The recent IRS scandal and the revelation that tea party affiliated groups had been targeted by IRS has revived suspicions that the IRS is being used for political purposes. However, when looking at more details into the practices of the IRS, it appears the reasons behind the profiling are more complex than one would think.
First, it is important to understand the type of organizations that were “targeted” by the IRS. They were all 501(c)4 organizations. This tax exempt status was created at the beginning of the 20th century to exclusively promote social welfare. Over time, however, this characterization has evolved to primarily mean promoting the common good and social welfare.
This did not matter that much until the 2010 Citizens United decision that opened the gates for unlimited spending by corporations and unions on political matters. The fact that 501(c)4 allows donors to remain anonymous has made them the perfect recipient for millions of dollars of political money.
However, the fact remains that 501(c)4 cannot primarily have a political purpose. With the IRS staff being reduced over the last few years, internal memos have encouraged agents to look for “flag words” that could indicate the organization’s underlying political agenda. These flag words have included “tea party,” “patriots,” or “9/12” for their quite obvious political connotations.
While such a strategy raises concerns over political profiling, the fact is that 69 percent of the flagged groups were found to have a significant political involvement. But, despite being involved in political campaigns, 36.5 percent of the organization were granted a tax exempt status, 54 percent are still under review. Only 1 organization has been denied the 501(c)4 status.
Americans will never find out if the IRS scandal’s was really about: political targeting or shortcuts made by an understaffed agency. Regardless of the truth, the IRS’ history of being used by presidents of both sides for political purposes will forever stain the recent revelations.
The following infographic was provided by Top Accounting Degrees.org.