Why the real IRS scandal happened in 1959


The IRS is facing criticism after news broke that a Cincinnati branch targeted Tea Party-related groups with unequal scrutiny–but according to msnbc’s Lawrence O’Donnell, the real scandal happened long ago.

Section 501(c)(4) of the Internal Revenue Code defines tax-exempt social welfare groups like this:

Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.

In 1959, under the administration of Dwight Eisenhower, the meaning of this section was changed dramatically when the IRS decided the word “exclusively” could, in effect, be read as “primarily.”

“For 54 years, the IRS has gotten away with the crime of changing the word ‘exclusively’ to ‘primarily,” said Lawrence O’Donnell on The Last Word  Monday. “The IRS took a hard, clear word like ‘exclusively’ and changed it into a soft word  ’primarily’ and then left it to the IRS agents to determine if your organization was primarily concerned  with the promotion of social welfare.”

“The IRS does need some kind of test that helps them weed out political organizations attempting to register as tax-exempt 501(c)4  social welfare groups,” wrote Ezra Klein in the Wonkblog Monday. “But that test has to be studiously, unquestionably neutral.”

As Klein says, the IRS “must act in ways above reproach.” O’Donnell agrees with a balanced approach, but “if in 2010, there was a flood of Tea Party applications for tax exempt status and many fewer applications for tax exempt status from liberal political groups, then it only makes mathematical sense that more questions would be directed at Tea Party applications.”

O’Donnell argues that the “test” Klein speaks of is made harder to enforce precisely because of the squishiness of the language. It was that change from “exclusively” to “primarily,” he argues, that “allowed political organizations to buy political advertising in support of candidates or as an attack on candidates and do so under a tax-exempt provision in the law that was never intended for them to hide behind.”

“That,” he says, “is truly scandalous.”