Internal Revenue Service Acting Director Steven Miller was forced to resign this week following revelations that the IRS targeted tea party organizations that applied for tax-exempt status. I enclose below reaction to this scandal from Iowa’s Congressional delegation.

A separate post is in progress to catch up on recent votes by Iowa’s four U.S. representatives and two senators.

Although IRS scrutiny should never be politically motivated, the abuse of tax-exempt 501(c)3 and 501(c)4 status is a major problem. Erika Kelton expressed it well in this commentary for Forbes:

Taxpayers in effect subsidize tax-exempt groups with the understanding that these groups engage solely in social welfare, educational, charitable or other work deemed important for the public good as specified in the tax code. Groups that don’t hold up their end of the bargain should lose the benefits of being tax-exempt. […]

Sen. Chuck Grassley (R-Iowa) has long spoken out about the abuse and misuse of tax-exempt status. Many years ago he identified key areas of concern, which haven’t changed. Some of those concerns included:

* Excessive compensation perks, pay and sweetheart deals involving officers and directors.

* Nonprofit groups that act more like for-profit businesses than charities.

* Inappropriate political activity.

* Lack of financial transparency and accountability to donors.

* Nonprofit hospitals that do not provide adequate charity care and community benefits.

* Tax-exempt organizations fronting as tax-shelters.

Too many groups that don’t deserve tax-exempt status have gotten it with very few questions asked. Taxpayers shouldn’t be subsidizing groups that hide their political agenda behind their tax-exempt status or subsidizing any other organizations that don’t truly qualify.

In the recent controversy, all sides seem to agree that the IRS went too far in the demands for information from the Tea Party groups. However, the lesson from the Tea Party applications shouldn’t be to stop asking questions; it should be to establish clear definitions and rules regarding who qualifies for tax-exempt status and to consistently ask the same questions of all applicants.

On May 14, Grassley’s office sent out this press release:

Grassley Seeks Details Behind IRS Official’s Apology for Targeting Tax-exempt Groups

WASHINGTON – Sen. Chuck Grassley of Iowa today asked the IRS for details on the agency’s move to disclose the targeting of tax-exempt groups for scrutiny and apologize for the targeting at a legal conference, after refusing to fully answer questions about such activity from members of Congress who have been asking about the targeting for more than a year.  Grassley also asked for communications on the issue between the IRS and the White House or other organizations.

“An IRS official apologized for activities the IRS previously denied,” Grassley said.  “She explained the activities in a detailed way.  Why now, and why at a conference instead of to Congress?  Congress has been asking the same questions.   The IRS has to answer for its behavior and its failure to disclose its behavior.”

The IRS’ screening of tax-exempt groups with certain political leanings came to light on Friday, when the head of the IRS’ tax-exempt division disclosed the practice at an American Bar Association conference and apologized for it.  The disclosure came days before an inspector general report on the issue is expected to become public.

Key members of Congress have written to the IRS and heard testimony from top IRS officials in denial of the targeting practice over the past year.

The text of Grassley’s letter is available here.

Representative Bruce Braley (D, IA-01) released this statement and letter to President Barack Obama on May 13:

Washington, D.C. – Rep. Bruce Braley (IA-01) today called on President Barack Obama to request the immediate resignation of Lois Lerner, Director of Exempt Organizations at the Internal Revenue Service, and launch an independent investigation into revelations that the IRS has been targeting certain groups for increased scrutiny based on their political beliefs.

On Friday, the IRS admitted it had targeted groups for tax audits based on whether organizations used terms like “tea party” and “patriot” in their names. Lerner apologized for those actions.

Braley said, “Our society is based on free ideas and free expression. When the government targets organizations because of their political beliefs, it has a chilling effect on free speech and damages the very foundation of our country.

“Sorry just doesn’t cut it. There need to be consequences for this violation of the public trust, starting with the resignation of Lois Lerner. President Obama should also immediately begin a thorough and independent investigation of the IRS to ensure that anyone responsible for this behavior is held accountable.

“There is simply no place for politics at the IRS.”

Braley made the request in a letter to President Obama. Full text of the letter follows; a copy of the signed letter is attached.

—

May 13, 2013

The Honorable Barack Obama

President of the United States

1600 Pennsylvania Ave NW

Washington, DC 20500

Dear President Obama,

I am shocked and furious to learn that an agency with the authority and responsibility as influential as that of the Internal Revenue Service (IRS) has unfairly increased scrutiny over Americans for using terms such as “tea party,” “patriot” and “9-12.”  In reviewing applications for 501(c)(4) tax exempt status, the IRS has failed to treat all citizens equally and judiciously in carrying out the law and their obligations to the American people.

I appreciate your immediate attention to this matter and acknowledgement that this activity is unacceptable.  I ask that you not tolerate these biased and unfair actions in the IRS and immediately launch a swift, independent investigation of the egregious oversight, as well as call for the resignation of Lois Lerner, the Director of Exempt Organizations for the IRS.  I am extremely troubled that under Lerner’s supervision IRS agents were given little guidance for review of these applications and repeatedly changed their criteria for their examination.

Lerner knew of this activity in June of 2011 and still, rather than create a fair and uniform process to review the applications, six months later in January of 2012 the IRS adopted standards to focus on “political action type organizations” that are involved in “limiting or expanding government,” and “educating the public on the Constitution and Bill of Rights, and social economic reform.”   These criteria clearly target applicants based on their political beliefs rather than whether or not their activities and structure meet the eligibility standards for 501(c)(4) status.  

These revelations about the IRS have damaged the agency’s ability to enforce laws that require 501(c)(4) organizations to comply with statutory limits on political advocacy.  During this time of increased political advocacy and heightened partisan politics, Americans rely on the IRS to act with neutrality and integrity.  Restoring this confidence is necessary to empower the IRS to exact its oversight and ensure that groups applying for and operating under this tax exempt status are in fact meeting the goals and requirements associated with the 501(c)(4) tax exempt status.

I understand that all agencies are doing more with less and that review of these applications increased without clear guidelines for review.  However, this is exactly the problem.  No clear guidelines for a neutral assessment were provided to the IRS agents until May 17, 2012.  This error is a direct problem in supervision and management and it must be dealt with on behalf of all Americans.  In overseeing the social welfare and political activities of groups that apply for this status, the IRS must provide guidance and criteria that allow agents to act in a fair and neutral manner with all applicants.

American citizens need to know that their beliefs and associations will not be discriminated against by their government and they deserve quick action that affirms this activity is intolerable.   I hope that you will move forward immediately to ensure a thorough and independent investigation takes place, clear guidelines are provided, and that the appropriate supervisors are dealt with.

Sincerely,

Bruce Braley

Member of Congress

After President Obama announced yesterday that Miller had resigned, Braley’s office sent out this comment:

“The resignation of the IRS acting director is a good first step at holding accountable the people responsible for the shameful actions of the IRS.  As I’ve said, there is no place for politics at the IRS, and the IRS’ targeting of groups for scrutiny based on nothing more than their political beliefs is an affront to our society’s value of free expression.

“I continue to urge the President to conduct a thorough and independent investigation to ensure anyone responsible for this behavior is held accountable.”

On Monday, Braley wrote President Obama urging him to ask for the resignation of Lois Lerner, Director of Exempt Organizations at the IRS, and launch an independent investigation into the actions of the IRS. The letter is attached.

Today Braley hit the nail on the head in these comments to Radio Iowa:

“The latest reports of what has been happening at the Internal Revenue Service undermines the public’s trust in government, it harms the IRS’s effort to enforce the laws that they’re charged with enforcing. And it hurts their efforts to enforce the laws that apply to 501C-4 non-profit organizations.”

The IRS admitted it targeted conservative groups when applications were put in to review them. Braley says the rules require the non-profit groups to have a 50-percent cap their political activity.

“I believe that there have been abuses of that 50-percent cap and that’s one of the enforcement responsibilities of the Internal Revenue Service. But when you have a cloud hanging over the agency because of the approval of the applications on the front end, it damages the credibility of the agency to conduct a nonpartisan investigation of groups to make sure that they are complying with the law,” Braley says.

He says the IRS problems have to be cleared up before anything can be done about possible violations of the rules by non-profit groups.

Representative Dave Loebsack (D, IA-02) released this statement on May 14:

Washington, D.C. – Congressman Dave Loebsack today called on President Obama to fully investigate the allegations that the Internal Revenue Service (IRS) illegally targeted non-profit organizations based on ideological criteria.  He also called for the swift dismissal of anyone involved in the wrongdoing and anyone who had knowledge that it was happening and did not act to stop it.  Yesterday, Loebsack wrote to the Acting Commissioner of the IRS calling for an investigation and today sent a letter to the President demanding action.

“I call upon the IRS to promptly conduct a thorough, independent investigation of these allegations.  The agency needs to hold those responsible for this partisan discrimination fully accountable, including firing anyone who had knowledge that it was happening and did not act to stop it,” Loebsack wrote to Steven Miller, the Acting Commissioner of the IRS.  “I respectfully call on you to see through an impartial, independent investigation of these allegations, and urge you to take appropriate actions to hold those responsible fully accountable.”

“I was incredibly shocked to read the reports that the Internal Revenue Service engaged in targeting of groups based on ideological criteria.  It is unacceptable for the agency that we as a nation rely on to execute our tax code to be anything but completely neutral and nonpartisan,” Loebsack wrote to President Obama.  “If it is found that these allegations are true, I urge the swift dismissal of those involved in the wrongdoing as well as anyone who knew what was happening and did not immediately act to fully investigate and disclose actions by IRS employees.”

The letter to Acting Commissioner Miller can be found here. The letter to President Obama can be found here.

Loebsack’s office sent out this statement yesterday before Miller’s resignation was made public:

Washington, D.C. – Congressman Dave Loebsack released the following statement calling on Steven Miller, the Acting Commissioner of the Internal Revenue Service (IRS), to step down in light of a report by the Treasury Inspector General for Tax Administration.  The report contained new information citing “ineffective management” as a reason non-profit organizations were illegally targeted based on ideological criteria for more than 18 months.

“After the report by the Treasury Inspector General for Tax Administration, the IRS watchdog, I believe Acting Director Steven Miller must step down.  The American people expect the IRS to be wholly neutral and nonpartisan and to have a Commissioner who is capable of providing the leadership necessary to enforce that standard amongst every IRS employee.  I no longer believe Acting Commissioner Miller is viewed as such by the American people and he needs to be replaced.  If Mr. Miller will not step down on his own, I believe the President needs to dismiss him.”

Today Representative Steve King (R, IA-04) released this statement after participating in a joint press conference by Republicans in Congress.

“Today I joined my friends in the House and Senate, as well as conservative leaders from across the country, to bring light to the recent admission by the IRS that it unjustly targeted conservative groups leading up to the 2012 election,” said King. “There is no place for this kind of political targeting in our constitutional republic. This reeks of the kind of political tyranny that so many people from around the world came to America to escape.

This scandal cannot be considered in isolation. The IRS has become a bullying arm of the monstrous federal government – used to harass the political enemies of the president. This problem will only get worse, as the IRS will be the prime enforcement arm of ObamaCare: collecting a trillion dollars in new taxes and auditing individuals and businesses to make sure they have government-approved health insurance. This IRS scandal makes it more important than ever that we repeal ObamaCare, and it should also renew calls for fundamental tax reform, the FairTax, which would abolish the IRS entirely.”

At this writing, I have not seen any public comments on the IRS scandal from Representative Tom Latham (R, IA-03) or U.S. Senator Tom Harkin.

President Obama has said he was unaware of the IRS actions toward tea party groups.