Tempest in a Teapot?

Tempest in a Teapot?

While Common Cause strongly supports an independent and thorough review of the IRS's actions, the hearings should also account for the agency's failure to enforce the law against political front groups masquerading as social welfare organizations.

The Internal Revenue Service’s apology for subjecting certain Tea Party groups to extra scrutiny merits the widespread attention it is receiving if political bias motivated the audits. The President himself called the emerging scandal “outrageous,” and leaders from both political parties agree. So does Common Cause. More information will soon come to light, because the Treasury Department’s Inspector General is preparing to release a report on its own months-long investigation, which may drop as soon as this week.

Meanwhile, IRS officials are steeling themselves for the hot seat, as they should. Chairman Camp announced late Monday that the Ways & Means Committee in the House will begin hearings into the matter as soon as Friday. Senators McCain and Levin announced in a joint statement that the Senate’s Permanent Subcommittee on Investigations will postpone its tentatively scheduled June hearing into lax IRS enforcement of partisan nonprofit groups so that it can expand its investigation into the issues raised by the IRS’s apology. Senator Baucus intends to hold hearings in the Finance Committee, too.

But the apparent actions of IRS officials to prioritize certain (namely, conservative) organizations for audits is only part of the scandal. While Common Cause strongly supports an independent and thorough review of the IRS’s actions, the hearings should also account for the agency’s failure to enforce the law against political front groups masquerading as social welfare organizations. In other words, these hearings must not be used as a Trojan horse to undermine the IRS’s responsibility to impartially enforce the law governing nonprofit political spending. Emphasis on impartially, with equal emphasis on enforce.

Leaked portions of the forthcoming Inspector General’s report support a finding that senior IRS officials were struggling with how best to vet the massive influx in 501(c)(4) “social welfare” organization applications just as the Tea Party rose to prominence, widely credited with flipping control of the House of Representatives in 2010 by intervening in electoral races.

To qualify as a 501(c)(4), the organization’s primary purpose must be the furtherance of “social welfare” and the common good — something that the law expressly says does not include intervention in political campaigns. But that hasn’t stopped corporations and billionaires from forming these tax-exempt groups that flout the law, funneling secretly-sourced money into our elections for the sole purpose of providing donor anonymity. A 501(c)(4) is under no legal obligation to reveal its donors.

Setting up a 501(c)(4) is actually quite simple. The law allows these nonprofits to “self-declare,” submit the IRS application, and immediately begin spending on political ads, even before the IRS advises the group on the status of their application, which can take years.

Between 2010 to 2012, applications for 501(c)(4) status more than doubled to 3400. This tracks the explosion in 501(c)(4) political spending in the wake of Citizens United, decided in January 2010. Social welfare organizations pumped over $254 million dollars into the 2012 elections according to the Center for Responsive Politics (CRP). That’s only $1 million less than what political parties themselves spent. And that doesn’t count 501(c)(4) spending on state and local races.

Anyone living in a swing-state during the last presidential election will remember the near constant commercials. Social welfare organization ads were easy to confuse with those of Super PACs — sometimes they have very similar names. Karl Rove’s nonprofit, Crossroads GPS, dumped $70 million into independent expenditures — commercials that called for the support or defeat of specific candidates. (Democracy21 and the Campaign Legal Center filed a complaint about Crossroads GPS with the IRS, citing this $70 million as “prima facie evidence” that the group “is a campaign operation, not a “social welfare’ group.”). Americans for Prosperity, the Koch-backed political machine that also considers itself a social welfare nonprofit, spent over $33 million on independent expenditures. Common Cause sent its own letter to the IRS last year about Liberty Central, a 501(c)(4) founded by Ginni Thomas, the Tea Party activist, lobbyist and wife of Supreme Court Justice Clarence Thomas. We requested an investigation into Liberty Central’s primary purpose, one of the very first social welfare groups to spring up in the wake of Citizens United. Liberty Central was heavily involved in advocating for the defeat of Members of Congress that voted in favor of the Affordable Care Act. Ms. Thomas traveled the country, referring to state-based Tea Parties as “satellite offices” and advocating for the election of specific candidates in those states.

If it seems like the overwhelming majority of social welfare nonprofit electioneering was on behalf of conservative viewpoints during the 2012 elections, you aren’t mistaken. CRP reports that among all independent groups that do not disclose their donors, over 85% of the hundreds of millions in spending supported conservative viewpoints, with just 11.2% spent for those that are liberal.

Of course, the fact that social welfare nonprofit spending was overwhelmingly conservative does not excuse the IRS from its obligation to apply neutral, impartial criteria when deciding which groups to audit. Neither does it justify an abrogation of the agency’s duty to enforce the law in the first place.

If you support our work to hold the IRS accountable, please join or renew your membership with Common Cause today.