Thursday, November 10, 2022

IRS Commissioner Nominee Evokes Memories of Alleged IRS Bias Against Conservative Nonprofits

The Washington Post reports that the White House announced on Thursday that President Biden will nominate Daniel Werfel to lead the Internal Revenue Service, tapping a former budget official to spearhead implementation of key parts of the administration’s economic agenda. 

Mr. Werfel served in the George W. Bush and Obama administrations, working at senior levels of the White House Office of Management and Budget and at the IRS. He was acting IRS commissioner in 2013, taking over after top officials resigned over a controversy involving the agency’s scrutiny of nonprofit groups.

What was the controversy about? 

NPR provides the answer. In an October 5, 2017, report, NPR revealed that in 2013, IRS official Lois Lerner revealed that conservative groups seeking tax-exempt status had been getting extra scrutiny, based on words such as "tea party" or "patriots" in their names. For conservatives, Ms. Lerner's statement confirmed their darkest suspicions: in the Tea Party heyday years of 2009 and 2010, hundreds of groups affiliated with the party had sought tax-exempt status as 501(c)(4) "social welfare" organizations. IRS demands for documents left many of them in bureaucratic limbo for a year or more.

The NPR report revealed that an audit by the Treasury Inspector General overseeing the IRS had found that the agency had targeted not just conservatives but also scores of groups with words like "progressive" in their names. The Treasury Inspector General for Tax Administration, or TIGTA, did the report at the request of a bipartisan group of senators.

The report did not satisfy everyone, particularly supporters of the conservative groups who had sought tax-exempt status during that period. Conservative lawyer Cleta Mitchell, who represented eight groups that were given the extra scrutiny, said at the time that the approval process took far too long. In one case, she said, "the IRS wanted every communication that this organization had made about Obamacare," as the Affordable Care Act is commonly called. 

Mitchell opined that even if progressive groups were targeted, "they didn't get subjected to the kinds of follow-up the Tea Party groups did." Meanwhile, in June 2013, Rep. Hal Rogers, R-Ky., told Fox News the IRS had an "enemies list out of the White House." Also, at a Tea Party rally on Capitol Hill, Sen. Rand Paul said an out-of-control government was "persecuting people for their religious and their political beliefs."

According to the NPR report, 

Then-President Obama quickly cleaned house in the upper echelons of the IRS, but congressional hearings ran more than three years before they spun off into secondary issues, which inevitably included missing emails. Lerner became a target for conservative attacks when she took the Fifth Amendment at a House investigative hearing.

In cleaning house, President Obama appointed Mr. Werfel acting IRS Commissioner. According to the Washington Post, current Treasury Secretary Janet Yellen reacted positively to Mr. Werfel's pending nomination:

Danny’s prior service under both Democratic and Republican administrations, his deep management experience, and his work directing significant transformation efforts, make him uniquely qualified to lead the agency at this critical juncture. Danny’s deep commitment to fairness and making sure government works for all will also be invaluable as we improve the taxpayer experience and eliminate a two-tiered tax system.

John Koskinen, who served as IRS commissioner after being nominated by President Obama, also had words of praise for Mr. Werfel. According to Mr. Koskinen, Mr. Werfel worked effectively with the GOP at the height of the anger over accusations that the tax agency had targeted tea party groups for additional scrutiny. He continued: "Werfel was dropped into the middle of a maelstrom [yet] did a good job of responding positively to congressional inquiries.”

But not everyone is sold on the idea that Mr. Werfel is the best person for the job. The Post reports that at least one leading House Republican on Thursday criticized Mr. Werfel’s performance during that period. According to Rep. Kevin Brady (R-Tex.), the top Republican on the House Ways and Means Committee, "Daniel Werfel was named acting IRS commissioner in 2013 with the goal of restoring credibility and confidence in the IRS after the agency’s shameful targeting of conservative groups. He didn’t succeed in 2013 and I’m concerned about whether he can succeed in 2023 and beyond."

We shall have to wait to find out. If the Senate confirms Mr. Werfel's appointment as IRS Commissioner, he will face many challenges, including the challenge of improving IRS customer service, which struggled amid the pandemic after years of budget cuts. The IRS taxpayer watchdog reported over this summer that the agency had a backlog of 21.3 million returns, and call response rates have plummeted. Only 1 in 10 of the 73 million taxpayer calls for help reached an employee in the last filing season. 

Whatever he does, though, it would be wise for Mr. Werfel to ensure that the IRS does not unnecessarily target nonprofit organizations for extra scrutiny. 

Prof. Vaughn E. James, Texas Tech University School of Law

 

    

https://lawprofessors.typepad.com/nonprofit/2022/11/irs-commissioner-nominee-evokes-memories-of-irs-bias-against-right-wing-nonprofits.html

Current Affairs, Federal – Executive, In the News | Permalink

Comments

The Post's summary of the history is a little rose-colored. The May 2013 TIGTA report that kicked off the public scandal documented that conservative groups were targeted in about 2/3 of the returns examined by TIGTA, whereas progressive groups comprise about 20% of the total and were often included in the targeting by coincidence or in error. A subsequent inquiry by House Democrats caused TIGTA to reiterate that there was a definite ideological bias in the targeting by the IRS. The most exhaustive documentation comes from the 200+-page 2018 final report of the House Oversight and Government Reform Committee. I still have a copy somewhere on my computer -- I can follow up with a document reference and, I hope, a web link if anyone's interested.

BTW, I wrote about 25 articles on the targeting scandal for The Nonprofit Quarterly (NPQ) between 2013 and 2018.

Posted by: Michael L. Wyland | Nov 14, 2022 3:00:26 PM

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