WASHINGTON—The growing scandal that posits the Internal Revenue Service as taking political pot shots at Tea Party groups is shaking the capital—not just because everyone likes to see the IRS take heat, but because the IRS isn’t normally seen as a politically minded agency.
Steven Miller, acting commissioner of the IRS, who took office last November, was the first head to roll late Wednesday. Treasury Secretary Jack Lew requested and accepted Miller’s resignation over reports that IRS employees had unfairly targeted Tea Party groups seeking tax-exempt status.
President Barack Obama announced Miller’s resignation in a statement, saying, “I will not tolerate this conduct in any way, especially from the IRS, given the power it has.”
“[I]t’s important to institute new leadership that can help restore confidence going forward,” Obama said.
Dr. John Hudak, political analyst with the Brookings Institution, believes “sloppy management” at the IRS was responsible for the scandal in which employees singled out for special scrutiny conservative groups that had applied for the tax-exempt 501(c)(4) status.
“When you are a Democratic administration and you are charged with investigating groups that have a political action and there is even a hint that there might be politics going on, you have to go up your chain of command,” he said. “Keeping it away from the top desk or micromanaging a scandal is not good management.”
Hudak said the IRS is not as politically influenced as other federal agencies and believes that may explain why no one realized earlier that biased targeting was occurring.
“The challenge is we expect political appointments to be political and expect bureaucrats to be technical. When there is a ripple in that framing, there is even more outrage,” he said.
Attorney General Eric Holder, testifying before the House Judiciary Committee Wednesday, described the IRS actions as “outrageous.”
“We have to ensure this kind of activity does not happen again,” he said.
Holder said that the Justice Department, in conjunction with the FBI, was investigating if criminal violations had taken place.
“There are potential civil rights law [and] false statement violations,” Holder said, outlining areas of investigation.
The IRS said in a report last Friday that some of its employees had singled out nonprofit conservative groups with names that included words like “tea party,” “patriot,” and “constitutional education.”
The groups had applied for 501(c)(4) status, a result of the Supreme Court’s 2010 Citizens United decision, which allows a group tax exemption if it can be classified as a social welfare organization. The ruling allows for a degree of political activity, including lobbying, issue advocacy, and attacking or defending candidates for public office, provided political action is not the group’s primary focus.
It is the role of the IRS Exempt Organizations Division (EOD), to determine whether a 501(c)(4) group is primarily engaged in politics or the “common good and social welfare of the community.”
According to Center for Public Integrity (CPI), a public trust watchdog, the division “is drowning in paperwork” a result of reduced staff from budget cutbacks and a surge of applications in an election year.
The EOD “processed significantly more tax exemption applications in fiscal year 2012 by so-called 501(c)(4) social welfare organizations—2,774—than it has since at least the late 1990s,” David Levinthal reported on the CPI website.
The IRS has said that in order to deal with the increased workload, bureaucrats had attempted to “centralize” the increased number of applications into groups that contained more common phrases such as “tea party” in them.
“That was wrong, that was absolutely incorrect, insensitive and inappropriate—that’s not how we go about selecting cases for further review,” Lois Lerner, IRS exempt organizations director, said Friday. “We don’t select for review because they have a particular name.”
Accounts of the level of scrutiny those groups were subjected to, however, do not match those of an understaffed division.
Rep. Ted Poe (R-Texas) described the experience of Catherine Engelbrecht and her husband who had applied for 501(c)(4) status in 2010 for two groups True the Vote and the King Street Patriots.
They were run through a “gauntlet of analysts and hundreds and hundreds of questions,” Poe said. The IRS investigation had required every Tweet and Facebook post, places where they had spoken or would speak, and visits from federal agencies, including six from the FBI.
“And here we are today they still don’t have this tax exemption,” he said.
Darrell Issa, chairman of the House Oversight and Government Reform Committee, set a hearing for May 22 to examine allegations of misconduct in the IRS.