IRS targeting fiasco gets worse daily. The scary damage. Ponder the causes cited by the TIGTA report.

Using ideological criteria to select organizations for a drawn out review of their exemption application is a serious disaster for everyone.

I want to develop three ideas in more detail but don’t have the time to do so now. Still would like to lay down a marker for the ideas.

First, this disaster is getting worse with every day that passes. Not sure whether the progression is arithmetic, geometric, or exponential. If you need a sinking feeling in your gut, trace the pieces of information as they have emerged. Somebody needs to start giving answers that are accurate past the next sunrise.

Second, the most serious damage from this disaster will be undercutting voluntary compliance in the nonprofit sector. If the powers that be don’t get this under control really fast, the damage could spread to voluntary compliance by individual taxpayers.

Third, a cursory review of the TIGTA report, available here, combined with the news reports of the last few days is giving me a sinking feeling that we haven’t gotten anywhere close to the worst news of what actually happened.

Let me describe my understanding after a first read of the report and quick double-check of a few comments:

The ideological screening of (c)(4)s took place because nobody at the Service was supervising or managing the Cincinnati Determinations Unit and the tax law specialists in that unit aren’t familiar with the I.R.C.

That’s from the TIGTA report. No supervision. Lack of knowledge.

This mess took place because the subject matter experts weren’t.  Every manager over them wasn’t.

You probably don’t believe my summary. Go check out the report.

There are multiple references to lack of management oversight. Ineffective management is cited on the first page of highlights as the underlying cause.

The TIGTA report says the issues developed because the tax law specialists in the Cincinnati Determinations Unit did not appear to be familiar with I.R.C. section 501(c)(4). Don’t take my word for it. Look at pages 7, 14, and 18.

The staff in Cincinnati had to receive some special training by EO headquarters staff about what c4s can do. I’m serious. Check out page 14.

In 2010 and 2011 there were exactly 4,000 applications for 501(c)(4) exemptions. Assuming that is the population subject to the special attention, look at the info in the TIGTA report for status of applications:

For the 296 total political campaign intervention applications TIGTA reviewed as of December 17, 2012, 108 had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 were open from 206 to 1,138 calendar days (some for more than three years and crossing two election cycles).

Let me put that in a table.

number Percent percent
population 4,000
selected for review 296 7.4%
approved 108 2.7% 36.49%
withdrawn 28 0.7% 9.46%
pending 160 4.0% 54.05%
total 14.8% 100.00%

You can analyze that yourself.

Three points. Somewhere around 7% of the applications were subject to an ideological review. Application is still pending for over half subject to special review.  Ten percent of the organizations subject to additional review withdrew their application. Ten percent.

I’ve not reread the articles earlier than today, but don’t recall seeing there were 300 organizations involved – I thought it was around 100. (See point 1.)

One final point – the report said the IRS staff revised their BOLO list (yes, yes, they call it ‘be on the lookout’) from specific names to organizations advocating certain ideological positions.

Someone please tell me I misunderstood everything I’ve read in the report and that everything in this post is wrong. Please.

2 Responses to IRS targeting fiasco gets worse daily. The scary damage. Ponder the causes cited by the TIGTA report.

  1. Good job on the analysis, as always.

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