Don't Mess With Taxes

The hubbub over the Internal Revenue Service's inept and ill-advised vetting process for groups seeking nonprofit status no longer dominates the news cycle.

But make no mistake, the issue has not disappeared. TaxProf blogger Paul Caron has been keeping a daily tally of coverage. We're now up to Day 256 in the so-called IRS scandal.

Fiscal costs to IRS: And there are more direct implications for the IRS other than just a public relations nightmare.

The recently enacted $1.1 trillion spending bill that keeps the federal government running through Sept. 30 includes provisions directly related to the IRS 501(c)(4) nonprofit status imbroglio and other missteps the agency has made in recent years.

Overall, the IRS is paying for its operational indiscretions by receiving less money and more restrictions on how it does spend what funds it has.

Non-profit review overreach: In case you've forgotten, a Treasury Inspector General for Tax Administration examination last year found that the IRS inappropriately scrutinized conservative groups that applied for the special tax-exempt status.

During this process, IRS reviewers used be on look out, or BOLO, lists that included words such as Tea Party and patriot. Subsequent Congressional hearings revealed that BOLO lists also were used to identify liberal and progressive groups.

When word broke that the IRS aggressively examined the political leanings of groups applying for nonprofit status, President Obama was among those denouncing the action.

In announcing last May that he had asked IRS Acting Commissioner Steven T. Miller to resign, Obama cited the need for all federal agencies, but particularly the "IRS given the reach it has in all of our lives, ... to operate with absolute integrity."

"If you have the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous," Obama said. "It is contrary to our traditions."

IRS history of harassment: Uh, actually, Mr. President, while it's not the law of the land, it sadly is not contrary to our traditions.

In my lifetime, there has been pressure from as high as the White House to use the agency to keep seemingly insurgent sectors in control or at least on their heels.

President John F. Kennedy mobilized the IRS against the right-wing, fundamentalist Christian ministers who had been critical of his Catholicism. A decade later, President Richard Nixon wanted the IRS to investigate around 200 people who were on Nixon's famous "enemies list."

And on this Martin Luther King, Jr. Day, we can't overlook how tax laws were used in the 1950s to intimidate civil rights leaders.

Dr. King, several of his lawyers and members of the Southern Christian Leadership Council were audited repeatedly by the IRS. The major tax attack, however, came from the state of Alabama.

Alabama officials conducted two tax investigations into King's finances. In 1956, King settled charges against him for a deduction he was unable to document.

The second tax charge four years later was more serious. In 1960, King became the first person ever prosecuted by Alabama on criminal tax charges that he had signed fraudulent tax returns for 1956 and 1958.

King took the stand in his own defense, asserting that the state tax examiner had revealed that he was "under pressure by his supervisors" to find fault with the civil rights leader's returns. After nearly four hours of deliberations, the all-white jury returned a "not guilty" verdict.

King cited the verdict as "great hope" and as a revelation that "there are hundreds and thousands of people ... of goodwill" across the country. That's a message he carried forward as the civil rights movement continued to grow.

More legislation to restrict IRS actions: As our country's recent history in the Dr. King's case and other situations indicates, the IRS has been used for political purposes by both sides.

Sadly, that's not likely to happen.

Sure, the IRS might not be auditing folks for political purposes with as much impunity as it did 50-plus years. And you can be sure that the agency will be on eggshells when does anything for the foreseeable future.

But folks on Capitol Hill are still using the IRS to make political points.

The latest example comes from House Ways and Means Committee Chairman Dave Camp (R-Mich.), who has introduced the Stop Targeting of Political Beliefs by the IRS Bill of 2014.

H.R. 3865, if enacted, would prevent the Treasury Department and IRS from issuing or finalizing proposed regulations that Camp says would restrict the First Amendment rights of Code Sec. 501(c)(4) tax-exempt organizations.

OK, that's not a bad goal. As long as the IRS just follows the rules and makes sure that any group applying for this tax-favored status is primarily -- or, as the statute says, exclusively -- engaged in social welfare activities, it shouldn't matter to the IRS whether it's founded by right- or left-leaning folks.

IRS as political pawn: But Camp, like most of his Capitol Hill colleagues, can't leave well enough alone.

The chair of the House tax-writing committee says his bill is necessary to "stop the Obama administration from targeting groups that engage in civic debate," turning the political pandering rhetoric volume knob to 11.

Camp's bill would halt any new IRS 501(c)(4) rules for a year to ensure, says the chairman, that ongoing Congressional investigations into the full extent of IRS targeting of conservative groups are completed.

How convenient that the postponement time frame would get us past the 2014 mid-term elections, keeping the issue politically alive for Representatives and Senators facing tough campaigns.

You also might find these items of interest:

• King to Obama, America's journey from 1963 to 2013
• Volunteer tax efforts and MLK Day 2012
• Remember Martin Luther King's legacy and tax trial