The Inspector General for Tax Administration at the Treasury Department has issued a preliminary report on the IRS’ targeting of Tea Party and “patriot” groups that applied for 501(c)(4) status. You can see that report here. The report does conclude that inappropriate criteria was used, but finds no evidence that it was anything other than bureaucratic incompetence that caused it:
The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Ineffective management: 1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary information requests to be issued.
The key problem, the report says, is that the IRS simply does not have any objective criteria established to determine when a 501(c)(4) might have a “primary activity” of being political, as opposed to being a social welfare organization.
In April 2012, the Senior Technical Advisor to the Acting Commissioner, Tax Exempt and Government Entities Division, along with a team of EO function Headquarters office employees, reviewed many of the potential political cases and determined that there appeared to be some confusion by Determinations Unit specialists and applicants on what activities are allowed by I.R.C. § 501(c)(4) organizations. We believe this could be due to the lack of specific guidance on how to determine the “primary activity” of an I.R.C. § 501(c)(4) organization. Treasury Regulations state that I.R.C. § 501(c)(4) organizations should have social welfare as their “primary activity”; however, the regulations do not define how to measure whether social welfare is an organization’s “primary activity.”
Good luck with that! Frankly, I think it’s a mug’s game. There’s really no way to define this in any kind of rigorous way, and even if you could, how would you apply it to organizations that are merely applying for 501(c)4 status? In the wake of Citizens United, this whole section of the Internal Revenue Code is a definitional witch’s brew that admits of no sensible resolution. If we had a functioning Congress, I’d suggest that they should address this from the ground up and provide a set of guidelines that makes sense in the modern world. But I don’t suppose that’s very likely, is it?
No, it isn’t. If Congress was functional and rational, they would do away with this whole thing entirely. They would provide a new designation for all non-profits that air any commercials or take out any ads of any kind during an election and require them to disclose the source of all major contributions they receive, just like a PAC has to do. The exact same reporting requirements would apply. And this would not violate the ruling in Citizens United, which upheld such disclosure rules. Given the reality of that ruling, and the 4th Circuit’s Free Speech Now ruling, that is the best we can get at this point.