Tag: IRS

IRS Lied to Congress about Targeting Tea Party

On Friday, the IRS admitted that when “social welfare” groups with the terms “tea party” or “patriot” in their names applied for 501(c)(4)/tax-exempt status, IRS agents targeted them for extra (and extra-legal) scrutiny to ensure they were not engaged in politicking. The Washington Post reports, “about 75 groups were selected for extra inquiry — including, in some cases, improper requests for the names of donors.” IRS agents did not apply similar scrutiny to groups with “progressive” in their names.

Over the weekend, more details emerged. It now appears the IRS lied to Congress about this practice for more than a year. It also appears the IRS is still targeting tea-party groups today, in part because IRS bureaucrats believe groups that “educat[e] on the Constitution and Bill of Rights” deserve greater scrutiny.

Here’s a rundown. 

Senior IRS officials have known about these abuses for nearly two years. The Associated Press reports: “Senior Internal Revenue Service officials knew agents were targeting tea party groups as early as 2011…on June 29, 2011, Lois G. Lerner, who heads the IRS division that oversees tax-exempt organizations, learned at a meeting that groups were being targeted, according to the watchdog’s report. At the meeting, she was told that groups with ‘Tea Party,’ ‘Patriot’ or ‘9/12 Project’ in their names were being flagged for additional and often burdensome scrutiny…Lerner instructed agents to change the criteria for flagging groups ‘immediately’…”. IRS agents also gave extra scrutiny to groups that “criticize how the country is being run.”

The IRS tried to get away with it again. The Washington Post reports:

the agency revised its criteria a week later.

But six months later, the IRS applied a new political test to groups that applied for tax-exempt status as “social welfare” groups, the document says. On Jan. 15, 2012 the agency decided to target “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement”…

The agency did not appear to adopt a more neutral test for social welfare groups…until May 17, 2012…

Of course, these revised criteria are not politically neutral either. Tea-party groups are still far more likely to receive extra scrutiny than progressive groups. Lots of right-leaning political groups describe their mission as working to limit government or educate people about the Constitution. Far fewer left-leaning groups emphasize educating people about the Constitution or openly declare their mission is to expand government. And note: the U.S. government treated groups as suspect if they educate the public about the Constitution and Bill of Rights. Let that one sink in.

The IRS lied to Congress for more than a year. The Associated Press reports: “At a congressional hearing March 22, 2012, [then-IRS commissioner Douglas] Shulman was adamant in his denials. ‘There’s absolutely no targeting.’” Senior IRS staff knew that claim was false nine months before Shulman made it. Yet they let Shulman’s false statement to Congress go uncorrected, amid a congressional investigation into whether the IRS was targeting tea-party groups, for another 14 months. According to the Washington Post, “The IRS made no mention of targeting conservative groups in five separate responses to congressional inquiries between Nov. 18, 2011, and June 15, 2012, according to the [inspector general’s] timeline.” Even if we view the facts in the light most favorable to the IRS and assume Shulman did not know he was uttering a falsehood – which, by the way, would mean he is a very poor manager – the IRS’s failure to correct that falsehood pretty much makes it a lie. I don’t mean that in the phony way PolitiFact uses the term. I mean a real lie.

The IRS did not come forward of its own accord. The Associated Press: “The Treasury Department’s inspector general for tax administration is expected to release the results of a nearly yearlong investigation in the coming week.” House Oversight Committee chairman Darrell Issa (R-CA) put it, “Before the IG’s report comes to the public or to Congress as required by law, it’s leaked by the IRS to try to spin the output. This mea culpa’s not an honest one.”

IRS officials maintain the targeting of tea-party groups was the work of low-level employees and not politically motivated. Yet the agency has shown a willingness to deceive Congress and the public about its own misconduct. Congress should conduct a thorough investigation.

Even if it is true that low-level IRS bureaucrats were acting on their own, Congress’ investigation should examine the role Obama administration officials played in encouraging those bureaucrats to single out the tea party. As New York Times columnist Ross Douthat explains:

Where might an enterprising, public-spirited I.R.S. agent get the idea that a Tea Party group deserved more scrutiny from the government than the typical band of activists seeking tax-exempt status? Oh, I don’t know: why, maybe from all the prominent voices who spent the first two years of the Obama era worrying that the Tea Party wasn’t just a typically messy expression of citizen activism, but something much darker — an expression of crypto-fascist, crypto-racist rage, part Timothy McVeigh and part Bull Connor, potentially carrying a wave of terrorist violence in its wings.

It would be very bad if senior Obama administration officials ordered the IRS to intimidate the president’s political opponents. It would scarcely be better if administration officials denounced their opponents until IRS bureaucrats took the hint.

People should lose their jobs over this.

Great Moments in Government: The IRS Apologizes for Bias while Simultaneously Denying Bias

I’m happy to bash the IRS, but I usually try to explain that our anger should be focused on the politicians who created the corrupt, 74,000-page tax code.

But sometimes the IRS deserves some negative attention. The tax collection bureaucracy has thieving employees, incompetent employees, thuggish employees, seemlingly brainless employees, and victimizing employees.

The senior folks at the IRS also deserve scorn for bone-headed decisions such as squandering millions of dollars on a P.R. campaign and a scheme to regulate and control private tax preparers.

Now it seems we have another reason to condemn the tax-collection bureaucracy. As Michael Cannon has noted, the IRS is engaging in Nixon-type political harassment.

Here’s some of what the Associated Press just reported.

The Internal Revenue Service inappropriately flagged conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status, a top IRS official said Friday. Organizations were singled out because they included the words “tea party” or “patriot” in their applications for tax-exempt status, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups.

IRS Chief, Who Defended Illegal ‘ObamaCare’ Taxes, also Denied Targeting of Tea-Party Groups

In 2011, members of Congress began criticizing a proposed IRS rule implementing ObamaCare’s health insurance tax credits. They claimed that the proposed rule violated the clear language of the Patient Protection and Affordable Care Act, as well as congressional intent, by issuing those tax credits in states that declined to establish a health insurance “exchange.” In effect, they claimed the proposed rule would result in the federal government taxing, borrowing, and spending hundreds of billions of dollars without congressional authorization. 

At the time, then–IRS commissioner Douglas Shulman leapt to his agency’s defense. He wrote that various provisions of the statute “support” the rule. He wrote that the “relevant” legislative history doesn’t show that Congress didn’t want the IRS to tax, borrow, and spend those hundreds of billions of dollars. He wrote that the proposed rule is “consistent with the language, purpose, and structure” of the law. The only thing he didn’t do was cite a provision of the law authorizing the rule, or even creating any ambiguity about the rule’s illegality.

The IRS finalized that illegal rule in May 2012. You can read all about it in my article with Jonathan Adler, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.”

It is worth noting that Shulman also leapt to the IRS’s defense against another charge that the agency was abusing its power. In 2012, conservative groups complained that the IRS was targeting them for audits. Shulman issued a forceful and categorical denial:

IRS Commissioner Douglas Shulman told Congress in March 2012 that the IRS was not targeting groups based on their political views.

“There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman told a House Ways and Means subcommittee.

Shulman was wrong. Today, the IRS admitted it has been targeting conservative groups for audits

Perhaps some Friday afternoon hence we will be treated to an IRS admission that their tax-credit rule violates the Administrative Procedures Act and the PPACA, as two lawsuits now allege. I won’t hold my breath.

Targeting the Tea Party Isn’t the IRS’s Most Egregious Abuse of Power

Not by a longshot. 

As Jonathan Adler and I explain in this law journal article, and as I explain somewhat more accessibly in this Cato paper, the IRS is trying to tax, borrow, and spend $800 billion in clear violation of federal law and congressional intent.

Yes, you read that right: $800 billion.

Shades of Nixon: ‘IRS Apologizes for Targeting Conservative Groups’

From the Associated Press:

WASHINGTON (AP) — The Internal Revenue Service is apologizing for inappropriately flagging conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status.

Lois Lerner, who heads the IRS unit that oversees tax-exempt groups, said organizations that included the words “tea party” or “patriot” in their applications for tax-exempt status were singled out for additional reviews.

Lerner said the practice, initiated by low-level workers in Cincinnati, was wrong and she apologized while speaking at a conference in Washington.

Many conservative groups complained during the election that they were being harassed by the IRS. They said the agency asked them an inordinate number of questions to justify their tax-exempt status.

Certain tax-exempt charitable groups can conduct political activities but it cannot be their primary activity.

Let’s all recall what President Obama told Ohio State University graduates just days ago:

Unfortunately, you’ve grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity that’s at the root of all our problems. Some of these same voices also do their best to gum up the works. They’ll warn that tyranny [is] always lurking just around the corner. You should reject these voices. Because what they suggest is that our brave, and creative, and unique experiment in self-rule is somehow just a sham with which we can’t be trusted.

We have never been a people who place all our faith in government to solve our problems. We shouldn’t want to. But we don’t think the government is the source of all our problems, either. Because we understand that this democracy is ours. And as citizens, we understand that it’s not about what America can do for us, it’s about what can be done by us, together, through the hard and frustrating but absolutely necessary work of self-government.

“Government is simply the name we give to the things we choose to do together,” says Barney Frank. Like persecute our political enemies.

Ohio, Missouri Introduce the Health Care Freedom Act 2.0

Ohio Reps. Ron Young (R-Leroy Twp.) and Andy Thompson (R-Marietta), and Missouri Sen. John Lamping (R-St. Louis County), have introduced legislation—we call it the Health Care Freedom Act 2.0—that would suspend the licenses of insurance carriers who accept federal subsidies through one of the Patient Protection and Affordable Care Act’s (PPACA) health insurance Exchanges. At first glance, that might seem to conflict with or otherwise be preempted by the PPACA. Neither is the case. Instead, the HCFA 2.0 would require the IRS to implement the PPACA as Congress intended.

Here’s why. Under the PPACA, if an employer doesn’t purchase a government-prescribed level of health benefits, some of its workers may become eligible to purchase subsidized coverage through a health insurance “exchange.” When the IRS issues the subsidy to an insurance company on behalf of one of those workers, that payment triggers penalties against the employer. Firms with 100 employees could face penalties as high as $140,000.

Congress authorized those subsides, and therefore those penalties, only in states that establish a health insurance Exchange. If a state defers that task to the federal government, as 33 states including Missouri and Ohio have done, the PPACA clearly provides that there can be no subsidies and therefore no penalties against employers. The IRS has nevertheless announced it will implement those subsidies and penalties in the 33 states that have refused to establish Exchanges. Applying those measures in non-establishing states violates the clear language of the PPACA and congressional intent. See Jonathan H. Adler and Michael F. Cannon, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” Health Matrix: Journal of Law-Medicine 23 (2013): 119-195.

Whether legal or illegal, those penalties also violate the freedoms protected by the Health Care Freedom Amendment to Ohio’s Constitution, and Missouri’s original Health Care Freedom Act, which voters in each state ratified by overwhelming majorities. The Ohio (HB 91) and Missouri (SB 473) bills would protect employers and workers from those penalties, and thereby uphold the freedoms enshrined in Missouri statute and Ohio’s Constitution, by suspending the licenses of insurance carriers that accept those subsidies.

The question arises whether the PPACA would preempt such a law. It does not. The HCFA 2.0 neither conflicts with federal law, nor attempts to nullify federal law, nor is preempted by federal law.

The HCFA 2.0 concerns a field of law—insurance licensure—that has traditionally been a province of the states under their police powers. In preemption cases, courts “start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Wyeth v. Levine, 129 S. Ct. 1187, 1194-95 (2009). Courts then must determine whether the state law in question is nevertheless trumped by express or implied federal preemption.

Politico Has Been Reading My Email

From today’s Politico Pulse:

OBAMACARE LAWSUIT RECRUITMENT 101: START WITH THE INTERNS - Cato Institute’s libertarian mastermind Michael Cannon appealed to former interns of the right-leaning group to join an “exciting” legal challenge to Obamacare. Cannon is among the top proponents of a legal theory that suggests the health law forbids federal subsidies to people accessing insurance through a federally run insurance exchange.

—”To see if you might qualify, have a look at this checklist,” Cannon writes in a “Dear former Cato Intern” letter. “There are income criteria, plus you must live in one of 33 states, prefer to purchase no health insurance (or low-cost catastrophic insurance), et cetera. If you believe you meet the criteria for at least one of the three categories, email me … to learn more about how you can get involved in this exciting legal challenge, and jump on this chance to make history. Feel free to forward this email to others who may be interested.” The checklist: http://bit.ly/12lJ8Yb.

Thanks, guys. Might as well tell everybody, now. (And “right-leaning”? Seriously?)