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IRS: Bureaucratic Blunder or Political Profiling
The IRS has a known history of scandalous behavior. With Nixon, Johnson, Hoover, Kennedy, and the FBI using the IRS to intimidate their enemies, it's no surprise that people have their eye on the IRS. Now under President Obama, they're at it again, which begs the question: bureaucratic blunder or political profiling?
THE 501(c)(4) loophole
From no politics to some politics...
In 1913, congress granted tax-free status to non-profit groups that operate "exclusively for the promotion of social welfare" that donate their earnings "exclusively to charitable, educational, or recreational purposes." In other words, NO POLITICS.
In 1959, the IRS defined operating "exclusively for the promotion of social welfare" as "primarily engaged in promoting in some way the common good and general welfare of the people of the community." Go figure!
This opened the door for non-profits into politics as long as it wasn't the primary goal of the organization.
From no corporate money to unlimited corporate money...
In 2010, the Supreme Court's landmark "Citizens United" decision cleared the way for corporations and labor unions to raise and spend unlimited sums of money, and register for tax-exempt status as a 501(c)(4).
Now, for the first time, corporations, unions and associations can raise and spend unlimited amounts of money on politics... anonymously, and tax-free.
The Perfect Storm
The 501(c)(4) loophole + with Citizens United + The rise of the Tea Party + The budget cuts at the IRS = The Perfect Storm.
"We are doing as best we can with a staff of 14 that used to be a staff of 32"
So, since 2010 there has been a huge influx of 501(c)(4) applications from conservative educational organizations that primarily focus on politics social welfare funded by anonymous concerned corporations citizens. The underfunded/understaffed liberal IRS flagged targeted political sounding conservative groups in order to stop fraud attack the President's enemies.
Liberal in WH + tax-free, anonymous, unlimited spending on (51% social welfare + 49% politics) = a whole lot of conservative applications taking advantage of a loophole.
Underfunded and understaffed, The IRS is tasked with determining if these groups are "primarily engaged" in social welfare or not (and they didn't fully understand the code themselves).
The IRS Blunder
So, 2 months after Citizens United, the IRS decided to start flagging politically sounding groups for further scrutiny. This was in anticipation of the extra burden brought on by the influx of faux conservative social welfare groups.
In an effort to save money, he said, the "safety valves" that had existed to move questionable or politically charged exemption applications to Washington were shut off, as part of "a rational allocation of scarce resources.
Flagging Criteria - taking referrals from the public, media, watchdog groups, and members of Congress, the IRS established various 'flags' to help weed out groups seeking to take advantage of the tax code:
296 cases were flagged:
No case has yet to be denied exemption. 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.
The IRS would then ask for Donor lists, volunteer lists, transcripts of speeches by their members, what their views towards Israel are, and lists of politicians the group has met with are demanded by the IRS or anything to determine "political engagement."
7 requests were deemed unnecessary:
DOUGLAS SHULMAN, Former U.S. Commissioner of Internal Revenue, and STEVEN MILLER, Former IRS Commissioner, claim ignorance and Lois Lerner, the head of the IRS division on tax-exempt organizations pleaded the fifth: "I have been advised by my counsel to assert my constitutional right not to testify or answer questions related to the subject manner of this hearing."
Makes one wonder what's really going on, especially given the...
IRS's Abusive History
Kennedy January 20, 1961 to November 22, 1963
Johnson November 22, 1963 to January 20, 1969
Nixon January 20, 1969 to August 9, 1974
J. Edgar Hoover May 10, 1924 to March 22, 1935