Morning Java: IRS Scandal? Really! How About Citizens United Scandal?

Enjoy while the caffeine kicks-in!!!! “The World As 100 People,”  to go along with your Sumatra,  Kopi Luwak Indonesian, Kenya AA, Tanzanian, French Roast, Kona Coast, ‘Black Ivory’ [Thai Elephant Dong],  Jamaica Blue Mountain, Ethiopian Yirgacheffe, Costa Rican, Espresso,  Moyobama Peruvian Organic, Indonesian Blend, Coffee Latte, Kauai Blend (often bitter), Colombian Red Lips, or your Folgers 100% Colombian. Coffees of the World

The issues surrounding the IRS and its “targeting” of conservative groups poses a bit of a dichotomy for me.  

First, I am not one who relishes government peeping at its citizenry unless that citizen has proven via their actions they are a direct threat to the greater society. All to often, we read or hear about a vile acts and wonder, “Now, why was that person not under arrest, or why was that person no being watched?”  I will grant backing away from my conviction regarding government scrutiny in that case and that case only.  In  fact, I found it most distasteful to read about the FBI’s involvement in the psychical “squashing” of the Occupy Wall Street movement, even though I knew physical manifestation of the movement would be very short-lived. The FBI must have infiltrated, spied upon, and guided local authorities in strategies to rid cities of the physical encampments.

As a liberal, rest assured I would be mighty upset if the IRS targeted groups that carried “liberal” titles. I will add, however  conservative groups generally choose identifiers that denote themselves as conservative. 

On a secondary basis, I recognize that there are times when dynamics place pressure points of systems and those systems need additional “propping-up”; for lack of a more expedient term. One such dynamic was the Citizens United SCOTUS Decision in 2010.  It should be noted that the Koch Brothers are major contributors to the founding of citizen’s United.  Do you think for one second the Koch Brothers have interest in so called, “social programs” regarding federal governance? Enough said on that point, for now. Post Citizens United the number of requests for 501 (c)(4) certification grew exponentially. despite Justice Alito’s consternation and mouthing, “that’s not true  at the President State of the Union Speech, the president’s words became prophetic.

Characteristics	501(c)3	501(c)4	527
Ability to engage in politics	Not supposed to engage in any political activities, though some voter registration activities are permitted	May engage in political activities, as long as these activities do not become their primary purpose	Politics is what 527s are *required* to do
Endorsing Candidates	CANNOT Endorse Candidates	CAN Endorse Candidates	CAN Endorse AND Field Candidates
Campaign Spending	Prohibited	Permitted but taxed	Required
Lobbying	Some lobbying	Substantial lobbying	No direct lobbying
General Political Advocacy (not related to legislation or the election of candidates.)	Yes, as an educational activity.)	Yes, provided it is not the primary activity of the organization	Yes
Contributions	Able to accept unlimited, tax-deductible donations	Able to accept unlimited, non tax-deductible donations	Able to accept limited (based on FEC regulations), non tax- deductible donations.
Donor Reporting	Donors kept anonymous.	Donors kept anonymous.	Donors are publicly reported.
Must apply with the IRS	YES	NO	YES

Outside the Beltway published the following analysis, and for me it seems very credible and laden with facts. 

The following chart, included in the IRS audit, demonstrates that in the wake of Citizens United, there was a marked increase (~40% a year) in the number of 501(c)4 applications being submitted to the IRS.

Let me note that this period—2010 to 2012—also saw the maturation of the Tea Party. And research into Tea Party communities shows that the accepted wisdom was that new Tea Party chapters should immediately file as 501(c)4 organizations. Ironically, of the three organization tax designations in question—501(c)3, 501(c)4, and 527—only 501(c)4 allows for a group to self-declare their status without first filing with the IRS. The advantage to filing is official recognition, which is only necessary if an outsider challenges the group’s 501(c)4 status. Otherwise, for all intents and purposes, the only thing required to operate as a 501(c)4 is to say that you‘re a 501(c)4. 

Getting back to the IRS scandal, the broader point I’m trying to make is that, whether intentional or not, the very structure of 501(c)4, combined with the Citizens United decision, and the rise of the Tea Party, unexpectedly transformed the 501(c)4 from simply being about social welfare to being about politics. And that this was, generally speaking, a relatively rapid change.The scenario so far is as follows.

We have Tax law written as far back as 1959 without modification for post Ronald Reagan 1980s GOP politics.

We have a selectively crafted SCOTUS heavily stacked with judicial activist by GOP presidents. Heck, the SCOTUS could have included the Neanderthal Robert Bork. Did you know Bork was Romney’s Chief Legal Advisers?

We have a Citizens United decision in favor of an organization the the Koch Brothers heavily support and fund.

We have  a Koch Brothers funded tea party replete with anti-government sycophants, armed  domestic terrorist brandishing weapons in public, racist signage and placards and a need for funding operations. As you know, people with people dislike two things about contributing. They generally do not want to be taxed, and in the case of political contributions they have no desire to have their names associated with their contributions. Thus, the circular and existential threat of Citizens United.

We have the coming 2011/2012 election campaigns with a green Citizens United light for secretive contributions.

What we really have is the smell of a rat!


I have read reports that progressive groups were also delayed in approval of certification. Moreover, there are reports not of one request was denied. They were to a point all approved.  

The IREHR, Institute for Research & Education on Human Rights published a detail piece on May 17th. The piece includes data related to certification denials. 

The Tea Party and the IRS “Scandal” The Actual Facts of the Case Excerpt A May 14 draft report by the Treasury Inspector General for Tax Administration found that none of the 296 questionable applicants had been denied, “For the 296 potential political cases we reviewed, as of December 17, 2012, 108 applications had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 cases were open from 206 to 1,138 calendar days (some crossing two election cycles).” (p. 14)  In fact, the only known 501(c)(4) applicant to recently have its status denied happens to be a progressive group: the Maine chapter of Emerge America, which trains Democratic women to run for office. Although the group did no electoral work, and didn’t participate in independent expenditure campaign activity either, its partisan nature disqualified it from being categorized as working for the “common good.” The Inspector General’s report found that in the “majority of cases, we agreed that the applications submitted included indications of significant political campaign intervention.” (p. 10).  In fact, only 91 of the 296, roughly 31%, of the applications reviewed for the report did not have “indications of significant political campaign intervention.” In other words, more than two thirds of those flagged for processing by a team of specialists had those indications.

Nation of Change published a piece on Monday of this week related to what some insist on calling a scandal.  The writer at Nation of Change questions, “Scandal or Hoax.“

William Boardman  (See permission statement at article end) Published: Monday 3 June 2013 What seems much stranger, but not as surprising as it should, is that so much of the media goes on reporting as fact the partisan political version of a story that never happened. Can’t Anyone Here Play This Game Straight? Almost everything you hear and read in the media about the current IRS “scandal” is based on deliberate falsification of basic facts.  Some might call it lying.   Here’s a reasonably typical media-framing of the IRS lie, from the usually careful and accurate Economist, posted May 23:  “Even before this month’s revelation that conservative political groups applying for 501(c)(4) status were being singled out for special scrutiny….”  You see this false framing of the IRS story across the media spectrum, from Info wars to ABC News and NBC News to the Economist to DemocracyNOW! (The latter on May 24:  “the scandal over the targeted vetting of right-wing groups…).    Even the usually reliable Wonkblog at the Washington Post doesn’t get the story right, apparently because it hasn’t read the relevant law.      An exception to this remarkable mental stampede in the wrong direction was Jeffrey Toobin (New Yorker, May 14) who wondered, “Did the I.R.S. actually do anything wrong?”  His answer started to put the story in reasonable perspective, with a focus on tax law and political money:  “…the scandal isn’t what’s illegal—it’s what’s legal. It’s what society chooses not to punish that tells us most about the prevailing ethical standards of the time.”  Anatomy of a False Narrative – Lying, Laziness, Partisanship, What?  How is it that the conventional framing is dishonest?  Here are some of the ways:   1.     It wasn’t a revelation.  All kinds of people were aware of the underlying problem, that 501(c)(4) tax status abuse had been going on since 1959, and that it took a quantum leap after 2011, when the Supreme Court’s Citizens United Decision opened the democratic process to money flooding that would be facilitated by the secrecy offered by the 501(c )(4) status.   2.     There were bi-partisan public hearings on the problem scheduled by the Senate well before the “scandal” broke.   Anyone could look it up.   3.     As soon as the story broke, Lawrence O’Donnell (MSNBC The Last Word) was reporting accurately on the issue, rooted in the difference between a law that says 501(c)(4) organizations should be “exclusively” for social welfare and a 1959 IRS regulation that says, with Orwellian authority, that “exclusively” is to be interpreted to mean “primarily.”   Too many reporters and others still do not get this, even though responsible research begins with these primary sources.   4.    No one was singled out.   That’s right, no one was singled out.  The problem with 501(c)(4) applications is that the IRS mustreview every one to see if the applicant qualifies for tax-exempt status.  Given the flood of applications from political groups of all sorts post-Citizens United, the IRS needed some way to make sure those applications were “primarily” for social welfare, even though political insiders knew that had been a joke for years (Karl Rove’s Crossroads GPS and MoveOn.org are both IRS-approved 501(c)(4) organizations, of which there are thousands – reportedly 97,382 in 2011).      5.     There is no reason within the law that any political organization should get a tax subsidy from American taxpayers.  That is allowable only under the IRS regulations put in place in 1959 under the Eisenhower administration.  And the Congress could fix this virtually overnight by restoring “primarily” to its original meaning in the law, “exclusively.”  Perhaps, the real scandal, and a bi-partisan one at that, is that that’s not what’s happening.  6.     No one was singled out.  The IRS at some level (that eventually included Lois Lerner) made a remarkably stupid, tone deaf, inept effort to identify applications that were more likely than others to be primarily political.   Looking for applications tagged “tea party” may have reflected the reality of an inordinate number of such applications, but it was really dumb.  Using the tag “party” not only would have done the job, but would have been wholly defensible, since no political party is eligible for public tax subsidy and secrecy for its donors.   7.     No one was singled out.  The IRS net for possibly political organizations caught some 300 applications.  Of these, no more than a third were “conservative” or “tea party” or “right-wing.”  The rest were something else, including “liberal” and “left-wing.”  None of the so-called conservative group applications were denied.  Some were delayed, deservedly so, but a group can function as a 501(c)(4) with an application pending, so it’s hard to see how much damage a delay would do, if any.    8.     At least some of the groups on the right were clearly partisan and perhaps broke the law.   The New York Times of May 26 reports in a story wrongly headlined “Groups Targeted by I.R.S. Tested Rules on Politics” describes several tax exempt groups that spent money on partisan activities.    9.     One of the groups, Emerge America, was granted 501(c)(4) status in 2006 in order to train women to run for elected office.  In 2012, when an IRS review showed that Emerge America was training only Democratic candidates, the IRS revoked the group’s tax-exempt status.     10. Another group calling itself “CVFC 501(c)(4)” on its application in 2010 gave its address as the same as “Combat Veterans for Congress PAC” (political action committee).   Perhaps PAC triggered a closer look.  While awaiting an IRS decision, CVFC spent almost $8,000 on radio ads for a Republican candidate.  CVFC omitted this expenditure from its 2010 tax return.  On a questionnaire asking if it had engaged directly or indirectly in political activity on behalf of a candidate, CVFC checked “NO.”  NBC News Reporting Achieves Incompetence and Partisanship  In a report on May 29, “Open Channel Investigative reporting from NBC News” (bylined Lisa Myers, Rich Gardella, Talesha Reynolds) starts with a flat-out false headline: “IRS higher-ups requested info on conservative groups, letters show.”   The story begins:  “Additional scrutiny of conservative organizations’ activities by the IRS did not solely originate in the agency’s Cincinnati office, with requests for information coming from other offices and often bearing the signatures of higher-ups at the agency….”    The letters don’t show that.  NBC provides two letters, and both come from and direct responses to the IRS Cincinnati office, although one letter also has an apparently hand-stamp signature for “Lois Lerner, Director, Exempt Organizations” and no address other than Cincinnati.  The letters comprise nine pages, of which five pages are form letters.  Each of the applicants also received a personal, two-page request for additional information to justify tax-exempt status.   The IRS asked Ohio Liberty Council Group in March 2012 to update a two year old filing, and to describe its planned activities, public events, membership recruitment, political activity, and lobbying – if any.     The IRS asked Linchpins of Liberty if they had adopted bylaws or chosen a board of directors. The IRS also wanted to know, among other things, about the organizations income and expenses, its loan agreements and other contracts, and whether its activities wound go beyond selling a book (“Linchpins of Liberty”) written by its president.   NBC fails to note that this isn’t a response to a relevant 501(c)(4) application, but the IRS answer on May 6 to an application for the more stringent 501(c)(3) tax-exempt status.   If You Hate Government, Do You Hate It More When It Does Due Diligence?    Nothing in these two letters suggests anything more than due diligence by the IRS in protecting public policy and assets.   The information in the story came to NBC mostly from attorneys representing the complaining groups.   NBC provides no reliable, independent support for the opinions of its biased sources, even though it reports those opinions as more or less fact.   The IRS story went off the tracks of fact the moment Lois Lerner planted a question with a reporter at an American Bar Association conference on May 10.  In answer to the reporter’s posing of Lerner’s question, Lerner answered this way, as reported by Associated Press (no transcript appears to be available):  “The Internal Revenue Service apologized Friday for what it acknowledged was ‘inappropriate’ targeting of conservative political groups during the 2012 election to see if they were violating their tax-exempt status.   “IRS agents singled out dozens of organizations for additional reviews because they included the words ‘tea party’ or ‘patriot’ in their exemption applications, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups. In some cases, groups were asked for lists of donors, which violates IRS policy in most cases, she said.”   For whatever reason, the AP makes the IRS apology institutional even though it comes from a mid-level IRS manager ratting out people she was supposed to be managing.  The news catches her superiors in the IRS, as well as the White House, completely off guard.    It also sets off a right-wing feeding frenzy, which the AP reports at length in the same story.  Somebody Needs to Give This Story a Little Perspective and Proportion  Only near the end of the story, in a clumsily written paragraph, does the AP reporter touch on the factual context for the news Lerner was breaking and in which she had been a central player:   “In all, about 300 groups were singled out for additional review, Lerner said. Of those, about a quarter were singled out because they had ‘tea party’ or ‘patriot’ somewhere in their applications.”   In other words, about 225 applications were not “political conservative groups, as AP had reported at the top of the story, and for which it has yet to issue a correction or an apology.    Given her unusual behavior over the past few years, it doesn’t seem all that strange that Lois Lerner has refused to answer questions in Congress, pleading the Fifth Amendment protection against self-incrimination, while refusing to resign from her $180,000-a-year job (she’s now on administrative leave).   What seems much stranger, but not as surprising as it should, is that so much of the media goes on reporting as fact the partisan political version of a story that never happened.    Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

The outrage against the (fake) IRS Scandal should have a focus directly on the parties who are espousing the perpetration of flack against the Obama Administration Vs. proper and necessary attention to meaning legislation.  If we want a good look at issues that warrant outrage, think of the time,. energy and waste funds associated with the House voted to defund ACORN. The community services organization has been defunct since it was attacked by Fox News, Breitbart Dot Com and every conservative in Congress. I believe ACORN shutdown operations three years ago. 

Let’s close this piece out with a basic syllogism regarding the “fake’ IRS issue.

Citizens United has provided opportunity for unlimited secret contributions to political campaigns. 

A.) The Koch Brothers are major contributors to Citizens United (The organization). 

B.) The Koch Brothers were (and are) Major contributors to the tea party, Freedom Works and others conservative political groups focused solely on strategy, planning and operations to  unseat the Obama Administration and fund future campaigns (2014 and 2016).

C.) Internal Revenue Service Tax Code 501 (c)(4) as shown in the table above allows secret contributions to certified organizations without taxation! 

D.) The number of request for 501 (c)(4) certification increased exponentially after Citizens United (2010). 

Major premise A:  The Koch Brothers are major contributors to Citizens United (The organization).

Major premise B:   The Koch Brothers were (and are) major contributors to the tea party, Freedom Works and others conservative political groups focused solely on strategy, planning and operations to  unseat the Obama Administration (e.g., winning elections).

Minor premise: The Koch Brothers are supporters of ultra conservative causes and contribute millions to conservative campaigns (state and national elections). The millions they contribute are subject to taxation unless hidden in a 501 (c)(4) organization. 

Conclusion: Conservative causes can be advanced via Koch Brothers’ contributions and billions from other secret contributors (especially if untaxed) if the contributions go through the 501 (c)(4) organization.

I posit the IRS was doing its job via deep questioning of organization (Both conservative and liberal) who appeared as seeking certification beyond the scope of the 1959 law, and organization buoyed by the secret contribution freedom of Citizens United.  Thus, the IRS looked to preserve the Union and integrity of our elections from organizations that were and are working to win the Oval Office and state elections.