But the prospect of the IRS imposing its political will on this country is the most scary prospect of all. It now appears that the impact of the class warfare economic rhetoric that Obama used to help himself get re-elected has biased the way that the IRS administers the federal tax code. Even Democrats have been forced to agree that this is a gross abuse of government power that endangers American democracy, and it is even more shocking to realize that this has been allowed to go on inside the IRS for two years without being reported to the public.
These political biases were not subtle or hidden. As they applied to non-profit organizations, they were incorporated into policy statements by IRS officials, and attempts to eliminate them were subsequently overturned to reinstate similar biases.
The target of the political bias was shockingly well-defined. In early 2010, when the use of non-profit organizations for political activism was becoming more popular, the IRS “determination unit” based in Cincinnati set up a new set of criteria for evaluating which groups should get more careful scrutiny before being granted that non-profit status. Nobody has explained why, but someone in that unit decided that if your group‘s name contained certain key words or phrases, such as “patriot,” “tea party,” “9/12,” your application would be set aside for special treatment.
In August of 2010, the people running the Cincinnati operation created a spreadsheet with key words which triggered the special treatment. Ironically the spreadsheet was nicknamed the BOLO, which is a police acronym for “Be On the Lookout For” and is often applied to suspected criminals.
CONSERVATIVE GROUPS IN BUREAUCRATIC GRIDLOCK
Nobody has yet come forward to admit who actually chose those criteria, but it quickly became clear that the overwhelming majority of applications which were being selected for more scrutiny through this new process came from conservative groups.
It soon became clear that being selected by the BOLO criteria meant that your application for IRS approval would likely get bogged down in the approval process. The organizations with flagged applications were supposed to get letters asking for more information to make sure that they are primarily “social welfare” organizations rather than political action groups, as required by federal law to receive tax-exempt status.
However, there was no set procedure in place at the IRS as to the kind of additional information required. That meant that when somebody at the IRS finally got to one of these applications, they sent out letters asking for all kinds of information about the group’s membership and activities, which imposed a huge paperwork burden on the applying groups. But most of the time, these applications and the extra paperwork they generated just sat on a desk in the IRS and didn’t get any attention for months, or even years.
According to the newly released report of the IRS inspector general, of 298 applications which were selected for additional scrutiny, almost no work was done on the majority of them for 13 months. Eventually, 108 of the applications won tax exempt status approval, 28 of the applying organizations simply got tired of waiting and all the added paperwork and withdrew their applications, and the rest remained in bureaucratic limbo.
PATTERN OF DISCRIMINATION RECOGNIZED
Those inquiring about the status of their applications were stonewalled, as the backlog increased. Eventually, the heads of these groups started complaining to members of Congress, who noticed the ideological pattern, and began asking IRS officials if they were deliberately stalling on the approval of applications from conservative groups.
In late June, 2011, the head of the IRS tax-exempt organizations division, a career civil service employee named Lois Lerner, realized that the processing of these types of applications had bogged down, and instructed the people in the Cincinnati office to stop using the BOLO spreadsheet and adopt a broader set of criteria in judging whether they met the legal requirements. But that proved to be too vague, and the backlog of unfinished applications continued to lengthen.
Six months later, the unit adopted another set of key words which were slightly more general, but the process was still flagging primarily conservative groups. By February of 2012, Lerner realized that the screening process had failed, and called a halt to the letters going back to the organizations flagged asking for more information. But by that time, there were serious complaints being made to members of Congress about a deliberate anti-conservative bias by the IRS. In March, 2012, the House Oversight and Government Reform Committee contacted the IRS inspector general, J. Russell George, to ask him what was going on, and he decided to launch an investigation.
PROBLEM WAS IDENTIFIED LAST YEAR
Lerner and other senior IRS officials did not publicly acknowledge the problem, and White House officials still insist that they remained unaware of it until very recently. But Inspector General George said last week that he had informed the Treasury department’s general counsel and Deputy Treasury Secretary Neal Wolin early last summer that he was investigating complaints from conservative groups. This disclosure obviously poses a challenge to the White House claim that it had no clue as to what was going on.
Meanwhile, another unit of the IRS was also apparently targeting major contributors to conservative political for extra audits of their individual tax returns.
CONSERVATIVE DONORS TARGETED AS WELL
In April 2012, several months after Idaho businessman and longtime Republican donor Frank VanderSloot made a sizable donation to a group supporting the Romney campaign, he was named on an Obama campaign website as one of eight wealthy Romney donors with a “less-than-reputable record.” Some of the others were also described as having been “on the wrong side of the law.”
Then an intimidation campaign began against VanderSloot. A political opposition research firm asked an Idaho courthouse for his divorce records. VanderSloot had never been audited by the IRS before, but that June, the IRS notified him and his wife that it was going to audit two years of their tax returns. In September, the IRS informed him of another audit of one of his businesses, and in July, the Department of Labor informed him that it was investigating the guest workers at his Idaho cattle ranch.
None of the audits or investigations has found anything wrong, but they did succeed in holding up his tax refund for more than 20 months, and cost him $80,000 in legal fees, not including the damage to his personal reputation from the slurs on the pro-Obama web site.
A NEW FORM OF INTIMIDATION
This is the new 21st century model for political intimidation of opposition campaign donors, and all it requires is some anonymous mud-slinging on the Internet.
The methods may be different, but this kind of intimidation and abuse of power is not new. We have seen it before. Forty years ago, Richard Nixon decided that the best way to punish his political enemies was to unleash the IRS on them. Those who had the misfortune to appear on the Nixon White House enemies list were singled out by the IRS for special audits and extra strict enforcement of the federal tax code. But today, the same kind of thing can be done much more efficiently, and on a much larger scale than in Nixon’s day.
There is one important difference. In the Nixon White House, actions against those on his enemies list were carried out by the president’s top aides and cabinet members. There are tape recordings and transcripts of those private conversations between the conspirators in the Oval Office. They are part of this country’s shameful legacy from the Watergate scandal.
OBAMA’S ENEMIES LIST
The orders which set the action agenda for today’s IRS scandals are found elsewhere. During the last presidential election, they were found in the enemies lists on campaign web sites, targeting people like Mr. VanderSloot.
Obama promoted his organizational enemies list in his class warfare campaign rhetoric. It told the American people that the wealthy are greedy and unworthy, that economic opportunity in this country is a thing of the past, and that the money the successful have earned should be taken away from them to be given by big government to those who have not earned it in the name of “fairness.”
It therefore followed that those who supported lower taxes, smaller government and free market capitalism are “the enemy” (Obama’s words) and deserve extra harsh scrutiny from government regulatory agencies, with the IRS being at the top of the list.
The president derided “tea baggers.” Vice President Joe Biden compared them to “terrorists.” In more than a dozen campaign speeches last year, Obama warned that conservative political action groups represented evil interests that were perverting the electoral process. “Nobody knows who’s paying for these ads. We don’t know where this money is coming from,” Obama said about conservative messages sponsored by “tea baggers.”
“All around this country there are groups with harmless-sounding names like Americans for Prosperity, who are running millions of dollars of ads against Democratic candidates,” Obama complained. “And they don’t have to say who exactly the Americans for Prosperity are. You don’t know if it’s a foreign-controlled corporation.”
DEMOCRAT SENATORS CALL ON IRS TO ACT
In 2010, Democrat Senator Max Baucus, head of the Senate Finance Committee, with direct oversight over the Treasury department, wrote a letter to top IRS officials accusing them of having “failed to address” the “problem” of conservative groups that were “improperly engaged” in campaigns. Last year, Democrat Senator Charles Schumer got six other Democrats to sign a similar letter to the IRS, demanding “immediate changes in the framework of enforcement of the tax code as it applies to [conservative] groups.”
When the IRS scandal finally broke last week, the agency’s administrators and White House officials suggested that the problems originated with “low level bureaucrats” in the Cincinnati unit. But Republican political analyst Karl Rove, in a commentary on Fox News, said, “Maybe the low-level bureaucrats aren’t so low level and maybe they were influenced by Democrats in the Congress saying take on these groups or else you will face the consequences in front of us.”
A REFLECTION ON OBAMA’S COMPETENCE
Because the IRS is part of the executive branch of the federal government, the scandal reflects directly on Obama’s competence as president. So far, his actions in response to it have been expressions of anger, rather than acceptance of responsibility, and promises to put things right again.
“I think we’re going to be able to figure out exactly what happened, who was involved, what went wrong, and we’re going to be able to implement steps to fix it. It is just simply unacceptable for there to even be a hint of partisanship or ideology when it comes to the application of our tax laws,” Obama said.
Part of the problem for the White House is that it has had trouble keeping its own story straight about what the president and his staff knew about the investigation at the IRS and when they knew it.
On Sunday, White House advisor Dan Pfeiffer appeared on five different network news programs to declare that Obama knew nothing about the IRS scandal until reports about it began to appear in the media on May 10.
On Monday, the White House spokesman admitted that the official time line had changed. He acknowledged for the first time that some White House officials were told about the scandal in April, but still maintains that Obama first learned about it when it was reported on May 10.
In trying to explain why Obama was not told about it in April, White House spokesmen have insisted that it would have been inappropriate for Obama to act before the inspector-general’s report on the IRS scandal was finalized this month, so there was no reason to tell him any earlier.
Does that mean that administration officials did not trust Obama with that information, or that they merely wanted to give him the politically convenient ability to deny any knowledge of the scandal before it inevitably broke?
This revision of the official White House timeline for when it became aware of the IRS scandal has prompted reporters to closely review earlier statements by Obama and top administration officials about the scandal. Last Friday, Jack Lew said he was briefed about the investigation of the IRS in March, by the IRS inspector general when he became Treasury Secretary. Lew claims that he did not learn the details of the IG’s report until the story broke in the media, but there is still an obvious question: If Lew learned in March that the IRS was under a serious investigation, why didn’t he tell Obama about it at that time? Lew also admitted that he first become aware of the IG’s investigation in 2012, when he was still Obama’s White House chief of staff. This leads to at least the possibility that the official White House timeline for what Obama knew about the IRS scandal and when he knew it could change once again.
EVASIVE ANSWERS FROM THE IRS HEAD
Last week Obama fired the acting head of the IRS Steven Miller, whose lame responses to a tough grilling at a hearing of the House Ways and Means Committee on Friday, failed to satisfy anyone. Miller tried to minimize the importance of what happened at the IRS on his watch, describing it as merely “horrible customer service” and “foolish mistakes.” But he insisted that none of it was politically driven.
The normally soft-spoken committee chairman, Republican Dave Camp, was obviously frustrated with Miller’s evasive answers. “The reality is, this is not a personnel problem. This is a problem of the IRS being too large, too powerful, too intrusive and too abusive of honest, hardworking taxpayers.”
Camp added that he believes the problem reaches beyond the IRS.
“This appears to be just the latest example of a culture of cover-ups and political intimidation in this administration. It seems like the truth is hidden from the American people just long enough to make it through an election.”
Republican Senate Minority Leader Mitch McConnell agreed with Camp, saying, “There is a culture of intimidation throughout the administration. The IRS is just the most recent example.”
Senator Rand Paul said, “I can’t believe one rogue [IRS] agent started it, because it seems too widespread.”
HIDING THE INVESTIGATION
Several lawmakers accused Miller of trying to mislead Congress by failing to disclose to them that the IRS was being investigated for political bias. Congressman Paul Ryan recalled that Miller had been asked by the committee previously about the allegations, “You didn’t mention targeting based on ideology. You didn’t mention targeting based on buzzwords like ‘tea party’ or ‘patriots’ or ‘9/12.’ You knew that, but you didn’t mention this to the committee. Do you not think that that’s a very incomplete answer?”
“I answered the question truthfully,” Miller insisted.
Republican Congressman Dave Reichert told Miller, “I’m disappointed. I’m hearing, ‘I don’t know. I don’t remember. I don’t recall. I don’t believe.’ Who knew? You don’t even know who investigated the case, but yet you say it was investigated.”
A SNEAKY FORM OF DISCLOSURE
The legislators were also angry at the sneaky way that IRS officials tried to get out ahead of the Inspector General’s report. They planted a fake question at a May 10 American Bar Association meeting which Lois Lerner could then use to try to break the news of the scandal gently and apologize for the additional IRS scrutiny of conservatives.
Republican Congressman Peter Roskam, asked Miller why he decided to disclose news of the IRS scandal at the ABA conference instead of informing Congress first.
“We were going to do it at the same time, I believe; that our intent was to talk to you all at the same time,” Miller said, but then admitted that he never did.
“All of us are angry on behalf of the nation and we are determined to get answers,” said Sander Levin the committee’s ranking Democrat. He angrily accused Lerner of failing to inform the committee of the scandal just two days before she announced it at the ABA conference. “This is wholly unacceptable and one of the reasons that we believe she should be relieved of her duties.”
Republicans were also angry that Lerner initially misled the media and elected officials by suggesting that the problems at the IRS were all the result of actions by low level employees at the Cincinnati unit, which was not the case.
It soon became apparent that some of the letters demanding excessive documentation from conservative groups came from the main IRS office in Washington DC and another on the West Coast.
SECOND DAY OF TESTIMONY
In a second day of committee hearings Tuesday, the former IRS administrator, Douglas Shulman, who stepped down after completing his 5-year term of office in November, also claimed that he was unaware of the targeting of conservative groups applying for tax exempt status. Shulman, who was appointed by President George W. Bush, said, “I agree this is an issue that when someone spotted it, they should have brought it up the chain. And they didn’t. I don’t know why. . . I very much regret that it happened and that it happened on my watch.”
This did not satisfy committee members who suggested that Shulman owed conservative groups an apology, because when he was asked at a hearing of a House Ways and Means subcommittee in March, 2012, he stated very firmly, “There’s absolutely no targeting.”
Miller also testified, along with Treasury Secretary Jack Lew at a separate hearing held by the Senate Banking Committee. Lew stated that the singling out of conservative groups applying for tax exempt status was “unacceptable and inexcusable.”
At that hearing Senator Orin Hatch accused Miller of deliberately failing to inform legislators of the special treatment being given conservative groups, even though he was repeatedly asked about it.
“Mr. Miller, that’s a lie by omission,” Hatch said. “There’s no question about that in my mind. You kept it from people who have the obligation to oversee this matter.”
Another prime target for Republicans in the IRS scandal is Sarah Hall Ingram, who was technically the head of the tax exempt section when the problems started, and then took over the IRS’s Obamacare office. Republicans are already arguing that the partisan scandal in her IRS department should disqualify her for the new position.
But that is not the way Washington works. While Ingram’s department was getting bogged down because it was targeting conservative groups for unfair scrutiny, she actually received more than $100,000 in bonus pay, in addition to her regular salary.
MORE HEADS WILL ROLL
Obama has appointed Danny Werf. the controller of the White House Office of Management and Budget, in Miller’s place. The White House realizes that getting the IRS back on track is essential for the success of Obama’s second term. In a statement announcing Werf’s appointment, Obama said, “The American people deserve to have the utmost confidence and trust in their government, and as we work to get to the bottom of what happened and restore confidence in the IRS, Danny has the experience and management ability necessary to lead the agency at this important time.”
A second top IRS official, Joseph Grant, also resigned under pressure as deputy director of the IRS tax exempt division, just a week after assuming the post. But angry legislators will not be satisfied with those relatively low level political scapegoats.
“We’re not done,” Camp said at the end of the Ways and Means Committee hearing. “We found out about this a week ago, so we’re going to continue to examine.”
The House Oversight and Government Affairs Committee and the Senate Finance Committee also have announced IRS hearings.
One measure of the strength of the political fallout from the IRS scandal was that Democrats also feel compelled to denounce it, and have been reluctant to publicly come to the defense of the administration.
Democrat Senator Max Baucus was bracing for more bad news from the IRS when he said, “I have a hunch that a lot more is going to come out.”
Democrat Senator Claire McCaskill, who was formerly a state auditor in Missouri, and has had long experience with bureaucratic bunglers like those at the IRS, is now calling for a clean sweep at the agency.
“We should not only fire the head of the IRS, which has occurred, but we’ve got to go down the line and find every single person who had anything to do with this and make sure that they are removed from the IRS and the word goes out that this unacceptable.” It’s a nice sentiment, but unlikely to ever be carried out in a tightly-knit political culture like the one in Washington.
TEA PARTY ACTIVISTS REJUVENATED
On the other side of the aisle, the IRS scandal seems to have rejuvenate the enthusiasm for the Tea Party movement in Washington. About 100 Tea Party activists from around the country journeyed to Washington to stage a rally that denounced the IRA scandal which targeted their organizations. They demanded that the Obama administration be held responsible for that. Republican Senator Rand Paul, told the crowd, “There is something profoundly un-American about targeting your political opponents.”
House Speaker John Boehner accused the Obama administration of “remarkable arrogance” and said the scandal might lead to jail time for IRS officials, pointing to a law that mandates up to five years in prison for government officials found guilty of extortion or “willful oppression.”
So far, Republicans leaders have been careful not to get too far out in front of the IRS scandal, relying instead on the growing feeding frenzy in the media and expressions of bi-partisan outrage to drive the story, and keeping the White House on the defensive.
With more congressional committees getting involved, and many still unanswered question about who was really behind the political targeting at the IRS, the development of this Washington scandal still has a long way to go.