Money tangle: The IRS and its tea party tempest

Monday - 5/20/2013, 9:24am EDT

CALVIN WOODWARD
Associated Press

WASHINGTON (AP) -- The Internal Revenue Service is feeling the sort of heat that targeted taxpayers feel from the tax agency. It's the sense that a powerful someone is breathing down your neck.

Republicans in Congress are livid with the IRS over its systematic scrutiny of conservative groups during the 2010 and 2012 elections. Democrats agree that something must be done. Likewise, President Barack Obama isn't at all happy with the tax collectors.

That kind of commonality in Washington is about as rare as a budget surplus. So expect a bumpy ride for the IRS, unloved in the best of times, as a Justice Department criminal investigation and multiple congressional inquiries try to get to the bottom of it all.

A look at the matter:

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IN BRIEF

The central issue is whether IRS agents who determine whether nonprofit organizations have to pay federal income taxes played political favorites or even broke the law when they subjected tea party groups and other conservative organizations to special scrutiny.

Also foremost in the concerns of Congress: Why senior IRS officials, for many months, did not disclose what they had learned about the actions of lower-level employees despite persistent questions from Republican lawmakers and howls from aggrieved organizations.

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WHY IT MATTERS

The IRS is expected to be pesky, even intimidating, to miscreants, but at all times politically neutral. Nonpartisanship is the coin of its realm, perhaps more so than in any other part of government.

"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 into all of our lives," Obama said in ousting the agency's acting chief, Steven T. Miller.

The president named Daniel Werfel, a senior White House budget official, to take charge of the agency temporarily. Werfel launched a 30-day review of IRS operations, a step unlikely by itself to quiet the storm. Some Republicans want a special counsel appointed to investigate; Democrats are resistant to that.

There's no question IRS actions in the period covering the 2010 congressional elections and the early going of the 2012 presidential campaign have tattered the perception that the agency is clean of political leanings. Whether that was also the reality remains to be discovered.

A report by the Treasury Department's top investigator for tax matters found no evidence that sheer partisanship drove the targeting. But the watchdog disclosed Friday that he is still investigating. His report faulted lax management for not stopping it sooner.

It's a sensitive time for the agency's professionalism to be in doubt because the IRS soon will loom even larger in people's lives. It's to be the enforcer of the individual mandate to carry insurance under Obama's health care law, itself an object of suspicion for many conservatives. To the right, that's insult upon injury from the left.

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WHAT WOULD MAKE IT MATTER EVEN MORE

Any effort from top levels of the administration or political operatives to manipulate the IRS for campaign purposes would put the scandal in the realm of Nixonian skullduggery.

The public record as it is known does not show interference.

At the same time, early IRS assurances that high-level people inside the agency did not know what was going on have been contradicted by evidence that the head of the agency's tax-exemption operation and later its deputy commissioner were briefed about it and did not tell Congress.

As well, J. Russell George, the Treasury inspector general for tax administration, testified Friday that he informed senior Treasury Department officials of his investigation last summer. Obama adviser Dan Pfeiffer said Sunday, "No one in the White House was aware."

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RED-FLAG WORDS

To qualify for exemption from federal income taxes, organizations must show they are not too political in nature to meet the standard. In the cases in question, applications that raised eyebrows were referred to a team of specialists who took a much closer look at a group's operations. That's normal.

But in early 2010, IRS agents in the Determinations Unit began paying special attention to tax-exempt applications from groups associated with the tea party or with certain words or phrases in their materials, according to the IRS inspector general's report. That's not normal.

The red-flag keywords came to include "Patriots," ''Take Back the Country" and "We the People."

That August, agents were given an explicit "be on the lookout" directive for "various local organizations in the Tea Party movement" that are seeking tax-exempt status. Such organizations saw their applications languish except when they were hit with lots of questions, some of which the IRS was not entitled to ask, such as the names of donors.