To many on Capitol Hill, the burgeoning scandal dogging the IRS looks like a simple case of partisan political targeting by an overbearing federal agency.
But the IRS controversy has laid bare a far more serious and far-reaching problem: the agency’s utter failure to keep pace with drastically changing campaign finance laws. For decades, the IRS has taken heat for its muddy rules governing politically active tax-exempt groups, a recent CQ Weekly story notes. Among other problems, the recent inspector general’s report found:
- IRS employees did not understand and bickered over the agency’s own rules, repeatedly changing course over how to screen groups seeking tax-exempt status.
- The IRS went so far as to reject the IG’s recommendation that the tax agency clear up guidelines for how to handle such groups. The IRS instead recommended more staff training, an alternative the IG in turn rejected.
- Though lawmakers and watchdogs urged the IRS to curb deep-pocketed nonprofits spending hundreds of millions of dollars on the 2012 campaign, the IRS ignored the top-spending players and instead went after shoestring groups.
The fallout has exposed an agency that lacks the tools, the will or even the rules to regulate increasingly wealthy and influential tax-exempt groups unfettered by the Supreme Court’s 2010 ruling to deregulate political spending.
Democrats fault the IRS for doing too little to block such groups from unrestricted spending in campaigns. They argue the IRS has interpreted tax laws far too narrowly, inviting abuses by political players who exploit nonprofit regulations to spend big money in secret. Republicans assail the agency for overpolicing activists and chilling constitutionally protected speech. But lawmakers on both sides of the aisle have failed, as has the IRS, to modernize outdated tax rules and clear up long-standing confusion over what’s permitted, particularly in the thorny arena of tax-exempt political spending.
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