How Citizens United Came Back to Bite Teabaggers in the Ass

That's the way the story about the IRS giving extra scrutiny to Tea Party groups sounded to me. For all the concerns about the IRS' Cincinnati office's higher-than-usual scrutiny of Teabagger groups, here's something that's gone unnoticed in all the reportage about the story:
The appendix of the inspector general’s report — which was requested by the House Oversight and Government Reform Committee and has yet to be publicly released — chronicles the extent to which the IRS’s exempt organizations division kept redefining what sort of “social welfare” groups it should single out for extra attention since the 2010 Supreme Court ruling Citizens United v. Federal Election Commission. That decision allowed corporations and labor unions to raise and spend unlimited sums on elections as well as register for tax-exempt status under Section 501(c)(4) of the tax code, as long as their “primary purpose” was not targeting electoral candidates.

The number of political groups applying for tax-exempt status more than doubled in the wake of the Citizens United ruling, forcing agency officials to make a slew of determinations despite uncertainty about the category’s ambiguous definition.
Citizens United was a group that basically were the Tea Party before it came to be known as the Tea Party. It was that case that made it possible for overly political groups to raise and spend unlimited amounts of money on politics and still be tax exempt - which, by the way, created a huge, tax-payer subsidized sector of political speech - and in turn created room for the extra scrutiny under the IRS.

This isn't to make excuses for the IRS' practices. In fact, the President himself has repudiated the activities alleged in the news reports. Nonetheless, this is a case of being careful of what one wishes for. When a conservative Supreme Court overruled a century of campaign finance jurisprudence and declared that money is free speech, it would have been naive to think that such influx wouldn't create any systematic problems. What is going unnoticed is that these things happened in the immediate aftermath of the Citizens United decision. The decision suddenly cleared the way for tax exempt political organizations, but supposedly we are all supposed to be shocked that it took regulators some time to set broad standards, causing chaos in the mean time.

Make no mistake, that is exactly what happened. Nor, as the fog of media barrage is telling you, were Tea Party groups the only targets of special scrutiny post Citizens United. We head back to the Washington Post's original story on the Inspector General's report (a report that is not yet publicly available). The following should provide some clarification on the timeline.
On June 29, 2011, according to the documents, IRS staffers held a briefing with Lerner in which they described giving special attention to instances where “statements in the case file criticize how the country is being run.” She raised an objection, and the agency adopted a more general set of standards. Lerner [Head of IRS Exempt Organizations Division], who is a Democrat, is not a political appointee.

But six months later, the IRS applied a new political test to social welfare groups, the document says. On Jan. 15, 2012, the agency decided to look at “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement,” according to the appendix in the IG’s report.

The agency did not appear to adopt a more neutral test for 501(c)(4) groups until May 17, 2012, according to the timeline in the report. At that point, the IRS again updated its criteria to focus on “organizations with indicators of significant amounts of political campaign intervention (raising questions as to exempt purpose and/or excess private benefit.)”
So, what have we learned? First, the Democrat who was the head of the IRS division on exempt organization was the one to raise objections on biased standards. Second, both Teabaggers and Firebaggers were flagged - or, if you prefer more neutral terms, groups with extremist ideological agendas on both sides of the political isle seeking tax-exempt status were subjected to greater scrutiny. And lastly but definitely not least, the problem was resolved within the system nearly a year ago.

I agree with the president. Whoever in the IRS was responsible for unfair treatment of groups under the law should be held to account. But perhaps this issue should raise a larger question: Why are we giving tax exempt status to organizations with partisan political agendas? The 501(c)(4) status was originally created in law for issue advocacy and social welfare groups that sought to educate and activate the public on a given issue, not for organizations that wanted to serve overtly partisan politics. It was Citizens United that changed all that:
Prior to Citizens United, if a corporation spent money advocating for or against a candidate during federal elections, it could only do so using funds voluntarily given by individual officers or employees to separate political action committees (PACs or Section 527 organizations).  Similarly, labor unions could only use funds voluntarily given by individual union members.  Now, as a result of Citizens United, corporations—including certain not-for-profit corporations, such as issue-based 501(c)(4)s and 501(c)(6)s—can use general treasury funds to make independent expenditures expressly advocating for or against candidates in federal elections.  The decision left unchanged, however, the existing limits on direct or in-kind contributions to candidates and the required disclosures for corporations making independent advertisements.
Organizations that are tax exempt are in effect subsidized by the taxpayer as well as their donor identities protected, because we think they primarily serve a social welfare function. The Supreme Court, though, did not only decide in that case that corporations and unions had the power to spend unlimited cash in elections, they also decided that groups not subject to the same disclosure requirements - specifically, 501(c)(4)s - could do so as well.

But the court set no clear directions as to how the IRS would be able to weed out the political organizations merely using the 501(c)(4) status as a veil to avoid taxation from actual social welfare organizations that have  political advocacy as a part of their function to educate the public (and let's face it, in the rough math, right wing groups are much more likely to exploit the code simply for the fact that they do not have respect for the institutions of government). Before, the standard was pretty clear: you do issue advocacy, not candidate advocacy. The Supreme Court removed that restriction but set no standards on how to separate the trolls from the legitimate organizations. After that, Republicans blocked all action in Congress to try to set a legal framework for election spending.

It was in that vacuum - a vacuum created by the conservative majority on the Supreme Court and the obstruction of Republicans in Congress - that the IRS had to deal with an avalanche of new applications for tax exempt status. Sure, they did it in a messy and misguided way (and then they fixed it), but the real problem was originated by the Supreme Court and compounded by the GOP. If the Teabaggers want someone to blame, they can start with the 5 conservative men on the Supreme Court and follow it up by the people they elect to Congress.

Bottom line: Citizens United came back to bite the Teabaggers in the ass. Don't demand that elections become a free-for-all bidding war and then be surprised when something goes wrong.