American Elephants


The Tangled Web of “So-Called Scandals” by The Elephant's Child

In theory, Democrats should be as disturbed by the IRS scandal as Republicans. Yes, most of the IRS politicized tax enforcement was directed at the Tea Party, anything with names like “patriot” or “liberty” or “freedom,” “Constitution,” nefarious names that clearly indicate right-wing extremism, for quite obviously if Republicans regain a majority, there’s tit for tat, or turnabout’s fair play or plain old “payback,” not that they would, but they might. Democrats are more concerned with the immediacy of the attacks on the Obama administration, which cannot, by definition, do anything wrong.

We have the “so-called scandals” which just deny the whole thing, but that’s not likely to work, so they have switched to the concept that the real IRS scandal is the use by conservatives of 501(c) tax status as a shield for political advocacy. The 501 (c) designation is supposed to be, they say, for “social welfare,” not anything “partisan.”

Professor Richard Epstein points out that the criteria for Section 501 (c)(4) organizations are open-ended. Few complex organizations are operated exclusively for any single purpose, and many applicants have different ideas of what counts as “social welfare.”So you have loose standards and thousands of applications.

The Treasury Inspector General for Tax Administrations reported on May 14 that the Exempt Office of the IRS actions were not politically biased, but were attributable to the confusion of lower staff members who for three years, had never quite understood their job assignments. This is what we politely called, in my childhood, “road apples.” The delays and nitpicking questions were specifically designed to hold off approval until after the November 2012 elections.

Epstein says that the larger disease of which IRS misbehavior is only a symptom, is something that has taken root in many of the major administrative agencies in the United States — permit power.

Private individuals are not allowed to engage in certain activities or to claim certain benefits without the approval of some major government agency. The standards for approval are nebulous at best, which makes it hard for any outside reviewer to overturn the agency’s decision on a particular application.

That power also gives the agency discretion to drag out its review, since few individuals or groups are foolhardy enough to jump the gun and set up shop without obtaining the necessary approvals first. It takes literally a few minutes for a skilled government administrator to demand information that costs millions of dollars to collect and that can tie up a project for years. That delay becomes even longer for projects that need approval from multiple agencies at the federal or state level, or both.

Professor Epstein offers the mission statement of the FDA as an example” “The FDA is responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics and products that emit radiation.” Absolutes are unattainable, and there is a whole universe of gray area there. How safe is safe enough, how deadly are side effects, how many trials are needed. The mission statement allows the agency to slow down, for years, any approval or disapproval.

501(c)(3) organizations are barred from partisan campaign activities. Media Matters for America, a left-wing agitprop organization uses that cover for its daily attacks on conservatives. The Center for American Progress, which was supposed to be the left-wing think tank to match the Heritage Foundation has both 501(c)(3) and 501(c)(4) designations and has never had so much as a non-partisan thought pretty much demolishes the “social welfare” argument. Under the 501(c)(4) designation, organized labor had spent, as reported by the Journal in July 2012 $4.4 billion on politics and lobbying since 2005, mostly funded by union dues. Democrats always include a carve-out for unions in their proposals to require disclosure of political spending, and demonstrates why they are so furious about the Supreme Court Citizens United decision.

Oh what a tangled web we weave, when first we practice to deceive.



Pay No Attention to the Excuses. There Is No Excuse! by The Elephant's Child

I don’t think I have ever heard anything quite a shocking as Steven Miller’s testimony before  the House Ways and Means Committee yesterday on the targeting of organizations that might have been able to raise money to oppose the reelection of Barack Obama.

” I do not believe that partisanship motivated the people who engaged in the practices described in the Inspector Generals’ report. …Foolish mistakes were made by people trying to be more efficient in their workload selection.  …We provided horrible customer service. It’s my belief that what happened here is not illegal, but it was unappropriate. It’s my belief that what happened here was not illegal, but I suppose that there are some facts that might come out that would indicate otherwise, but it’s not my area.”

So he said he is accountable and  pushed up his previously announced retirement by a couple of weeks. Mistakes were made. Always the passive voice. In an earlier day he might have been run out of town on a rail.

So the United States Treasury Department is crooked. The agency within that department that collects taxes and has the legal power to investigate citizens’ and businesses’ financial affairs believes that they are free to conduct their investigations in a manner which will determine the results of a national election. But that’s not illegal, it’s just trying to be more efficient. Not inappropriate. You cannot trust the Internal Revenue Service. They are not only untrustworthy, but they do not understand what is wrong with what they have done.

The President of the United States, in complete defiance of manners, custom, and the separation of powers defined by the Constitution, which he took an oath to defend, called out the Supreme Court of the United States in the middle of a State of the Union Speech to tell them they were wrong in their Citizens United decision that said corporations has the same right to donate money as unions did. So it starts right at the top, in spite of any allegation of innocence.

Targeting of pro-life groups began in 2009. An IRS agent told the Coalition for Life of Iowa that approval of their application for tax-exempt status was withheld. They were told to send a letter to the agency signed by the entire board—under perjury of the law—stating that they do not picket, protest or organize any other groups to picket or protest any Planned Parenthood clinic.

The Obama administration was aware of the IRS scandal five months before the election. Ace of Spades notes that it’s about a union: the National Treasury Employees Union (NETU). Anything indicating conservative leanings like “Tea Party,” “Patriot,” were not only denied tax exempt status to which they were entitled, donors to right-leaning think tanks names were illegally given to their opponents, but other agencies were directed to investigate such groups. The Tax Professor’s blog includes a long list of links for those who want to understand what the IRS is up to more clearly.

Meanwhile, you might want to investigate the Cayman Islands or other tax sheltering venues.



The Scandal Heats Up, And it Will Get Worse. by The Elephant's Child

There is far more to the IRS scandal than just the attempt to delay or deny tax exempt status to tea party groups and other conservative groups before the 2012 election, as if that weren’t bad enough. The IRS evaluates the applications of nonprofits for 5019(c)(3) or 501 (c)(4) status. A 501(c)(4) organization can engage in political campaign activity, but that activity must not be the main focus of the organization.  The application of these standards opens the door to discriminatory enforcement.

In the current scandal, the IRS would routinely hold up such applications, sometimes for years, while making demands on the applicant, that were really irrelevant to the status applied for. At the same time, similar applications from liberal groups sailed through with quick approval.  

Separately, the IRS targeted conservatives for audits, especially high-profile donors to conservative causes. There seems to be significant evidence to support that belief. Where the conservative is a wealthy businessman with a complicated tax return, it’s hard to prove that the audit was politically motivated.

Last year, Frank VanderSloot made a sizeable donation to a super PAC supporting Mitt Romney. He signed on as a national co-chairman of Romney’s finance committee. And then the political attack began. The intimidation began in February 2010 when VanderSloot was the subject of hit pieces in left-wing Mother Jones, and by Salon’s Glenn Greenwald. Mr. VanderSloot was surprised by the negative portrayal of Melaleuca, the company he has overseen for more than 25 years.

In April, the Obama campaign named VanderSloot to the first presidential “enemies list” in years. They suggested that eight Romney donors had “less than reputable records. Quite a few have been on the wrong side of the law, others have made profits at the expense of so many Americans.” Their crime was donations to the Romney campaign. In June, the IRS notified VanderSloot that he and his wife would face a tax audit, then two weeks later, the Labor Department informed VanderSloot that it was auditing workers employed at his cattle ranch.  

The third IRS part of the scandal is illegal or improper leaking of confidential tax data. We know they leaked pending applications for 501(c) status to the left-wing media group that publicized them, because ProPublica stepped forward to admit it. The National Organization for Marriage has alleged that the IRS leaked confidential NOM data in order to damage the Romney campaign. Their confidential financial documents were leaked to their rival Human Rights Campaign, and published in the Huffington Post. They have published documents that showed the leaked confidential information did not come from a “whistleblower,” but came directly from the IRS. They will sue the IRS for the leak.

President Obama is “concerned”, “outraged,” at the “insufficient oversight” and “lack of managerial review” at the IRS. The IRS Commissioner has stepped down, and he clearly hopes that we can move on. This strikes me as pure Chicago-style politics brought to the nation’s capitol by the Chicago crew in the White House, Obama, Jarrett, Axelrod, Daley. The IG has found that of the 296 applications filed by conservative groups, more than half were still in limbo, many having been on hold for more than three years. It really doesn’t seem to be a random bureaucratic snafu.

ADDENDUM: About that IRS Commissioner stepping down. It seems that his assignment ended in early June, and so he’s just leaving a couple of weeks early. No big deal. The IRS Inspector General’s report is characterized as “a whitewash”. “These allegations are serious — that there was an effort to bring the power of the federal government to bear on those the administration disagreed with, in the middle of a heated national election”, said Mitch McConnell.




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