[EL] Wall Street Journal IRS Atmosphere Timeline

[Bill Maurer]

Why exactly was a high-level political appointee of the Administration speaking publicly about the tax status of a private entity over which he had no regulatory authority in the first place if not to place a political target on them?

From: law-election-bounces at department-lists.uci.edu [mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of Mark Schmitt
Sent: Monday, June 10, 2013 10:44 AM
To: law-election at uci.edu
Subject: Re: [EL] Wall Street Journal IRS Atmosphere Timeline

I remember Austan Goolsbee well, what of it? He made a statement, which was wrong, that he "thought" Koch Industries was structured as an LLP or MLP. He was mistaken. It was a statement about tax policy, a reminder that some large companies aren't subject to the corporate income tax, which is true. As it turns out, his example was mistaken. The Koch Industries website shows that several of its large subsidiaries are LLCs, but the corporation itself is not.

What is the signal that you think low-level IRS employees would take from that misstatement about tax policy and public information?

Mark Schmitt
Senior Fellow, The Roosevelt Institute<http://www.rooseveltinstitute.org/>
202/246-2350
gchat or Skype: schmitt.mark
twitter: mschmitt9

On Mon, Jun 10, 2013 at 10:27 AM, <BZall at aol.com<mailto:BZall at aol.com>> wrote:
No one seems to be reacting to the Wall Street Journal column attempting to use a timeline to explain how "low-level" IRS agents might find it necessary to scrutinize 1024s from some groups more than others, asking otherwise inappropriate questions about volunteers and individuals.

http://online.wsj.com/article/SB10001424127887323844804578529571309012846.html?mod=opinion_newsreel

This echoes a debate at last week's First Tuesday Lunch meeting where one set of public policy attorneys (my own term for lawyers who specialize in both campaign finance and exempt organization law) discussed with another set whether there was direction, either explicit or tacit, from the Administration. One set remembers Austan Goolsbee very well; others not so much, and the discrepancy taints the analysis of current events.

We have long known that the IRS reads the newspapers, as you would expect them to. The question is whether they consciously or unconsciously absorb some of the campaign rhetoric, and if they do, whether it is absorbed evenly or not. In an area where confirmation bias runs rampant, as evidenced by recent posts to this list, are we training IRS agents to avoid it? Even lawyers who read some IRS publications have no clue about how the political rules actually work. In many cases, it takes years to understand, just as you expect in any other complex area. There's no real evidence of that type of training in the IRS, and the TIGTA report indicates that training sessions were either late or incomplete. Was Judy Kindell, the resident guru on political matters in the IRS EO Division, consulted in 2009, when this whole mess began? Apparently the isolation of Cincinnati imposed by the 2003 IRS reorganization bore its bitter fruit, fertilized by a continual lack of resources, in that time period.

Perhaps the point is one also made at last week's lunch: the real problem here is that IRS Determs was using audit techniques instead of reviewing applications. That may have been because the agents were fearful that some of what was being said in the media (as opposed to the applications) was true, and sought to get to the bottom of it. That is not necessarily a bad thing if you are tasked with determining how organizations will operate in the future (itself an incredibly difficult task), particularly with charities. But these were c4s, where political activity is perfectly lawful. Audit techniques are likely inappropriate when an organization does not have a track record, and will only result in shutting down the smaller and newer organizations who can't afford the skilled counsel who can simply stare down the inappropriate questions or call the managers they already know to complain. It is all well-and-good to question the competence of low-level employees who made mistakes, but we should look at the system to see the real structural issues.

Barnaby Zall
Of Counsel
Weinberg, Jacobs & Tolani, LLP
10411 Motor City Drive, Suite 500
Bethesda, MD 20817
301-231-6943<tel:301-231-6943> (direct dial)
bzall at aol.com<mailto:bzall at aol.com>
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