Acting IRS Commissioner resigns after IG report found “inappropriate” actions taken against conservative organizations applying for tax exempt status

President Barack Obama today announced the resignation of Acting Commissioner of the Internal Revenue Service, Steven T. Miller, a day after an Inspector General report found that the IRS had improperly singled out conservative organizations, such as the Tea Party, that have applied for tax-exempt status for extra scrutiny.

The President confirmed that Treasury Secretary Jack Lew sought and accepted Miller’s resignation.

“I’ve reviewed the Treasury Department watchdog’s report, and the misconduct that it uncovered is inexcusable. It’s inexcusable and Americans are right to be angry about it, and I am angry about it,” said Obama. “I will not tolerate this kind of behavior in any agency but especially in the IRS given the power that it has and the reach that it has in all of our lives…It should not matter what political stripe you’re from; the fact of the matter is that the IRS has to operate with absolute integrity.”

Vowing to “hold the responsible parties accountable“, Obama said Miller’s resignation is needed to bring in new leadership “that can help restore confidence going forward.”

In addition, the President has promised that the IRS will begin implementing the Inspector General’s recommendations right away and that new safeguards will be put in place to “make sure this kind of behavior cannot happen again.”

Brief background on tax-exempt entities

A 501(c)3 tax-exempt organization that is allowed to receive tax deductible charitable contributions is prohibited from engaging in political campaign and is also limited in the amount of lobbying activity it can engage in.

However, a so-called social welfare organization – or 501(c)4 – is allowed to conduct  “limited political campaign intervention” as long as politics is not the “primary activity of [the] organization”.

Unlike 501(c)3, a 501(c)4 is not allowed to receive tax deductible charitable contributions.

But more importantly, however, a 501(c)4 is not required to disclose the identity of donors – an advantage not extended to 527 groups or political action committees (PACs).

The most prominent example of a 501(c)4 created and operated as an extension of a 527 political action committee during the 2012 election cycle is Crossroads GPS, co-founded by Republican strategist Karl Rove.

Both Crossroads GPS – a 501(c)4 that is not required to disclose the identity of its donors – and American Crossroads – a 527 political action committee – are headed by Steven Law.

According to the IRS, the number of applications for 501(c)4 status “more than doubled” between 2008 and 2012.

“We also received numerous referrals from the public, media, watchdog groups, and members of Congress alleging that specific section 501(c)4 organizations were engaged in political campaign activity to an impermissible extent,” according to an IRS memo dated April 30 in response to the IG’s report. “To be recognized as exempt under section 501(c)4, an organization must be engaged primarily in the promotion of social welfare…There are no bright line tests for what constitutes political intervention (in particular, the line between such activity and education) or whether an organization is primarily engaged in social welfare activities.”

Findings from the IG report

The Treasury Inspector General for Tax Administration found that the IRS used “inappropriate criteria” to target tax-exempt applications containing terms like “Tea Party”, “Patriots”, “9/12” and other “political-sounding” names for further review.

The Inspector General report also found that the IRS “delayed the processing of targeted groups’ applications and requested unnecessary information from targeted organizations.”

Some of the unnecessary information sought by the IRS include:

  • “Requests the names of donors”
  • “Requests a list of all issues that are important to the organization and asks that the organization indicate its position regarding such issues”
  • “Requests 1) the roles and activities of the audience and participants other than members in the activity and 2) the type of conversations and discussions members and participants had during the activity”
  • “Asks whether the officer, director, etc., has run or will run for public office”
  • “Requests the political affiliation of the officer, director, speakers, candidates supported, etc.”
  • “Requests information regarding employment, other than for the organization, including hours worked”
  • “Requests information regarding activities of another organization – not just the relationship of the other organization to the applicant”

As a result of the added scrutiny, it took the targeted organization twice as long to receive tax-exempt status, averaging 574 days as of Dec. 17, 2012.

The practice lasted for about 18 months, according to the IG report.

Attorney General Eric Holder confirmed that the FBI and Justice department are investigating whether the actions by the IRS broke any criminal laws.

“Those were, I think as everyone can agree, if not criminal, they were certainly outrageous and unacceptable,” said Holder. “But we are examining the facts to see if there were criminal violations.”


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One Comment on “Acting IRS Commissioner resigns after IG report found “inappropriate” actions taken against conservative organizations applying for tax exempt status

  1. Pingback: Transcript: President Barack Obama announces resignation of Acting IRS Commissioner Steven T. Miller | What The Folly?!

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