By Melanie Sloan and Anne Weismann
The IRS, reeling from the implosion of its Exempt Organizations unit and its leadership failures, issued a remarkable report Monday that reveals the agency still is in damage control mode, and listing badly. Among other fixes IRS Principal Deputy Commissioner Daniel Werfel proposed is a so-called “Streamlined Approval Process for the Priority Backlog.” Clearly designed to mollify congressional criticism about the long queue of applicants awaiting approval of their 501(c)(4) status, the proposal promises approval within two weeks or less for those applicants certifying they will spend less than 40 percent of their yearly expenditures and total staff time on political activities.
What’s wrong with this approach? Just about everything. One source of the IRS’s problems is its failure to reconcile its regulations, which require only that 501(c)(4) organizations be “primarily” engaged in social welfare activities, with the Tax Code itself, which dictates that such groups be organized “exclusively” for the promotion of social welfare. The IRS regulation not only contravenes the law, but has paved the way for 501(c)(4) groups to spend hundreds of millions of “dark” or anonymous money attempting to influence the outcomes of our elections.
In practice, both the IRS and applicants have interpreted the IRS regulation to mean an organization meets the statutory and regulatory requirements for 501(c)(4) status as long as its political activities do not exceed 49 percent. During the recent round of congressional hearings, many members noted that the core issue at the center of the IRS scandal is that the agency has re-defined “exclusively” to mean “primarily.”
In practice, both the IRS and applicants have interpreted the IRS regulation to mean an organization meets the statutory and regulatory requirements for 501(c)(4) status as long as its political activities do not exceed 49 percent. During the recent round of congressional hearings, many members noted that the core issue at the center of the IRS scandal is that the agency has re-defined “exclusively” to mean “primarily.”
It doesn’t take a math genius to figure out that 39 percent — the new threshold the IRS seemingly plucked out of thin air — is no more true to the word “exclusively” than the formerly used 49 percent.