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What to Think About the IRS Non-Scandal

When a political action group applies for – and receives – non-profit status as a 501(c)(4) it is asking for a public subsidy. Because it doesn’t have to pay tax on its income, every such dollar it gets to keep is a handout from the American taxpayer to that particular group. 

We’re not supposed to hand out handouts and subsidies arbitrarily for purely political purposes. A 501(c)(4) group is supposed to be engaged in educational or social welfare programs. These types of organizations are permitted to advocate for or against legislation, and to engage in other political activity, but only as an ancillary purpose – not a primary one.

This is why the “scandal” that idiot Washington and the right-wing faux-outrage industry have concocted regarding the IRS “targeting” of tea party groups is so fundamentally stupid. 

It is not just within the IRS’s power, but its job to determine whether a group applying for a 501(c)(4) tax handout is engaged in social welfare activity, or whether its primary purpose is political activism. If a group contains “tea party” in its name, there’s a good chance its application for a taxpayer subsidy should be rejected, since it sure seems more geared towards political activity rather than any social welfare program. 

The IRS has reacted out of an abundance of caution and stopped this particular practice, and there is no evidence of intentional wrongdoing. But were just tea party groups targeted? Not according to a newly released memo

An internal IRS document obtained by The Associated Press said that besides “tea party,” lists used by screeners to pick groups for close examination also included the terms “Israel,” ”Progressive” and “Occupy.” The document said an investigation into why specific terms were included was still underway.

The reason why the 501(c)(4) construct has been so popular? The group has no duty to disclose its donors


  • hwhamlin

    No such problem getting 501(c)(4) status for Barry’s 2012 campaign machine “Organizing for Obama”, though. Just re-name it “Organizing for Action”, get priority handling for your app from a compliant IRS, and you’re off to the races–campaigning for Democratic causes and Obama’s second-term agenda.

    “Nothing to see here, folks–return to your homes.”

    And, Barry’s brother’s bogus “charitable” foundation, which listed a fictitious address as its HQ, had its 501(c)(3) application approved by the IRS (actually, by Lois Lerner personally) within two weeks. So it could align itself with the charitable-oriented regime in Sudan.
    But it’s the phrase “Tea Party” that should be a disqualifier, according to this column’s rubrics.

    • http://www.buffalopundit.com/ Alan Bedenko

      Sorry, maybe you should read the article I posted and comment on that, instead.

      • http://byzantiumshores.blogspot.com Jaquandor (Kelly Sedinger)

        That’s not what he does. He’s a “Push button and get randomly generated Republican talking point” machine. Reading, understanding, and offering cogent comment on issues ain’t his bag. (One wonders why he thinks “Barry” is so funny or demeaning to say….)

      • hwhamlin

        Oh, I’m sorry–I thought you’d posted something about the IRS’s scrutiny of 501(c)(4) applications as it pertained to politically-oriented applicants.
        My bad for posting a comment about IRS scrutiny of politically-oriented 501(c)(4) applicants.
        Kelly–Barry went through college and law school as “Barry Obama” (and Madrassa as “Barry Soetoro”). Guess he was too dumb to realize he was demeaning himself, eh?

      • http://www.buffalopundit.com/ Alan Bedenko

        Yes, I posted about how the scrutiny of 501(c)(4) applications was not limited to right-wing groups such as the tea party, but applied throughout the political spectrum. If it was wrong to do to the tea party, it was wrong to do to the left.

      • hwhamlin

        Sorry, Alan–according to the IRS, you’re dead wrong that both groups were treated the same.

        The Treasury Department’s inspector general for tax administration (TIGTA) sent a letter Wednesday to congressional Democrats telling them that while several liberal groups may have gotten extra scrutiny, the IRS didn’t necessarily target those — but it did do so for conservative groups.

        “TIGTA concluded that inappropriate criteria were used to identify potential political cases for extra scrutiny — specifically, the criteria listed in our audit report. From our audit work, we did not find evidence that the criteria you identified, labeled ‘Progressives,’ were used by the IRS to select potential political cases during the 2010 to 2012 timeframe we audited,” Inspector General J. Russell George said.

      • hwhamlin

        “While we have multiple sources of information corroborating the use of tea party and other related criteria we described in our report, including employee interviews, e-mails, and other documents, we found no indication in any of these other materials that ‘progressives’ was a term used to refer cases for scrutiny for political campaign intervention,” Mr. George wrote.
        Does Artvoice post “corrections”?

      • http://www.buffalopundit.com/ Alan Bedenko

        They didn’t use “progressives”. They used other terms.

      • hwhamlin

        Haha. Out of 298 cases referred for “extra scrutiny”, 292 conservative groups were targeted, versus 6 progressive, or liberal, or whatever skirt you are hiding behind today.
        Your entire “equal treatment” meme falls apart when faced with the facts.

      • http://www.buffalopundit.com/ Alan Bedenko

        No citation?

        How about this? Or this?

        But I guess in your world, running ads for Republican candidates and hanging Romney door hangers is what amounts to “social welfare“.

      • hwhamlin

        Nuance!
        And exactly which liberal, progressive, Forward-thinking or whatever 501(c)(4) applicants had their paperwork “scrutinized” for months and years? Or their offices the sites of visits by a half dozen Federal agencies?
        And my “citation” is to the letter from Inspector General George. Feel free to find it yourself w/ mad Google skillz.

  • Scott Whitmire

    For months we’ve been asking: Name one liberal/progressive group that had their ap denied/slow-walked/hit with outrageous scrutiny. To date, not a single one has been able to come forward.

    Meanwhile, True the Vote organizer gets her private business audited by the IRS, ATF, FBI, OSHA and (IIRC) the EPA. All around the same time, and all apparently in response to True the Vote.

    • http://www.buffalopundit.com/ Alan Bedenko

      You must have missed it. In fact, in this whole thing, it was only a progressive group that was rejected.

    • disqus_g6fqjyhj09

      True the Vote applied for 501(c)3 status even though it’s main goal is lobbying lawmakers into pushing through restrictive voting laws and even donated to political entities (http://www.southernstudies.org/2012/10/nonpartisan-true-the-vote-gave-5000-to-republican-state-leadership-committee.html), neither which is allowed for this type of exemption. How could someone be that dumb to apply for a status that they clearly don’t qualify for?

      • Scott Whitmire

        And that relates to OSHA, the FBI and the ATF hitting their private business at the same time how, precisely?

      • disqus_g6fqjyhj09

        It doesn’t, and that’s the point.

        The FBI came around because they were investigating someone who attended one of their rallies, and is unrelated to the business.

        OSHA and ATF conducted audits that were 6 months apart, with the ATF only looking around for a few hours and were allowed to conduct the audit because their company makes parts for guns. OSHA also found nothing major but were fined for minor safety violations.

        They were also inspected by the Texas Commission on Environmental Quality after receiving complaints.

      • Scott Whitmire

        Maybe it’s a coincidence and maybe it isn’t. Coupled with NOM (as awful as they are) getting their private info leaked to rivals and IRS agent admitting that conservative groups were singled out for extra scrutiny based on ideology, it seems less a coincidence and more a part of a pattern of abuse.

    • http://www.buffalopundit.com/ Alan Bedenko

      “True the Vote” sounds more “political activity”-y, and not so much “social welfare”-y.

      • Scott Whitmire

        You may disagree with the method, but it’s not hard to cast ensuring the integrity of our elections as a matter of social welfare.

      • http://www.buffalopundit.com/ Alan Bedenko

        There’s no problem with the integrity of our elections.

  • Jesse Griffis

    Your first paragraph is only correct if you presuppose that every dollar earned or possessed is automatically the property of the Federal government, and that anything they let anyone keep is a subsidy.

    See ACSTO v. Winn in Apr 2011 regarding education tax credits.

    Money that has not been touched by the tax man is not money that the government is “spending” and thus is not a subsidy.

    You probably don’t think it matters. Fortunately, you’re wrong.

    • http://www.buffalopundit.com/ Alan Bedenko

      All income is taxable. If the government grants an exemption, you’re getting a subsidy. It’s tax law 101.

      • Jesse Griffis

        Money that has not been taken by the government is not a possession of the government, and thus cannot be “given out” to someone else in the form of a subsidy.

        Until it is taxed, and truly, until it is in the gov’t coffers, it’s yours, mine, and whatever 40X(Y) group’s. If the government chooses to tax one of us less than the other, that does not mean the lesser is “subsidized”. (though perhaps you believe those of us anywhere below the highest tax bracket are subsidized by the richest of the rich?)

        Simply, tax credits are not “subsidies”. They are bad policy, in general. But the definition is important.

      • http://www.buffalopundit.com/ Alan Bedenko

        Not for profit status whereby the government agrees that an entity’s income is not subject to taxation is a subsidy. It is a handout. It is taxpayers subsidizing the activities of the entity by permitting it to operate outside the normal rules of taxation in this country. It has nothing to do with the order in which the money is possessed – every person and corporate entity must declare income and be taxed on it. If you aren’t taxed on it, you’re subsidized by people and things who are.

        This isn’t a “tax credit”. This is the legal right to ignore the most fundamental rule of taxation law in this country.

  • jamesholstun

    “there is no evidence of intentional wrongdoing”: what would that entail? A supervisor writing, “Single these Tea Party groups out for persecution”? An agent saying, “I intended to do wrong, and I did it”? Isn’t the specification of certain groups itself pretty good evidence of intentional wrongdoing? If an IRS director said, “Single out people with a ‘ko’ at the end of their names for special scrutiny,” would you be satisfied that there was no intentional wrongdoing?

    The fact that various sorts of groups were singled out doesn’t mitigate the error of singling out one sort of group.

  • jimd54

    If you put a church on one corner and an Arby’s on the other, isn’t it true one pays for upkeep of that road and one doesn’t? Arguing over whether it is a subsidy or not misses the point. Also a lot of what the IRS did was the result of the sheer volume of 501-c’s applications. It was an anomaly. Maybe they overreacted but that’s kind of their job.