Thursday, May 16, 2013

Some Important Context on the IRS Scandal

As we watch the IRS scandal unfold, some  very important context has been missing from the reporting.

These groups are organizing as educational organizations under Section 501(c)(4) which is for educational organizations and strictly limits political activity. 

It is completely appropriate and in keeping with enforcing the IRS code that the IRS screen applicants for tax exempt status to make sure they are organizing for a permitted tax exempt purpose. 

All these conservative groups and liberal groups are organized as educational groups, many improperly.

Bloomberg reported yesterday that at least 3 liberal groups received the same treatment (including disclosure of donor lists), and unlike the conservative groups, one liberal group had their non-profit status rejected and were forced to pay some taxes. 

There is no question that IRS non-profit status is being abused for political purposes and I think the IRS acted appropriately in screening so called tea party groups.  But the same scrutiny must be applied to liberal or Democratic leaning groups.

Nevertheless, the IRS needs to explain the point of many of it's questions such as asking for the disclosure of donor lists and questioning what issues are important to an applicant group.  There is certainly nothing wrong with a group seeking to educate the public on the bain or virtues of high taxes and I can't see how this is relevant to an IRS investigation into the purpose of an applicant organization.  Likewise, I think everyone will agree that political affiliation of officers and directors is probably not particularly probative of the purpose of the group. 

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