All groups, IRS should follow tax rules

Bill Knight column for Thurs., Fri., or Sat., July 11, 12 or 13

Tax collectors were so unpopular for so long it took the Son of God to demonstrate that it was alright to forgive them, and who knows whether some modern St. Matthew works at the Internal Revenue Service. However, it’s obvious many politicians are in no forgiving mood when it comes to the prolonged attention to IRS scrutiny of groups applying for charity status.

In downstate Illinois, U.S. Rep. Aaron Schock (R-Peoria) – a member of the powerful House Ways and Means Committee – continues to play an active role in Congress’ ongoing investigation of the IRS, which he says targeted conservative organizations, including pro-life and religious groups, “based on their beliefs and political persuasions.”

In contrast, Schock noted at the committee’s June hearing that the non-profit Organizing for Action – a group that raised millions of dollars for its mission to support the agenda of President Obama – was approved.

Schock has a point. But he also misses some points.

First, no application was denied, according to veteran journalist David Cay Johnston, president of Investigative Reporters & Editors and a longtime New York Times staffer.

Second, “Congress requires the IRS to review every application for tax-exempt status to weed out organizations that are partisan, political or that generate private gain,” Johnston wrote, “– since 1913. [And] a 1963 federal appeals court ruled that to qualify for tax exemption under 501(c)(4), ‘the organization must be a community movement designed to accomplish community ends’.”

Next, such inquiries weren’t confined to conservatives. Progressive groups and even journalism organizations also report being targeted, with applications taking more than a year and intrusive questions being asked, which took time and resources to answer. Non-profit journalism outfits also questioned or delayed included the Chicago News Cooperative, although notorious right-wing provocateur James O’Keefe’s Project Veritas was quickly OK’d. (The chart above shows that Treasury's report demonstrates that two-thirds of exempt organizations examined were not conservative.)

The IRS has been criticized for pursuing conservative applicants for tax-exempt status, and in May it conceded that agents had improperly targeted Tea Party and other conservative groups for extra examinations when they applied for tax-exempt status during the 2010 and 2012 elections. Acting IRS Commissioner Steven Miller was forced to resign and Joseph Grant, from the agency’s tax-exempt and government-entities division, was forced to retire.

J. Russell George, the Treasury Department’s Inspector General for Tax Administration, audited the IRS’ policy and procedures, but his report was incomplete, according to U.S. Rep. Sander Levin (D-Mich.).

“There is increasing evidence that the May 14 audit was fundamentally flawed,” said Levin, the top Democrat on Ways and Means.

Indeed, IRS agents were instructed to “be on the lookout” for certain revealing words, including “Tea Party,” “9/12 Project” and Patriots,” but also “Progressive,” “Occupy” and “Medical Marijuana.”

The IRS was screening groups’ applications to determine their level of political activity. IRS regulations say tax-exempt social welfare organizations may not have political activity as their main mission. Doing so abuses the tax-exempt status and cheats taxpayers.

Further, all such groups opened themselves up to government examination by applying for the benefits of a 501(c)(4) social welfare organization, a tax status that lets them take unlimited amounts of money, keep contributors secret and pay no taxes – again, on the condition that politics not be the main reason they exist.

Applicants know they aren’t supposed to engage in politics, yet some – whether Organizing for Change or a Tea Party group – did so, or wanted to, anyway.

Others were subject to increased attention because their interests seemed political, if not campaign-oriented. For example, the liberal Catholics United group was asked to provide copies of materials they planned to distribute and faced seven years of delays. Progress Missouri endured a wait of more than a year for the IRS to approve its tax-exempt status, asking many questions about the group’s activities.

Organizing for Action sure seems to violate that restriction on political activity, but so do Republican strategist Karl Rove’s Crossroads GPS, which reportedly spent almost $71 million opposing Democrats during the 2012 campaign, and the conservative American Action Network, which spent $30 million against Democratic candidates in the 2010 and 2012 elections, according to the nonpartisan Center for Public Integrity. They’re both 501(c)(4) social welfare groups, the IRS decided.

Charities are great and should be helped in their social-welfare missions by letting them escape taxes other institutions pay. But tax agents should check out ALL applicants. After all, some are just Political Action Committees masquerading as social welfare organizations.

Another choice is to eliminate all such quasi-political groups from such charity status: left, right and center.

[PICTURED: Chart "Exempt Organizations function potential political case tracking sheet as of May 31, 2012" from Treasury Dept. report]