Specific targeting or profiling is wrong, and even those who support the idea apparently do not like it when they are the ones profiled.
Of course everyone is familiar with the current IRS scandal regarding the profiling of “conservative” groups with monikers such as Tea Party within their names. At least one and most likely more of these groups have filed and are in the process of filing lawsuits against the IRS for the increased scrutiny resulting from the profiling.
What the media, however, has neglected to cover as well is that the IRS is already being sued for its failure to properly investigate organizations applying for and holding this “social welfare” status.
You can read more on this lawsuit here.
The Spinning Coin with more than 2 sides:
On one side the IRS is being investigated by Congress for this profiling and the White House criticized for not “having knowledge” or “covering up” these acts by the IRS. When did people within the Executive Branch know, and when did the President know are among the prevailing questions. On the other side, the IRS is being sued for not scrutinizing organizations filing for 501(c)(4) status who are in fact engaged in political activities such as that alleged in the lawsuit filed by Dr. David Gill. Dr. Gill contends that the American Action Network funneled large sums of money into the 13th Congressional District of Illinois race. Rodney Davis won that race by the slim margin of 0.3 percent of the vote. Still, the spinning coin has the side of wondering why start profiling with smaller groups and not the largest on either political side of the spectrum.
Here is the confusion: 26 USC § 501 (c) (4)
(A) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.
(B) Subparagraph (A) shall not apply to an entity unless no part of the net earnings of such entity inures to the benefit of any private shareholder or individual.
The tax code states that 501(c)(4)’s must operate “exclusively” to promote social welfare, a category that excludes political spending. Some have interpreted that language to mean that some political spending would be permissible. Many maintain that groups meet that rule as long as they are not “primarily engaged” in election work. Which is it? That’s the problem.
This really isn’t new, but it’s just grown regardless of political party designation:
This idea about the potential for abuse is not new. The Democratic Party used the ability for anonymous contributions in the 1990s and with the Citizen’s United Case everyone is using the system to its fullest capacity.
Hello? Let’s just say everyone should have known of this SNAFU at the latest by 2010
Howard Gleckman wrote this blog entry for the Tax Policy Center back in 2010 where he addressed the issue and offered the solution.
“So why doesn’t the IRS act? There are lots of reasons. These groups are a political hot potato. The agency is chronically short-staffed and cracking down on them would produce relatively little revenue. Besides, the new (c)(4)s won’t even have to file their first returns until at least January 2012, so the agency today knows little about them. Most important, perhaps, it is not the IRS’ job to enforce campaign finance laws. That is supposed to be the role of the Federal Elections Commission, an agency carefully organized to be entirely ineffective.
In the end, this is a problem for Congress, not the IRS. The tax exemption is a valuable tool for these political fronts. They should be made to pay for the privilege by either refraining from campaign activity or disclosing their donors. If they won’t, Congress should take away their special tax treatment.”
Why is this news to Congress? Why won’t Congress fix the problem?
Michelle Bachmann and others may want to impeach President Obama about these stunning revelations, but where in the Constitution does the Executive Branch have the powers granted to the Legislative Branch? Congress, the National Taxpayer Advocate in its mandated annual report to Congress addressed the issues for every Member of the House and the Senate. It’s in there about why people dislike our tax system. It’s there of how honest taxpayers feel like they are getting hurt. It’s there about how one can take advantage of the system. It’s there about how terminology can be spun to fit any political agenda. It’s there about how inefficient the system is. It’s there about how much of a wait is typical. We only need to apply our own frustration level there. Please look at Numbers 1, 3, and 11 in particular (pages 2, 5, and 15) of the Executive Summary linked above and here.
While this report did not specifically address the 501(c)(4)s, it did address some issues with 501(c)(3)s. In an 18 month period, the IRS notified 440,000 organizations that their tax exempt status had been automatically revoked for not filing returns for 3 consecutive years.
Considering that the 113th Congress as of 20 May 2013 has managed to pass nine (9) total bills which have all been signed into law by the President, 440 thousand notifications are peanuts. Heck, we have even had one bill passed whose primary focus is on the economy. Of course the economy seems of lesser importance to Congress than partisanship and the upcoming elections.
Take the simple route here, abolish the 501(c)(4) status and regardless of if a group engages in “Issue” or “Election” advocacy, the group is placed in the 527 status. That eliminates the many gray areas. That applies to “conservative,” “moderate,” “liberal,” and any other accurate or inaccurate buzzword label of the day. That applies to “big,” “small,” “grassroots,” oak tree roots,” and so on.
The other thing is to simplify the tax code.
With thoughts and prayers to those suffering from the devastation of the tornadoes in Oklahoma and dealing with the injuries and loss of lives. It does not matter where or who to me, but my thoughts and prayers are with anyone who experiences these forces of nature. Obviously, I am most familiar with hurricanes and flooding, but the damage and suffering from any force of nature is still sad and the people in the path need assistance. Again, my thoughts and prayers to everyone.