The IRS Has More Than Its Rotten Image to Fix
President Obama is shocked and angered that the IRS targeted certain conservative organizations for special scrutiny when they applied for 501-c(4) tax exemptions as “social welfare” organizations. Republicans are just as shocked. The whole Washington political establishment is shocked, just shocked, that anyone, let alone the IRS, would try to stem the flow of political money that pours through this gaping loophole in the federal tax system.
The campaign finance reform organization Democracy 21 has tirelessly documented abuse of the 504-c(4) loophole by political organizations. Its president, Fred Wertheimer, is quick to agree that the IRS was wrong to single out Tea Party affiliated organizations for scrutiny. However, Wertheimer does not suggest that the IRS should evenhandedly rubber stamp all 501-c(4) applications. Instead, he argues that it should aggressively clamp down on loophole abusers of the right, left, and center. His list of targets includes Carl Rove’s Crossroads GPS, the pro-Obama group Priorities USA, and Americans Elect, an organization that sought to run an independent candidate for president in 2012.
There seems to be an informal premise, supported by past practice of the IRS, that a self-proclaimed social welfare organization is abusing its tax status if it spends more than half of its budget on overtly political activities. As Wertheimer points out, the IRS does not enforce even this generous limit. Many 501-c(4)s cross the 50 percent line with impunity, and some have even registered as political parties. However, as he recently told the Washington Post’s Dylan Mathews, the 50 percent limit, even if