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[The IRS], 501(c)(4)'s, and Political Activity
Hamurabi
MiamiRegistered User regular
MiamiRegistered User regular
So recently there's been much ado about the Cincinnati office of the Internal Revenue Service using some very specific keywords to identify groups for additional scrutiny when it came to applications for tax-exempt status.
Here is a quick Wikipedia breakdown of what exactly a 501(c)(4) organization is:
So whaddaya think, D&D?
NPR wrote:Scintillating isn't how you'd describe the report issued by the on the Internal Revenue Service's targeting of conservative groups.
It was written, after all, by government bureaucrats for government bureaucrats. Enough said.
Still, peel back the careful, cautious and colorless language and there are some eyebrow-raising tidbits in the report that give a sense of the dysfunction in the tax-exempt unit that allowed the controversial targeting to occur.
Here are 10 of them:
- The IG report was our first source without skin in the game (like IRS and White House officials) to report that agency employees said no outsiders influenced them to target conservative applicants. (Page 7)
- The IRS employees responsible for applying greater scrutiny to groups with "Tea Party" or "Patriots" in their names were evidently incorrigible. After their boss told them to cease and desist they did, temporarily. Then they went back to doing their own thing, which meant using inappropriate filters to select applicants for additional review. (Page 7)
- At one point, in an agency of 106,000 workers, just one, presumably very overwhelmed, bureaucrat had the job of reviewing applications for tax-exempt status that were selected for greater scrutiny because the information raised questions about their political activities. (Page 5, Footnote 14)
- The inspector general says "it's considering" following up its first evaluation with a deeper dive into exactly how the IRS unit it studied monitors the political activities of the "social welfare" groups it grants tax-exempt status. It wants to make sure the unit knows when such organizations cross the line to engage in too much politics. (Page 4, Footnote 12)
- Even employees in the IRS's tax-exempt unit were stupefied by the rules about which they had to make decisions. They were so confused, their bosses decided they needed hands-on training — after which an absurdly low and slow 2 percent application approval rate soared. Given the political sensitivity of this part of the IRS's work, you might have expected the training to happen sooner. The problems remain, however, according to the IG, and the guidance the workers labor under is vague at best. (Page 14)
- Some applications for tax-exempt status were, astonishingly, under review for as long as three years. What's even more remarkable is that even though the law gives applicants the right to sue the IRS if they failed to get a conclusive response from the agency within 270 days, none did, at least not during the two years of the IG's investigation. Maybe Americans aren't as litigious as they're often given credit for being. (Page 16)
- Even after the IG pointed out the error of their ways, IRS officials were, to some extent, still not seeing things as clearly as the IG thought they should. For instance, IRS officials said issues the IG raised had been resolved. The IG flatly contradicted them, saying no, they hadn't been fixed. (Opening memo)
- Some applications from groups with evidence of substantial political activity weren't forwarded to the team that had the task of giving applications extra scrutiny. Others that lacked evidence of significant political activity weren't sent to the IRS review team for further investigation. (Pages 9-10)
- IRS workers must watch a lot of TV cop dramas: They described their list of names to watch for as the "be on the lookout for" or BOLO list. (Page 6)
- When the agency asked for additional information — information the IG ultimately deemed to be irrelevant to the applications in question — the IRS would ask applicants to meet their requests within three weeks even though the IRS had essentially sat on some of the applications for more than a year. That's what New Yorkers would call chutzpah. (Page 18)
So my questions in all this, as someone who isn't intimately familiar with tax laws vis-a-vis organizations or the specific ins and outs of 501(c)(4) status-- and frankly I've made this thread for discussion but mainly to learn more about the subject from People Who Know Shit -- are the following...501(c)(4) organizations are generally civic leagues and other corporations operated exclusively for the promotion of "social welfare", such as civics and civics issues, or local associations of employees with membership limited to a designated company or people in a particular municipality or neighborhood, and with net earnings devoted exclusively to charitable, educational, or recreational purposes.[33] 501(c)(4) organizations may lobby for legislation, and unlike 501(c)(3) organizations they may also participate in political campaigns and elections, as long as its primary activity is the promotion of social welfare.[34] The tax exemption for 501(c)(4) organizations applies to most of their operations, but contributions may be subject to gift tax, and income spent on political activities - generally the advocacy of a particular candidate in an election - is taxable.[35]
Contributions to 501(c)(4) organizations are usually not deductible as charitable contributions for U.S. federal income tax, with a few exceptions.[36] 501(c)(4) organizations are not required to disclose their donors publicly.[37]
The lack of disclosure has led to extensive use of the 501(c)(4) provisions for organizations that are actively involved in lobbying, and has become controversial.[38][39] Criticized as "dark money," spending from these organizations on political TV ads has exceeded spending from Super PACs.[40][41]
The law allows Section 501(c)(4) organizations to self-declare and hold themselves out as tax-exempt; they do not have to obtain any approval from the Internal Revenue Service, though they may.[42]
- Isn't it the job of the IRS to scrutinize all organizations claiming tax-exempt status? That they were using keywords like "patriot" and "tea party" and "Constitution" strikes me as an heuristic device to try and keep pace with the enormous proliferation of Tea Party-affiliated organizations -- who would probably be very likely to engage in overtly political activity beyond the bounds permissible in the 501(c)(4) classification -- during 2009 and 2010. I mean, I guess this kind of comes cross as unabashedly partisan on my part, and I really don't mean it to; I'd like to think that if the political tables were turned, and the IRS under the Bush administration were using keywords like "progress" and "social justice" or something to try and find people not complying with the requirements for 501(c)(4) privilege, that I'd be okay with that as well.
- Why are ostensibly non-partisan professional bureaucrats being linked to the Office of the President? I mean I get that the buck stops with him, but if you peel back the headlines just a little... I presume these people got their jobs long before January 2009, and probably before Obama even considered a Presidential run. The bureaucracy is inherently non-partisan -- though obviously their theoretical impartiality doesn't always bear out in the real world.
- Someone explained to me briefly the basics of 501(c)(4) classification yesterday... and it strikes me as way too vague and open to free interpretation and fraud. Why do we draw the line at a vague definition of "some political activity?" They should either all be tax-exempt, or none of them should be, imo.
- The self-reporting standards for 501(c)(4) seem quite arbitrary. We're supposed to rely on people literally writing book reports on their educational materials to determine their tax-exempt status?
So whaddaya think, D&D?
Hamurabi on
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Meanwhile, a Democratic action fund was.
As to a couple of your questions, it is being linked to the Office of the President because Congressional Republicans are desperate for a scandal so that they can make people hate the president. Also remember that 2014 is an election year, and if they can get their base angry and Obama's base sad then they'll win big. Just like they did in 2010.
And a lot of the problems go back to Citizens United, Super PACs, and the relationship between money and politics more generally.
So I guess what I'm saying is ABOLISH THE DONOR SYSTEM NOW
I mean, I knew this answer, but I'm more making it clear that afaik there is no actual basis for doing so.
also seems to think "additional scrutiny" meant "auditing"
So this might have legs with voters because details are hard
To be fair, the details of this are imo legitimately pretty obscure -- which is why I'm going out of my way to look up 501(c)(4) regulation and to get other people's input. This is like 150% more effort than regular people have the time for. If their media isn't looking any further than the admittedly bad optics of 'IRS screens for organizations with Tea Party-sounding names for additional scrutiny'... then yeah, people will just assume partisan misconduct.
it's pretty impossible to connect this to Obama without willful deception, which the media seems to be delightfully embracing
Is it not possible that the Democratic action fund, well, didn't meet the requirements of a 501c4?
And if the Republican SuperPACs (since that's what I understand most of these 501c4s to be) had their approval unnecessarily delayed until after the elections I don't think you can just shrug it off like nothing happened.
It seems to me that when the IRS came clean about this they would have mentioned that they were also targeting left-wing groups to downplay the partisan optics, but hey, maybe they are just that incompetent.
I assume that because their status was denied they indeed did not meet the requirements.
since underfunding, understaffing, and incompetence were what made this happen, I think you may be on to something.
For international news in particular, but this is a complaint you can level at mainstream news as well.
Agreed in general. In this case, though, I think Stewart hit the nail on the head. The facts don't matter. This incident is justification for the right wing persecution complex for the next ten freaking years. If they can be "outraged" over the "lack of outrage over Benghazi!", then you can bet your ass they'll be ranting about IRS persecution till 2025.
Which is that Obama is the antichrist, as proven by 501(c)(4) persecution.
This IRS thing will get more legs and it has no connection to the office of the president or the democratic party, this saddens me
Doesn't this only further the Tea Party's case?
Not only can they argue that their cases were unfairly targeted because of politics, but that they were even less likely than other groups to have filed improperly so the IRS was flat out looking in the wrong place.
I mean, if 0 in 100 Tea Party applications were found to be improperly filed but 1 in 3 Democratic applications were found to be improperly filed, that looks pretty bad for the Democrats...
I don't see how it furthers anything other than the point that this wasn't some Machiavelli dictate from the Oval Office.
A lot of the Benghazi inconsistencies seem to stem the CAI sticking their nose in the PR. They're the ones that edited Rice's statements.
Well, now it's a conspiracy so that those fraudulent Democrats could avoid scrutiny and wharblygharblsecretkenyanmuslim.
Man, who knows with those guys - I'm sure they'll find something. But saying the IRS also reviewed a grand total of 3 Democratic applications out of the 7357 total applications between 2010-2012 doesn't particularly make the case for the office being less biased.
I'd say yes, this furthers the Tea Party's cause, in the sense that almost anything that happens ever can be twisted into something that furthers the Tea Party's cause. They are basically the raven paradox in partisan-politics form.
A blogger for the New Yorker had some interesting things to say about this. http://www.newyorker.com/online/blogs/johncassidy/2013/05/the-irs-and-the-tea-party-where-is-the-scandal.html
Perhaps most interestingly --
1) 501c4s are orginizations that are allowed to lobby, but can't be just about lobbying and can have anonymous donours.
Really think about that for a minute. How the fuck is the IRS supposed to figure anything out here? And that's basically the major issue here.
2) This tracks back to a general issue with US government agencies here these days. Congress hasn't done shit for a long time now on many legal issues, leaving agencies to try and figure out wtf to do based on other criteria they can set for themselves. There's no direction from Congress but they are scared of setting formal rules for themselves lest they get hammered on from above so many of them are running on reams of informal rules they sort of set for themselves.
Basically, it's a fucking mess.
To go back to the 501c4 issue, Citizens United ruling came down but Congress never passed anything related to it so the IRS is left trying to use old rules to deal with new capabilities the SCOTUS gave the things the IRS regulates.
(On some level, you could consider this one of the major problems with judicial review. The judiciary can only set policy in the broadest and least useful sense much of the time and can't force the legislative branch to clean that shit up)
Also, straight from the horse's mouth:
QEDMF xbl: PantsB G+
So explicitly political organizations were filing as agricultural ones?
Well, the Tea Party does excel in manufacturing manure.
What somebody should have done is sat down and created a list of watch-words or criteria that would ostensibly target both left- and right-wing groups. So for every "tea party" or "fight taxation" or whatever, also have a "progressive" or "social justice" or whatever. If the problem is that they were suddenly seeing hundreds of new groups forming and needed to develop some criteria, and those groups just happened to be almost all tea party groups, then the system would have probably hit the same proportions of groups while also appearing even-handed.
As it is, even if they technically did nothing untoward, this looks, at first glance, like a cop deliberately pulling over only black people and offering as his defense that black people are committing more traffic crimes.
By that metric the entire screening process was a failure since to date, not a single application delayed has been denied. Not just the tea party applications, but none of the applications have been denied. However, according to the IG report, it was a very effective criteria, since the majority of tea party applications should have been sent for review.
I agree with you in principle about what is wrong with this situation, but what I haven't seen is any proof that the bolded part is happening. No one has given statistics that say there was more conservative groups reviewed than progressive groups. That isn't a thing. All tea party applications were reviewed though, which I would agree would be unequivocally wrong, if not for the fact that the majority of them deserved to be reviewed.
As I stated earlier, it's one thing if you are automatically flagging tea party groups for review, it's quite another if you use that criteria to search for groups that may need additional review. While I do condemn the automatic flagging that was going on, I am simultaneously not that upset because almost all of them would have been reviewed anyway.
I would argue that, on a high level, this is true. Given groups like crossroads are 501(c)(4)s, and the huge explosion of applications in 2011 and 2012 (it's important to note there was no huge explosion in applications when these new troublesome criteria were devised) it's clear that people see this as a loophole to be exploited and that many groups that are applying ought to have been rejected. Hell, maybe the whole category shouldn't exist.
But you can't take that and then selectively apply it to conservative groups.
This reminds me a little bit of the joke 'the surgery was a success, but the patient died'.
The arguments in defense of using those criteria generally boil down to:
they had a huge influx of applications (which is not true) and rushed for time, decided to use a shorthand to screen out the ones that were overtly political.
Since they didn't find any applications to be denied using their conservative key word shorthand filter, I'd say that heuristic was a clear failure. In fact, it probably diverted resources from the groups that did need to be denied as I have to think any group planning to abuse this would be smart enough to not have an overtly political name that might invite extra scrutiny. (Crossroads sounds nice and generic, for example) You can't tell me that NO GROUPS in this 3 year period needed to be denied. (If you do, then yes, the whole screening process is a failure). Therefore, the IRS is clearly delaying the wrong groups entirely.
So not only was the shorthand 'tea party/patriot/constitution = overtly political group' bad from a discrimination standpoint, it was bad from an effectiveness stand point (as should have been obvious - don't rely on groups planning to do illegal things to tell you they are going to do illegal things in the name of their organization)
PSN: Vorpallion Twitch: Vorpallion
I can pretty much agree with all of that. I think the actual harm done by the situation is mild, as I think you point out, but that the principle of the thing "don't automatically flag groups for review based on political orientation" is at least somewhat important.
My bolded part was hyperbole to respond to the 100% statement. I don't believe anything close to 99% of conservative groups were delayed. Apparently literally all tea party groups were delayed but not all conservative groups are tea party groups. I also have no data on what proportion of other groups were delayed (although it appears to be low) but I imagine it's quite a bit higher than 1%.
I will say that if applications named after a certain political leaning are something like 10% of the total and 100% of them get delayed, I am going to be extremely suspicious, in general. I would need to see very, very rigorous explanations of why those applications deserved to be reviewed at such a disparate rate, independent of their political affiliation, before my concerns were met.
I would not take kindly to "Oh yeah if we didn't like their name we threw them in the 'delay for 2-3 years' pile" response which seems to have basically been what was happening here.
Even if, upon a more sober and judicious application of standards, many of them wound up in the delay pile in any case. (I would argue 2-3 years delay is absurd anyway you look at it. Applications need to be denied or approved in a timely manner. Delaying for 2-3 years is essentially a denial that keeps them from re-applying. It's actually worse than a denial. I could easily see that 'yes, this group deserved some scrutiny, but not 2-3 years worth of scrutiny')
PSN: Vorpallion Twitch: Vorpallion
It's better to be denied than to be jacked off for literally years under the threat of legal action.
Someone did. Management spotted what was going on and stopped it and changed the criteria to be more general.
It's just, apparently, those criteria were too broad so the people in question went back to their criteria, which management found out about again and stopped again and that's basically where we are now.
Only if your goal is to influence a specific election year.
"Hey, our river is polluted and we'd like to do something about it"
"Awesome, we'll slot you right into our 3 year review process"
"Wait, what?"
"And I'll need everything anyone you know posted on facebook, ever"
And then we wonder why ordinary people aren't more involved politically.
PSN: Vorpallion Twitch: Vorpallion
And if you ever get around to reading the report to become informed, you'll see that the delays were considered a very bad thing and need to be fixed.
Now, now, that'd get in the way of making a point.
I agree that the wholesale review of anything that mentioned tea party was almost certainly a bad idea, and possibly illegal. It's unclear if it is definitely illegal since they aren't defacto denying them status, just flagging them for review. Which is then coupled with their terrible ability to process the reviews to pseudo deny a bunch of applications. Which is then somewhat mitigated by the fact that you don't even have to apply for this status in the first place.
As for the legality of the delay, the IG report indicates that any application delayed for longer than 270 days has the right to sue for something. It's not really clear if they are sueing for an immediate judgement or for monetary compensation, or something else, but apparently bad shit happens after 270 days. Although none of the 39 or so applications that were past that point had opted to go that route.
-conservative groups were wrongly selected for extra scrutiny
-that scrutiny was wrongly and excessively intrusive and burdensome
You can see how that would perfectly fan the flames of 'the IRS is out to get us'.
If the extra scrutiny you receive is of an appropriate level, it doesn't really matter if you got selected for it incorrectly. You supply the needed information and move on with your life. But if the scrutiny is clearly over the line and asking questions it shouldn't and taking years and years - you are going to think you are being harassed - particularly if the people selected for this extra scrutiny all fall into the same group.
We know that conservative groups were wrongly chosen for extra scrutiny via the filter. We know there were other methods of selecting groups for extra scrutiny besides the tea party filter. I don't know that there's any evidence that *just* conservative groups received the extra harsh level of scrutiny. We know lots of them did. It's entirely possible all groups chosen for extra scrutiny had to wait too long. Or a random sampling of them. Do we know of any progressive groups that had to wait 2-3 years for their application to be granted?
Also, since I agree that the delays were a very bad thing that need to be fixed, it's obvious I've read the report and AManFromEarth has not. I think you are directing your advice to the wrong quarter.
PSN: Vorpallion Twitch: Vorpallion