Sometimes, a media firestorm can shine much-needed light on an issue that needs public attention, and sometimes the media even provides sufficient context to a story that can help the public understand the big picture.
Unfortunately, there has been too little of that in the furor over the IRS’s flagging of conservative applications for status as tax-exempt nonprofit social welfare organizations. There is a big story here, just not the one fueling breathless headlines over the supposed targeting of conservative groups for closer scrutiny.
To date, there is no evidence to suggest that the conservative groups were flagged because the IRS employees who worked in the agency’s exempt organizations headquarters in Cincinnati had a political bias. Agency officials insist they used certain names, such as Tea Party, or 9/12, as a quick means of ferreting out from among the recent flood of applications those that may not, in reality, meet the definition of a “social welfare organization” under the rules of IRS code 501(c)4.
And, it should probably be noted, that ferreting out applications that don’t meet the criteria for tax-exempt status is actually the job of the employees who work for the IRS. Those workers clearly erred when they selected names like “Tea Party” as part of their screening process, but mistakes in judgment by low level employees working in Ohio are hardly the makings of a major Washington scandal. Especially, since the IRS, in the end, didn’t deny the tax-exempt status to any of the organizations supposedly targeted.
President Obama’s knee-jerk firing of Acting IRS Steven Miller is yet another example of this administration’s penchant for throwing civil servants under the bus before all the facts are known. It’s reminiscent of the treatment of Shirley Sherrod, who the Obama administration axed after heavily edited video of her seemed to suggest she was racially-biased. It turns out, the full context of her remarks provided exactly the opposite conclusion, but the damage had already been done, both to Sherrod—who lost her job— and to Obama, who looked more interested in protecting his own political hide than the due process of decent civil servants.
The real story in all this, fortunately, has come out, thanks to organizations like Pro Publica, a non-profit online news source that has become a haven for quality public affairs reporting. (Check out www.propublica.org/article/six-facts-lost-in-irs-scandal for more.)
Turns out, there is a political scandal here— in the systematic abuse of the nation’s tax laws to help fund a flood of political attack ads. While the law states that tax-exempt social welfare organizations are prohibited from engaging in clearly political activity, such as campaigning for or against political candidates, that’s exactly what many of these groups have done. Karl Rove’s Crossroads GPS organization now has tax-exempt status as a social welfare organization, despite pouring over tens of millions of dollars into political ads during the last election cycle.
And Crossroads is not alone. Hundreds of mostly conservative groups have taken advantage of the lax oversight and recent court rulings, like the Citizens United case, to set up “social welfare organizations” that look and operate almost exactly like non-exempt political action committees.
But groups like Crossroads get several major benefits from tax-exempt status, the most significant being anonymity for big donors, something that’s not available to regular political action committees. And with the floodgates now opened wide to corporate funding of campaigns, the abuses are only going to get worse, and the public won’t be able to find out who is bankrolling candidates or issue advocacy.
In a few rare cases, journalists have uncovered examples of the kind of corporate money that is now being anonymously injected into our political system, under the guise of “social welfare.” In 2011, the massive insurance conglomerate Aetna gave $3 million to Norm Coleman’s American Action Network, which Coleman’s group promptly spent on election ads.
Aetna’s revelation was apparently an accident— in the vast majority of cases corporations can funnel money into these groups secure in the knowledge that their political involvement will be kept secret and that their contributions can be deducted as “business expenses.” That means we as taxpayers are helping to subsidize the corporate takeover of our political process.
While this activity is actually illegal, neither the law nor IRS rules are being enforced with any regularity. In each case, these groups are asked as part of their application, whether they plan to spend “any money attempting to influence the selection, nomination, election, or appointment of any person to any federal, state, or local public office or to an office in a political organization.” And, invariably, they answer no, since to do otherwise would likely lead to rejection. They answer no, and then do it anyway to the tune of many millions of dollars.
The New York Times recently exposed one egregious case, where the American Future Fund, another conservative social welfare organization, filed its application for 501(c)4 status in 2008, checking no to the question above. That very same day, the group began running campaign ads, including ads supporting Norm Coleman in his race for Minnesota governor.
The real scandal here is that the founders of these organization are allowed to perjure themselves in legal documents and escape any consequence for doing so. So where are the headlines about that?