In defense of the IRS

What this ruckus is really all about

IRS w haloI never intended to go political in this blog, and I certainly never thought I’d see that day I’d be defending the United States Internal Revenue Service. But I can’t sit still and see the IRS pilloried in the press when the current outrage is a big smokescreen for what’s actually going on. We all love to hate the IRS, but in the kerfuffle over using Tea Party keywords to search for tax exemption abuse, the real issue has gotten swept under the rug, and I will explain what that is later below.

In the meantime, it’s safe to say that the IRS’s initial motive was understandable, even though they acted like Keystone Kops. While it was really dumb to instruct employees to search for specific politically loaded keywords, it wasn’t criminal, and I daresay there was no political bias intended.

We still don’t know whole story, but I’d like to think that the IRS was equally interested in going after left-wing groups and may have lacked the stand-out catch phrases to hone in on them. The facts aren’t in yet. The media have whipped this issue into a frenzy when hardly anyone seems to know what they’re talking about.

The process at issue is applying for tax exemption, which is a privilege rarely granted. Having experienced the application process for 501(c)(3) tax exemption for two different organizations, I can attest that it’s a lengthy and tedious ordeal, with a lot of forms to fill out and questions to answer, and it can take at least a year. Then once the status is granted, the organization is monitored on an ongoing basis. The IRS is entrusted with upholding the law, and I know from personal experience that the laws about tax-exempt status are complex and confusing.

I certainly don’t claim to be an expert on this subject, but I have done a little research on the Internet, and what I’ve come up with is a real eye-opener. I started at the site http://en.wikipedia.org/wiki/501%28c%29_organization#501.28c.29.284.29 and then checked the sources it referred to. Here’s the deal.

The category in question, 501(c)(4), is for groups organized exclusively for the purpose of promoting social welfare, and their net earnings may only be spent for charitable, educational, or recreational purposes. These groups must be primarily engaged in promoting the common good and general welfare of the people of the community. They are allowed to participate in political campaigns and elections as long as their primary activity is the promotion of social welfare. However, if they advocate for a particular candidate in an election, that money is taxable. They are not allowed to participate directly or indirectly or to intervene in political campaigns on behalf of or in opposition to any candidate for public office.

Now listen up, boys and girls, because here’s what’s at stake, and what the media should really be awfulizing about:  501(c)(4) organizations are not required to disclose the names of their donors. This loophole has led to extensive (ab)use of 501(c)(4) status by groups that are actively involved in lobbying. According to the Wikipedia site: “Criticized as ‘dark money’, spending from these organizations on political TV ads has exceeded spending from SuperPACs  — and the donations are tax-exempt! In 2012, these tax-exempt groups outspent SuperPACs by a ratio of 3 to 2. That’s what this whole deal is really about.

Obviously Congress has no interest in changing this law, any more than they want to abolish the filibuster, and as long as it remains on the books, we should be encouraging the IRS to be on everybody’s tail, whether the groups are on the right, left, or middle of the spectrum.

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  1. I just now did a Google search on “Super PACs” + “tax-exempt”. The link below is from a 2012 New York Times article estimating that tax-exempt 501(c)(4) groups outspent Super PACs by a ratio of 3 to 2.
    http://www.nytimes.com/2012/07/08/us/politics/groups-shield-political-gifts-of-businesses.html?pagewanted=all&_r=0