Tea Party groups have quickly lined up this week to tell reporters about receiving intrusive questions from the Internal Revenue Service after applying for tax-exempt status. But some of those same groups have close ties to Republican politics. That reality underlines what a growing number of good government advocates and others are saying: The problem isn’t too much scrutiny from the IRS, it’s too little.
Karen Kenney, the coordinator for the San Fernando Valley Patriots, told The Washington Post this week that after applying for nonprofit status, her group received “pretty much a proctology exam through your earlobe.”
But that (very) up-close look may have made sense: Kenney is active in Republican politics in southern California. She ran in 2010 for an internal GOP position, and has spoken at least twice since 2011 at the San Fernando Valley Republican club, in her capacity as a local Tea Party leader.
Kenney didn’t respond to a request for comment, but it’s not just her. The president of the Greater Phoenix Tea Party, Chris Rossiter, told Politico that after applying, his group received an inquiry from the IRS with 35 questions, and he described a phone conversation he said the group’s founder had with an IRS agent.
That founder was Kelly Townsend, who last year was elected as a Republican to the Arizona statehouse. A post on the Tea Party group’s website congratulated Townsend on her win.
Neither the Post nor Politico mentioned these ties to the GOP in their stories, which portrayed the IRS scrutiny as self-evidently burdensome.
Townsend told msnbc she had no problem with being asked about the group’s political work, but objected to a drawn out process, saying the application is still pending more than three years after it was submitted.
“The biggest issue to me was not the questions,” she said. “It was the time frame. They cannot explain why it took two years to even initially contact us.”
The involvement of Tea Party activists in Republican politics doesn’t necessarily mean their applications should have been rejected. What counts as political work, and just how much of it a group can do while still claiming tax-exempt status, is a contested issue—which is part of the problem. And most people agree that using keyword searches for terms like "Tea Party" and "patriot" was a bad way for IRS agents to approach their work.
But it does suggest it was reasonable for the IRS to take a close look. Indeed, many of those concerned about the influence of money in politics have long argued that rather than being too intrusive, the IRS is actually too ready to grant applications for tax-exempt status—known as “c4” status—even to organizations that do substantial political work.
“The IRS has not been enforcing the tax code,” Craig Holman, a lobbyist for good-government group Public Citizen told msnbc. “They have been allowing groups to hide under the c4 tax status that are actually political front groups.”
There’s little agreement on just where the line between political and nonpolitical should be drawn. The tax code itself says that c4 groups must be exclusively committed to social welfare. In other words, they can’t do any political campaign work at all. But court decisions have established they can do an insubstantial amount of such work. And the IRS has said that applicants merely need to ensure that their “primary purpose” is social welfare, but has never developed a clear standard to define what that means.
Political group or nonprofit? Or both?
As a result, some big-money groups, like Karl Rove’s American Crossroads GPS or the liberal Priorities USA, have assumed that political work can amount to 49.9% of what they do. The IRS gave both groups c4 status—which allows them not just to avoid paying taxes but, more important, to keep their donors secret—though both clearly appear designed to sway the outcome of elections.
Public Citizen argues that the IRS should enforce the “insubstantial” standard, meaning that once a group gets to 25% or 30% political, they’re violating the law. And for several years, his group and others have been urging the IRS to take a second look at groups like Rove’s.
“What the IRS should have been doing, and they should have done this long ago…is start taking a look at groups that are in fact electioneering, even if they have c4 status, and determine whether or not their c4 status should be revoked,” Holman said.
Holman said he’s concerned that in the wake of the controversy, the IRS will be even more wary of scrutinizing applications for tax-exempt status.
“The IRS clearly never really wanted to enforce the tax law,” he said. “And this gives them every reason to stay away from doing so.”
But Holman added that one silver lining could emerge for those worried about money in politics. The last week’s events have helped create a consensus that the IRS shouldn’t be in the business of subjectively interpreting what qualifies as non-political, Holman said, and that a “bright-line” standard should be created.
A bill that would require the IRS and the FEC to team up to create such a standard was introduced earlier this year by Sens. Ron Wyden and Lisa Murkowski.
The IRS controversy has "given a lot more attention to the problem with these groups that are politicking anonymously," Ken Willis, a spokesman for Wyden, told msnbc.
And Alan Viard, a tax expert with the conservative American Enterprise Institute, this week laid out a version of the idea in response to the Tea Party tempest.
"The danger of future abuse will persist," Viard wrote, "if the standards remain vague and susceptible to political manipulation. So, Congress must spell out clear rules about what is and is not permitted for (c)(4)s," adding: "[T]hey should be as clear and objective as possible, so that the IRS can't be strict with some groups and permissive toward others."
“With conservatives jumping on top of this, this is a perfect opportunity to try to set up a bright-line standard, so we clearly define what is electioneering and what isn’t,” Holman said. “This is the solution. Let’s get the IRS outta here.”