How the IRS Wasted Time Chasing the Tea Party
Business + Economy

How the IRS Wasted Time Chasing the Tea Party

REUTERS/Kevin Lamarque

The IRS has sparked outrage for flagging Tea Party-style groups that applied for tax-exempt status for special reviews.

An official apology did little to appease critics, who range from GOP lawmakers to President Obama himself.

“There is no place for it,” Obama said at a Monday news conference. “People have to be confident that they are applying the law in a nonpartisan way. … You don’t want the IRS ever being perceived to be biased and anything less than neutral in terms of how they operate.”

The fiasco detailed in a forthcoming inspector general’s report indicates how partisanship has seeped into basic government functions. An IRS field office in Cincinnati began to target organizations with names that contained “Tea Party,”  “Patriots,” and “9/12 Project” in March, 2010. The actions likely helped confirm the suspicions these anti-tax organizations already have about the federal government.

“It is absolutely chilling that the IRS was singling out conservative groups for extra review,” Sen. Susan Collins, R-Me., told CNN’s “State of the Union” on Sunday.

The condemnations are expected, but the IRS’ actions are symptomatic of a larger problem that has reshaped the political landscape. These are the Super PACs and politically active non-profits that now dominate campaign spending. Their rise accelerated in 2010 after the Supreme Court’s Citizens United ruling that banning independent expenditures violated the first amendment.

It’s not their existence per se that constitutes the dilemma, but the dependence on a regulatory system that was never designed to oversee them—enabling the kind of abuses that have created the current firestorm.

Outside spending totaled just $16.59 million in 2002, a figure that ballooned to more than $1 billion by the 2012 election cycle, according to the Center for Responsive Politics. Those dollars came from 715 different organizations in the past cycle.

Neither the IRS nor the Federal Election Commission was prepared for that surge. The two agencies in charge of providing transparency and enforcing the law have not been able to coordinate on the 501(c)(4) non-profits involved in politics.

These groups have reportedly claimed to the IRS that they only participate in social welfare activities, while informing the FEC of political activities that may be deemed taxable.

In a March 15 letter this year to Sen. Carl Levin, D-Mich., the IRS explained that it cannot “formally coordinate” with the FEC because “the disclosure of information about specific taxpayers” is generally forbidden.

The 501(c)(4) jumble goes beyond conservative organizations. The AARP enjoys the same classification, making it the source of a 2011 investigation by House Republicans for its political activism. And after the 2012 presidential election wrapped up,  the predecessor of “Obama for America” became “Organizing for Action,” a 501(c)(4).

But if the IRS was hoping to prevent any abuses, it was a mistake to specifically go after Tea Party-affiliated groups. Few have the resources to dramatically alter any election based on their publicly available IRS returns. They lack the expertise of Karl Rove’s nonprofit American Crossroads, let alone the cash of entities backed by billionaires such as Sheldon Adelson, a major player in GOP politics. Similarly, many conservative political powerhouses such as the Club for Growth likely escaped the IRS dragnet because they were founded before 2010.

Meanwhile, the Norcal Tea Party Patriots are one of the larger groups in the database of non-profits that appeared in a search of the terms used by the IRS.  The group based in Colfax, Calif. spent $149,047 in 2011, primarily on a rally at the statehouse and a health care policy forum. Their single largest expense—$44,314—was on merchandise.

“That’s the sad irony about all of this,” said Robert Maguire, a researcher at the Center for Responsive Politics. “The Tea Party groups don’t spend on politics. They are not the sorts of organizations that anyone who cares about transparency is paying attention to.”