the Internal Revenue Service division under fire for singling out conservative groups sent a 2012 letter under her name to one such group, POLITICO has learned. The March 2012 letter was sent to the Ohio-based American Patriots Against Government Excess (American PAGE) under the name of Lois Lerner, the director of the Exempt Organizations Division...at the time of the letter, the group was in the midst of the application process for tax-exempt nonprofit status — a process that would stretch for nearly three years and involve queries for detailed information on its social media activity, its organizational set-up, bylaws, membership and interactions with political officials. The letter threatened to close American PAGE’s case file unless additional information was received within 60 days.

These burdensome requests were apparently designed to bury the victimized groups in paperwork.  Carol reported last night that some 58 percent of these applicants were asked for unnecessary information and data, according to the Inspector General's review.  Some inquiries asked for screenshots of organizations' Facebook posts and even lists of what books (!) its members were reading.   

"No Political Bias" - This claim was laughable on its face from the start, in light of the agency's surreal criteria for added scrutiny and the "red flag" words and phrases that triggered investigations.  Now add to the mix this scoop from USA Today:

In February 2010, the Champaign Tea Party in Illinois received approval of its tax-exempt status from the IRS in 90 days, no questions asked. That was the month before the Internal Revenue Service started singling out Tea Party groups for special treatment. There wouldn't be another Tea Party application approved for 27 months. In that time, the IRS approved perhaps dozens of applications from similar liberal and progressive groups, a USA TODAY review of IRS data shows. As applications from conservative groups sat in limbo, groups with liberal-sounding names had their applications approved in as little as nine months. With names including words like "Progress" or "Progressive," the liberal groups applied for the same tax status and were engaged in the same kinds of activities as the conservative groups.

Lerner also reportedly fast-tracked an approval for a foundation operated by President Obama's half brother, taking the extraordinary step of granting it retroactive tax-free status.

"Seventy-five organizations effected" - That number almost immediately swelled to 300.  Now it's closer to 500:

The IRS targeting of conservative groups is far broader than first reported, with nearly 500 organizations singled out for additional scrutiny, according to two lawmakers briefed by the agency.  IRS officials claimed on Friday that roughly 300 groups received additional scrutiny. Reps. Darrell Issa, R-Calif., and Jim Jordan, R-Ohio, said Tuesday that the number has actually risen to 471. Further, they said it is "unclear" whether Tea Party and other conservative groups are being targeted to this day.

We have an answer to that question now, too.  Here's Carol again, quoting the cover letter from the IG's findings, dated yesterday: "A substantial number of applications have been under review, some for more than three years and through two election cycles, and remain open."  Lest you even ask, nobody involved in this scheme has been disciplined (yet); just the opposite, in fact:

from #IRS briefing to Hill: no employees involved in inappropriate scrutiny of conservative groups disciplined, one was promoted.

— John King (@JohnKingCNN) May 14, 2013

More allegations of IRS impropriety are cropping up across the country, andsimilar questions are now being raised about political favoritism within the EPA's FOIA request process: "Conservative groups seeking information from the Environmental Protection Agency have been routinely hindered by fees normally waived for media and watchdog groups, while fees for more than 90 percent of requests from green groups were waived, according to requests reviewed by the Competitive Enterprise Institute."  This steady drumbeat of ugliness was enough to prompt NBC's Nightly News to kick off its broadcast with a Nixon comparison last evening, and for Jonathan Alter to pronounce the administration's crisis management efforts "disastrous:"

It's rigorous work keeping pace with all of these scandals, as House Democratic Whip Steny Hoyer discovered earlier this week, but we're doing our best nonetheless.  On the IRS targeting issue, we covered a lot of groundyesterday and earlier, but the "fun" never ceases.  It will come as a surprise to no one that IRS employees lean heavily Democratic.  Their livelihoods depend on the existence of big, complicated government, so of course they'd vote blue.  In the 2012 cycle, during which their agency's abusive methods were in place, IRS employees donated to Barack Obama over Mitt Romney bymore than a 2-to-1 margin.  What did the political contribution break-down look like in Cincinnati -- where the tax exemption office is based?  Cough:

The Cincinnati office where the political targeting took place is much more partisan, judging by FEC filings. More than 75 percent of the campaign contributions from that office in the past three elections went to Democrats.In 2012, every donation traceable to employees at that office went to either President Obama or liberal Democratic Sen. Sherrod Brown of Ohio.

One. Hundred. Percent. The office's director is an Obama donor, too.  The undue logistical hoops through which conservative groups were forced to leap are being document left and right; this one's especially egregious.  Even as the president expresses (feigns?) outrage over the IRS' victimization of groups he's demonized throughout his presidency, and even after the IRS admitted wrongdoing, some liberals are still trying to justify the agency's actions.  Some say the Tea Party deserved it because they're racist terrorists; others say their brought it on themselves through their "persecution complex" and attempts to abide by the law, or something.  Meanwhile, Fox 19 in Cincinnati explored the significant local angle to this story and mined this juicy quote, which further eviscerates the IRS' "it was basically just two local guys" fable:

http://townhall.com/tipsheet/guybenson/2013/05/15/reports-irs-spared-liberal-groups-as-tea-party-languished-more-conservative-orgs-targeted-than-first-thought-n1596864

These four IRS workers claim "they simply did what their bosses ordered". Keep in mind, as FOX19 reported on Tuesday, the report by the Office of Inspector General states that senior IRS officials knew agents were targeting Tea Party groups as early as 2011.

One more piece of the hierarchy puzzle, via the Wall Street Journal:  "The IRS is many things, but 'independent' isn't one of them. It is formally part of the Treasury Department and is headed by the Commissioner of Internal Revenue, who is appointed by the President. The Commissioner is accountable to the President reporting through the Treasury Secretary."  So much for all that "totally independent" pablum we've been spoon-fed in recent days.

http://townhall.com/tipsheet/guybenson/2013/05/16/irs-scandal-lowlevel-cincinnati-workers-say-they-simply-followed-bosses-orders-n1598023

Oops: IRS’s rationale for scrutinizing tea partiers debunked by nonprofit application data

Good work by the Chronicle of Philanthropy, although we could have guessed that this was the case. Here’s what Lois Lerner said in her initial statement last week copping to the agency’s malfeasance:

“We get about 60,000 applications for tax exemption every year, most of them are 501(c)(3) organizations. But between 2010 and 2012 we started seeing a very big uptick in the number of 501(c)(4) applications we were receiving and many of these organizations applying more than doubled, about 1500 in 2010 and over 3400 in 2012. So we saw a big increase in these kind of applications, many of which indicated that they were going to be involved in advocacy work.

That kinda sorta made sense the day she said it, because at the time we thought the IRS hadn’t started scrutinizing tea partiers until 2012. Then we found out they were doing it in 2011, and then we found out they were doing it in 2010. The further back you push the timeline, the less coherent the “big application surge between 2010 and 2012″ defense becomes. The Chronicle administers the coup de grace:

Both Steven Miller, the agency’s acting commissioner until he stepped down Wednesday, and Lois Lerner, director of the agency’s exempt-organization division, have said over the past week that IRS officials started the scrutiny after observing a surge in applications for status as 501(c)(4) “social welfare” groups. Both officials cited an increase from about 1,500 applications in 2010 and to nearly 3,500 in 2012. President Obama ask Mr. Miller to resign on Wednesday.

The scrutiny began, however, in March 2010, before an uptick could have been observed, according to data contained in the audit released Tuesday from the Treasury Department’s inspector general for tax administration…

According to the audit, 1,735 groups applied for 501(c)(4) exemption for the federal fiscal year that ended September 30, 2010—six months after the IRS began its scrutiny. That was down slightlyfrom 1,751 the prior year…

IRS officials did not return requests for comment about the discrepancy in how they accounted for their actions.

A former IRS employee interviewed by the Chronicle theorizes that it wasn’t the volume that gave the IRS headaches but the complexity involved in learning on the fly how to scrutinize a new grassroots network like the tea party for 501(c)(4) compliance. I can sort of buy that as an explanation for delays on the first few applications, but most of these groups look alike. The learning curve for IRS analysts should have been sudden and steep. Why did the delays and extra attention persist for years?

By the way, in case you’re updating your scandal meme scorecard, we’ve now moved on from “Obama’s passive and disinterested, but certainly not culpable” to out-and-out assertions that the IRS was completely in the right here, despite their (and O’s) acknowledgment of their wrongdoing. MKH was on that last night, but here’s Scary Larry from Wednesday evening’s MSNBC broadcast proving he’s the most progressive progressive of them all. I’ll leave you with this from HuffPo’s business editor, who felt moved to opine in favor of these fine, hard-working public servants:

The Tea Party stands for many things, but a big part of its message is that sending money to Washington amounts to the perpetuation of a dangerous welfare state that’s intent on turning America into a helpless land where our lone skill is filling out the forms to go on the dole.

Isn’t it reasonable to assume that people who hold such beliefs might feel additional motivation to pursue grey areas and loopholes at tax time? Wouldn’t the people who oversee federal coffers have been derelict had they not at least had a good look?